Good afternoon, everyone. We are very pleased that you could join us to hear more about today's exciting and transformational announcement. A few minutes ago, the boards of Aker BP and Lundin announced a pivotal step in the history of the two companies, creating what we believe will become the best pure-play independent oil company in the world. I'm told the largest public transaction in Norway the last 15 years. Before diving into the details of the transaction, I want to share with you some insight to the events that brought us to this historical moment. Over five years ago, in 2016, we partnered with BP to merge Det norske and BP Norge to create Aker BP. It's been quite a ride and nothing short of a success story.
Aker BP is today one of the largest independent listed oil companies in Europe and has created significant value for both its shareholders and for Norway. In true Aker and BP fashion, already in 2016 we had our eyes set on another, potential opportunity for value creation. A subsequent transaction with Lundin Energy was the vision that Bernard Looney, the current BP CEO, and I shared from the very first day. A transaction which we have not only dreamt about often, but also a combination which shareholders, investment banks, and others have repeatedly and consistently encouraged us to pursue. It's not difficult to understand why. Lundin Energy is a fantastic company with the Lundin family, Lukas and Ian in particular, as a successful, visionary, and entrepreneurial main shareholder.
We know both the company and the individuals as a great partner and a highly capable operator on the Norwegian Continental Shelf. We often discussed internally that the Lundin Energy and Aker BP were clearly two complementary companies, both with the Norwegian Continental Shelf as their sole focus area, both with world-class assets like the 31% combined ownership in the Johan Sverdrup field, and both with highly competent, strong teams. There were those who liked the idea, including many of you. There were those on the other side of the fence, including, by the way, our main shareholder, who claimed that it would never happen. Today, I'm happy to say that sometimes, not often, but sometimes, even he's mistaken. Because after all these years, we got the opportunity, and both Kjell Inge and I became busy overnight.
Now, finally, we can share the enthusiasm about the fact that the long time vision and dream that some of us had had become a reality and a vital part of our joint future. The guy who has kept us busy the last couple of weeks is standing next to me here on stage. Nick Walker.
Thank you.
CEO of Lundin Energy. It's great to see you, Nick, that you are just as happy about this transaction as we are. Nick, please share with us your perspectives on this opportunity.
Well, Øyvind, thank you, and good afternoon, everyone, and thank you for joining with us. I think this is a tremendous deal to put two tremendous companies together to make something even better and bigger. I think it's a great deal for Norway. I think it's a great deal for our shareholders of both companies. I also think it's a great deal for the Norwegian staff on both companies, putting two great companies together to create lots of growth opportunities for individuals. As Lundin, we've been focused on creating value for shareholders for over 20 years, and I think we've created a lot of value over that time. We always look as a business to see how we can continue to create more value for our shareholders.
I think putting these two leading Norwegian independent companies together to create another Norwegian champion, the second largest E&P business here in Norway, and I think one of the world's greatest upstream independent companies is a great opportunity. I think it's win-win for both sets of shareholders. I think if you look at it's one plus one equals more than two, and I think that's the key ingredient with this. It creates Europe's leading E&P company. It's scale, which I think is really important through the energy transition, and we've recognized that. It also creates production growth, and I think when you put the two companies together, as I think you'll see, it creates a tremendous growth profile.
More than that, it's low cost and low carbon, and I think it sets the business up to be successful through the energy transition, delivering long-term value and I think strong cash flow into the future, which importantly allows the business to deliver sustainable and growing dividends long term. When you look at the business together, Lundin shareholders will own 43% of the business. We're not going away. We're the Lundin shareholders are part of this and joined in the success of the joint company. Indeed, the Lundin family will retain be one of the largest shareholders with 14.4%.
You look at this. It solidifies some value around 20% of the Lundin value today, but importantly gives shares in the joint company, which will deliver strong shareholder returns over the long term. On top of that, we are retaining and into the existing Lundin Energy business, the renewables business, which we look to grow. I say this is a great deal, as I mentioned at the beginning, for Norway, for our shareholders and for the Norwegian staff in our business. I do want to just say a little bit about the renewables business. That it's a new renewables business. We have three high-quality renewable assets in the Nordics. It's debt-free and with significant cash reserves, and we're generating free cash flow from the end of 2023.
With the capacity to grow the business further and also positioned to pursue other opportunities in the energy transition. We will talk more about what this business looks like as we lead up to our Annual General Meeting around approval of this deal, what the board looks like, what the strategy looks like, and what the management will be like. What I want to do is, before I hand back, to reiterate this is a great deal for Lundin Energy and Aker BP. I want to congratulate Øyvind and your team for putting this together. We've worked very hard, a lot of late nights for the last bit, last while, and I think, it's a great success for both of us to create, one of the world's great, upstream independent E&P companies. Thank you for the cooperation.
I'll hand back to you.
Thank you very much, Nick. As you just said, this transaction makes perfect sense for both Norway and for the companies involved. In addition to the strategic rationale, there is also a bigger picture, one in which the oil and gas industry is undergoing a massive structural change. New winners and losers are being crystallized based on sector consolidation and transformations, not least impacted by the ability to deploy digitalization and new technologies. Some companies are choosing to transition away from oil and gas and into renewable. Others are becoming and remaining pure play oil and gas. The world needs both. Together, we're collectively facing a world in which demand for energy is rising.
A world in which oil and gas is expected to lose market share to other forms of energy longer term, yet consumption of oil and gas is likely to grow over the next decade. This means two things, both of which provide a strong rationale for the transaction beyond our early vision of value creation. One, size matters. While a diversified portfolio is increasingly important, building sizable players is vital to ensure access to the resources needed to develop and invest in growth and improvement, and to set the standard for basins like the Norwegian Continental Shelf for a long time to come. This is especially important to ensure continuity through cycles in an industry volatile by nature. Following the transaction, Aker BP will be the second-largest company on the Norwegian Continental Shelf with total reserves and resources of around 2.7 billion oil barrel equivalent.
The company will almost double its current oil and gas production, and the ambition is to grow production to well above 500,000 bbl of oil equivalents per day by 2028. The organic growth comes from a highly profitable pipeline of projects, all made possible by the temporary changes to the Norwegian petroleum tax system. In addition, we expect to realize annual synergies of up to $200 million from the combination. Secondly, and in combination with size, pure play companies are essential to ensure continued and long-term quality of oil and gas production. With this acquisition, Aker BP confirms its pole position as a low-cost, low-carbon oil and gas producer. It will have among the lowest CO2 emissions intensity in the global E&P industry. Hence, the combined company will be in a very good position for shaping the lower carbon energy future.
This rests largely on the unique quality of the NCS portfolio, especially with a significant 31% participation interest in the Johan Sverdrup field, providing industry-leading low-cost operations. The combined entity will continue to have the Norwegian Continental Shelf as its sole focus area. It will build on the combined competence of the two companies, not least within digitalization, as well as leveraging the alliance model to drive up efficiency throughout the value chain in cooperation with suppliers. To sum it up, this is a transformative time for a vital inter-industry. In that market environment, we are creating an even stronger pure play company with an even more solid financial fundament, which enables continued investment in profitable growth, predictable growth in dividends, supported by a robust cash flow from a more diversified portfolio of assets, and continued contribution to a lower emissions future.
Now, let me spend a few words on the structure of the transaction. The transaction is technically an acquisition where Aker BP will acquire Lundin Energy's oil and gas activities in Norway. In exchange, Lundin Energy will receive 271.9 million new shares in Aker BP and a cash consideration of $2.22 billion. Per Lundin share, this is equivalent to approximately 0.95 Aker BP shares plus SEK 71 in cash. This means that the Lundin shareholders will own around 43% of the combined company. The consideration will be distributed to Lundin's ultimate shareholders. The company will keep its Aker BP name and its headquarters here at Fornebu, Norway. The existing board and the existing management team of Aker BP will remain in charge of the combined company.
Ashley Heppenstall, the former CEO in Lundin Energy, is joining as a new shareholder-elected member of the board of directors. The transaction is expected to be completed in the second quarter of 2022 and is subject to shareholders approvals in both companies, as well as regulatory approvals. The Lundin family, Aker, and BP will be under a six-month lockup from closing. The terms negotiated are balanced and fair. This slide shows why. It outlines how the share prices of the two companies have correlated ever since the establishment of Aker BP back in 2016. Both the average since 2016, the average for the last two years, and the closing share price yesterday are nearly spot on the transaction's exchange ratio.
By combining Aker BP and Lundin Energy at the agreed terms, we are creating a regional pure-play champion on the Norwegian Continental Shelf, a unique point of departure for creating shareholder value for decades to come. Karl, the Aker BP CEO, will now explain why and how.
Thank you, Øyvind, and thank you, Nick. It is not difficult to share your enthusiasm on today's announcement. The new company announced today will truly be an oil and gas company fit for the future. It is, of course, tempting today to describe the new company in many words, but it's even more powerful when done in numbers. Listen to this. After the acquisition, the company will have around 1.5 billion barrels of oil equivalent in reserves with nearly 90% liquids. The resource base that is unsanctioned oil and gas discoveries amount to roughly 1.2 billion oil equivalents. Also, there's mostly oil. As previously highlighted, the production will be around 400,000 bbl of oil equivalents, while the operational cost is below $7 a barrel.
This is, in fact, the target level presented to the Aker BP CMU in February and a testimony to the quality of the portfolio. Last but not least, maybe the most impressive metric is the combined company's CO2 footprint at around 3.8 kg per BOE produced. Needless to say, this is truly world-class performance, positively impacted by the high production from Johan Sverdrup, but also by the high degree of electrification of our installations provided by the safe and efficient operation that historically has been the hallmark for both Lundin and Aker BP. Further, it speaks volumes to the quality of the underlying portfolio. Speaking of portfolio, through the transaction, we are creating a company that has an unparalleled portfolio of high-quality assets with strong and growing production.
While Aker BP and Lundin has had ownership interest in many of the same fields, including Alvheim and more than a 30% interest in the exceptional Johan Sverdrup, the transaction also grants us access to new assets in operation and exposure to some very interesting development projects. In fact, the company will operate or participates in most of the new field development, major field development that is on the NCS, with NOAKA and Skarv Satellites and Wisting as the three biggest projects. The combination will allow Aker BP to roll out its operating model on an even greater number of assets. New projects will be developed under the alliance model, reducing cost and improving quality of these developments. Additional activity will lead to reduced cost for all activities under the alliance umbrella.
Aker BP will strengthen and increase our digital efforts, and the combination paves the way for true leadership and digitalization of all activities in the company. In addition, we will provide an even greater contribution to the digitalization of the industry at large. The new company will be in possession of perhaps the most interesting exploration portfolio on the NCS. In the months to come, we will high-grade that portfolio to increase the value of an already extremely interesting exploration campaign, both in 2022 and in 2023. In total, the company expect to realize up to $200 million in operational and financial synergies per year over the next few years. Finally, we are combining two of the most, if not the most competent teams in the oil and gas industry, and acting as one team going forward. This will be truly hard to beat.
Finally, in a world where ESG has firmly taken the center stage on the oil and gas company's strategic agenda, the most resilient strategy is to produce with lowest possible carbon footprint and the lowest possible cost. It's safe to say that after the acquisition, the starting point could not have been better. The combined entity will simply have the lowest operating cost and the lowest carbon intensity in the industry, creating an industry leader along both dimensions, and demonstrating the company's unmatched quality. Both cost and emissions are, of course, helped by the significant ownership share in Johan Sverdrup, but the overall performance of this portfolio is impressive and will continue to improve in the coming years.
We believe this serves as the backbone for creating the E&P company of the future, but we're not resting on our laurels and will continue to work diligently to reduce even further wherever possible. Another important trait of the company is the substantial hopper of new development projects. With the current portfolio, the company will immediately almost double its current oil production to around 400,000 bbl. In addition, the current portfolio of development project has the potential to grow production to well above 500,000 bbl from 2028 from a highly profitable pipeline of projects. In the next few years, towards 2023, Sverdrup Phase 2 will significantly increase production with a natural decline in the following years. When we approach 2027 and 2028, the inclusion of NOAKA and Skarv Satellites and Wisting will again lift production volumes to new record highs for the company.
All these projects will be developed under the temporary tax regime, and PDO will be submitted before the end of 2022, adding robustness to the project economics. We will continue our tireless effort to improve the project development portfolio and project under execution every single day as one team. All this growth will, of course, require capital. When it comes to capital allocation, make no mistake, Aker BP's priorities remain firm. The number one priority is to maintain financial capacity. E&P is a capital-intensive industry, and access to capital at attractive terms is a cornerstone for our agenda of profitable growth. In this respect, the combination of the two companies will, without a doubt, increase access to and most likely reduce the cost of capital.
The second priority is to invest in our unique portfolio of growth, profitable growth projects with low life cycle break-even and attractive risk-reward ratios. This investment activity will in turn enable us to meet our third priority, which is to return value to our shareholders through a predictable dividend. Our board of directors has resolved to increase the dividend by 14% compared to what Aker BP communicated on our Q3 presentation. This means that the dividend per share will increase to $1.9 from 2022, up from $1.35 this year, or up from $600 million to $684 million for 2022, with effect from Q4 2021.
In addition, Aker BP has previously stated that we aim to grow at least 5% a year, and this ambition is restated for the new company as long as the oil price is above $40. Finally, it is our opinion that the robustness of the dividend is significantly improved with increased quality and diversification in the underlying portfolio. To sum up, with this acquisition, we are creating the E&P company for the future with an industry-leading position as a low -cost, low -carbon oil and gas producer, the most attractive growth pipeline in the industry, and a high dividend capacity combined with strong investment-grade credit rating. While creating the E&P company for the future is no small ambition, our starting point could not have been better.
More concretely, Aker BP in the months and years to come will run our assets with safe and efficient operation, low cost, and low carbon emissions. We will continue to use the unique Aker BP alliance models to develop a large hopper of profitable projects, which will pave the way to production of more than 500,000 bbl in 2028. We will aggressively pursue digitalization and other improvement activities to improve our position further, and we will develop the best team in the industry from an excellent starting point. Thus, the value creation pillars for both the transaction and for Aker BP going forward will be scale, quality, and return. This will truly be the E&P company for the future. With that, I'm handing back to you, Øyvind.
Thank you so much, Karl. Before opening up for Q&A, it's my pleasure to welcome the Lundin team to the Aker family as a result of this transaction. We have been competitors in the past, but we have also been partners in the past. From that experience, we know your capabilities. Your reputation in the oil and gas industry is that you are one of the best and most competent teams and with deep functional expertise. I'm looking forward to adding on yet another 450 colleagues to our organization in Norway. I would also like to welcome the Lundin family, Ian and Lukas in particular, as fellow shareholders in the combined business.
We have been colleagues for several years, and now we're sitting on the same side of the table, and I'm pretty sure that also you're sharing my enthusiasm about the opportunity Karl just described. Last but not least, a big thank you to you, Nick, for your leadership. It has been instrumental and vital for ending up where we are today with an announcement which is historic milestone for Aker, but it's also an important milestone for the Norwegian oil and gas industry. Thank you so much.
Thank you.
It's time to open up for Q&A.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. Please state your name before posing your question. Again, it is star one to ask a question. We'll move to our first question. Your line is open. Please go ahead.
Hi, this is Sasikanth Chilukuru from Morgan Stanley. Can you hear me?
Yeah.
Hi. Thanks for the presentation. I just wanted to quickly touch upon the operating synergies that you mentioned. If you could provide more details on the $200 million that you intend to save on through synergies. Where are these coming from, and how do you expect to realize that? That would be quite helpful. Also, I just wanted to understand the rationale for the dividend increase. How did you arrive at that 14% increase in the dividend that you've highlighted? Finally, one last question, if you had any. Lundin Energy had the target of actually going carbon neutral by 2023. If you...
Is there any division in the Aker BP's policy on reduction of carbon emissions following the transaction or if you have thought about that, if you could share, that would be quite helpful as well. Thank you.
Those, I think, questions for you, Karl.
Yeah, thank you. When it comes to synergies, I think there are three main components. Obviously, we are operating many or participating in many of the same licenses, so there will be cost synergies. In addition, when it comes to the balance between Edvard Grieg and Ivar Aasen, there's obviously operational synergies to be realized, both as Edvard Grieg is supplying a lot of the utilities to almost all the utilities, in fact, to Ivar Aasen, and also others as logistics, heli-transport, et cetera. Finally, we also plan to optimize, as I explained in my presentation, the exploration portfolio and high grade that in such a way that we can drill better wells with higher probabilities.
Finally, there is a significant operational synergies from including the Aker BP portfolio and the Lundin portfolio into one common portfolio, where the alliance, both in terms of project and drilling, would have more work to be done. In total, and then of course, there are financial synergies reducing capital costs and improving access, as I also described. In total, we estimate that this will be an up to $200 million run rate per year. I think I'll leave it to that. When it comes to your question around our ambition level, we have obviously had an approach in Aker BP, where our drive to be a part of the energy transition have been threefold.
The first one is to make sure that we run our business as best we can, maximizing tax and dividends payable to the government and our shareholders. Of course, they can, in turn, invest this in new profitable projects that Aker has already demonstrated how to do. Of course, we are significantly and effectively reducing our own CO2 emissions from an operational standpoint. The third one is to participate in creating new jobs and new opportunities in this energy transition. We will continue with that strategy and relentlessly work to reduce our emissions. When it comes to the dividend, I think I'll hand back to you, David.
Yeah. When it comes to dividends, the framework for Aker BP is the same. Karl already talked about it. It's about the balance sheet and the resilience of the balance sheet. It's about investing in growth, and it's about providing high shareholder returns. Our dividend policy is based on having a balance sheet which is robust at $40 Brent. The ambition is then to increase the dividends by a minimum of 5% per year if the oil price is above $40. The new dividend policy, which means a 14% increase, is of course, based on this, methodology. Karl, when he talked about the synergies of the two companies, one of the key synergies is the combination of the two portfolios, which provides an acceleration of cash flow, and also enhanced balance sheet resilience.
That's the key to the dividend increase.
Great. Thank you very much.
We'll move to our next question.
Good evening. This is Teodor Sveen-Nilsen at SpareBank 1 Markets. Congrats to both teams for a very exciting deal. Three questions, sir, from me. Firstly, on the Wisting. I think it's pretty clear that Lundin and Aker BP, they do have somewhat a different view on this thing. So just wanted to hear your thoughts around what you think around that development going forward if the divestment can lead to a new company. My second question, that's on your overall exploration activity. Should we assume that that will just be the sum of the two companies, or will that be reduced compared to the current run rate? Final question, this is maybe to Nick.
Will Lundin Energy stay a listed company in Sweden? Thank you.
I should just actually start with you, Nick.
Teodor, I didn't quite catch your question. Could you repeat the last question?
Yeah, the question was, will Lundin Renewable stay a listed company in Sweden if the renewable assets are not a part of the deal?
That's the intention Teodor, and it will stay listed on Nasdaq Stockholm, and we will, you know, as we progress through the approval of this transaction, then we'll detail more about what the strategy of that company's going to be going forward, indeed the management and board as well.
Then there was a question about the Wisting field development. The Aker group, including Aker BP, knows that development very well. It's one of the projects enabled by the temporary changes in the Norwegian tax regime. The strategy of Aker BP will be to maintain the role as a license partner and support the development also in that capacity. Then you had one more question. Do you take that, Karl?
Sorry, I didn't catch your third question, Teodor.
It was on exploration, Karl. Is the exploration the sum of the parts, or do you think differently around exploration going forward?
As I explained in my presentation, we will sit down. We believe that the combined company has the most attractive portfolio of exploration assets in the business on the Norwegian Continental Shelf. There are obvious synergies to be had from high-grading our portfolio even further. In addition, this is probably the best exploration team in the two companies combined. I see no reason that we shouldn't be reinforcing our strategy on exploration. It might not be a complete addition of the two companies' portfolio.
Okay, understood. Thank you, and congrats again. Thanks .
Once again press star one if you had a question. If you find that your question has been answered, you can remove yourself from the queue by pressing star two. We'll go to our next question. Chris, your line is open. Please go ahead.
Thank you. Guys, thank you very much indeed for the presentation this afternoon. It's Chris Wheaton from Stifel here. I'm struggling slightly to understand the rationale of putting the two businesses here, could you perhaps say it again in language I can understand? Because I can't see anything here that either business could have achieved themselves individually. If I look at merging the two businesses, you've talked about the production profile, looks very similar to what happens if I put my Lundin and Aker BP models together. The cash flow doesn't look very dissimilar. The debt looks again, if you put the two businesses together, looks exactly where you'd expect it to be. I'm really struggling with the industrial rationale of this. Can you help me? Repeat it again for me, please, in a way that I can understand.
Thank you.
With this is the first time I'm hearing that argument. Karl, what do you? Will you take it?
I'm not sure I completely got you, but if you were challenging the argument as why these two companies could not survive alone, obviously they could. In combining these two companies, we are creating the best company out there. I'm absolutely certain that as you are combining both the quality of the portfolio, the quality of the teams, and the portfolio growth going forward, there is no better company that could be created. We truly believe that this is a unique opportunity to create the benchmark oil and gas company.
What you said about cash flow is not correct. If you consider the cash flow in the time horizons of the temporary tax changes, which has triggered a lot of investments in the Norwegian oil and gas industry. Aker BP will almost double its production due to projects which we are about to develop and have this aggressive growth program. Lundin Energy is involved in some of them that will generate significant cash flow. From a financial engineering perspective, we are more or less copying what we did with BP Norge in 2016, combining a growth company with a cash-generating engine.
That's a very helpful answer. Thank you. Again, I see the development profile of Aker BP didn't need the cash flow of one thing to develop. That's interesting. We'll take this up, I think offline, but thank you very much indeed for your time so far this afternoon. Thank you.
What we're achieving.
We'll move to our next question.
Okay.
If I may, just to give a comment to what you said about combination. You're right. It's obviously true that Aker BP can handle developments stand alone. Now we are creating an even more robust company, which will be able to pay an attractive dividend in parallel with an aggressive growth, even in a low oil price scenario. The robustness of the combined entity is very, very strong. Next question, please.
Caller's line is open. Go ahead with your question.
Yes, two-parted question from my end. First question regarding the synergies. Are all of the synergies to be realized in terms of reduced costs? And if so, does that mean reduced organizations essentially? The second, the activity level in terms of exploration. Will the combined company have a more high-graded exploration program than the two entities on a standalone basis, meaning that the total number of net wells will be reduced?
Why don't you, David, take the question and about synergies, and then I'll leave it to you, Karl, to elaborate on exploration?
Yeah, sure, I can do that. I might actually also answer the question on exploration when it comes to synergies. It's not all about cost when it comes to synergies, and it's not all about taking out the organization or employees. It's about synergies when it comes to the operation, as Karl talked about. The synergies between Edvard Grieg and Ivar Aasen, that's one major component. A second major component is, as Karl already mentioned, high-grading the exploration portfolio, which means that we will most likely not just add the exploration spend of Aker BP and Lundin together, but we will be able to optimize the exploration portfolio for the years to come, picking out the best wells, and I'm sure Karl can elaborate on that.
I think it's already been answered. We will obviously high-grade, which in this clear language means that we will not add all the wells together, but we only drill the most value-accretive wells. In addition, there is now a new operated hub in Aker BP, and that also means that we're obviously adding ILX, or infrastructure near the exploration wells, in the new hub as well.
Thank you. That'll be all for me.
We'll move to our next question.
Yes. Good evening. It's Al Stanton from RBC. You might have said at the beginning, but perhaps I missed it, but can you just highlight who instigated this merger, please? Because I can't help but feeling that Lundin is getting out at the top here, it seems to some extent. Then just two follow-on questions, if I may. How much discussion has there been with the Norwegian government and authorities? The consolidation of operatorships and ownership in Norway I wouldn't necessarily seen as a good thing. I'm just wondering whether they're on board with discussions at the moment. Then the final question is about change of control in the bonds. Do any bonds or debts need to be repaid as a result of the change of control? Thank you.
Al, perhaps I'll take the first one. You know, in Lundin, we've had a view for some time that I think during the energy transition, it's important to have scale. I think it's important to be low cost and low carbon. We've been looking to see how we can create that and create more value for shareholders. We approached Aker BP and we came to this agreement, which I'm very pleased that we've done. I think it takes two fantastic companies, and it makes one that's even better and bigger. I think it's gonna create a lot of success and value for shareholders going forward. That's the background.
To the question about dialogue with the Norwegian government, the Minister of Petroleum and Energy in particular, and the Aker Group as well as Aker BP obviously have a continuous dialogue with the authorities in Norway. We have, however, not discussed explicitly this transaction before announcement for obvious reason. It has been insider information, so we will have that dialogue subsequently. With the dominant position of Equinor on the Norwegian Continental Shelf, my personal expectation is that this transaction will be well received by the authorities as well as all the stakeholders in the Norwegian oil and gas industry. Your last question was about change of control.
The only change of control provision triggered by this transaction is, as far as I understand, in the RCF, the Lundin RCF. That RCF is undrawn. But nevertheless, we have prior to announcement put in place backstop facilities. I'm not aware of any change of control provision which will be triggered as a result of this transaction, which has not only already been mitigated.
Maybe I can also add a comment or two...
Thank you.
...on financing in total for the transaction. Because I think it's worth noting also that both companies, Aker BP and Lundin, has a significant cash position already at current point in time, and they will of course be worked in more detail. The numbers referred to here is pre-tax cash savings. There's obviously a tax element to it.
When it comes to taxes and tax optimization, we don't necessarily see anything specific to mention there. I don't know, Nick, if you want to refer anything which goes to our withholding tax.
Yeah, withholding tax, I mean, it's an issue depending on the residency of the shareholding. I think for most institutional shareholding, there won't be anything, but obviously for some jurisdictions there might. It's, I think for most people, there isn't.
We'll move to our next question.
Yeah, this is Yoann Charenton speaking from Société Générale. I'm not sure you can hear me.
Loud and clear.
Okay. Thank you. I appreciate this. Again, congratulations for this deal. I would like to better understand, if you don't mind, what sort of assumption is being made for the ultimate recovery of Johan Sverdrup barrels because it looks like this is the most important variable to price this deal together with oil prices. The second question will be on the gas side of things. Because as we speak, European gas prices are 4x-5x oil prices in oil equivalent. Aker BP and Lundin Energy, for instance, don't have the same exposure to gas. I'm really trying to understand what sort of assumption you made for gas prices to sort of agree on the exchange ratio. Thank you for the color you could provide.
Will you take that, Karl?
We have made no changes to the recovery rates of Johan Sverdrup from the already communicated recovery rates and reserves as a part of this transaction. When it comes to the merger balance, we have already demonstrated that the companies have basically been following each other even if the relationship has been trading around a little bit. I think both the difference in oil and gas portfolio, roughly 80-20 split, and the other makes the difference in relative pricing, not necessarily that sensitive to the transaction as a whole.
Thank you again.
We'll move to our next question.
Yes. Good afternoon. My name is Ebbe Bessvenning. I'm a Shareholder of Lundin. I have a question about reputation. As you're probably aware, Ian Lundin, who was welcomed with suspects of war crimes, and Ashley Heppenstall, who will be welcomed as director, who used to be suspect and oversaw the hideous operations that Lundin, according to the public prosecutor in Sweden, has had in Sudan. Now, I wonder how this merger what it will do to the reputation, moral reputation of Aker BP, welcoming these people who arguably oversaw one of the worst operations, morally speaking, of the history in the modern history of the industry.
Second question is, Lundin Energy AB will be left behind as an empty shell, while there's a claim of about $500 million laid down by victims of the war crimes. Doesn't Aker BP and its shareholders, by accepting this deal, facilitate the emptying of this company and basically denying the victims of war crimes access to remedy and reparation? How does that relate to Aker BP's support for the UN Guiding Principles? Thank you.
Maybe, Øyvind, do you want me to?
Yes.
To take those? I mean, I think I'd like to correct one thing. That Ashley Heppenstall is not a suspect in this case. For our perspective, it's incomprehensible decision by the Swedish Prosecution Authority to bring an indictment forward. The company carried out activity in Sudan around 20 years ago legitimately and responsibly. It was endorsed by international community. In terms of there's no basis for the alleged crimes, there's no evidence linking any of the company individuals or representatives to those. We have serious issues with the investigation. This is not going to proceed. It's not gonna end up in a conviction. I think when you ask about whether we're leaving an empty shell, that's not true. We're leaving a going concern.
We're leaving a business with a renewable energy business. It's got three high-quality renewable assets in the Nordics. It's debt-free. It's got significant cash reserves when we split the company out. It'll be generating free cash flows in the end of 2023, and it's got the capacity to continue to grow. I think it's positioned also to continue to pursue opportunities in the energy transition. You know, this is going to be a good company. We aim to grow it, and it can cover any of its liabilities. I think I'd like just to correct those items.
Yeah. In connection with this transaction, it's a fact that none of the businesses or assets involved have anything to do with the Sudan matter. It's a ring-fence business acquired by Aker BP. I can't see any reason why whatsoever this acquisition should jeopardize or have an adverse impact on Aker BP reputation, rather the other way around.
We'll move to our next question.
Oh, hi. Good afternoon. James Thompson at JP Morgan. Can you hear me?
Yes, sir. You are live.
Okay. Brilliant. Congratulations, gentlemen, on the deal. That's the deal. Well done. A few questions I have. Just firstly, you know, obviously the temporary tax regime in Norway is encouraging you all to invest in growing your own mature relevant assets at pace. Does this transaction allow you to sort of maybe reprogram some of those? Or are you still going to target sanctioning all of these developments inside 2022? Particularly, I suppose, given you know, a new tax regime that could come into play in the middle of next year. First question is really, you know, does this allow you to maybe make a more measured approach to the growth projects in the business? Or will you still kind of look to cram everything into 2022?
Karl?
These projects constitute probably the industry-leading pipeline in terms of profitable growth. We at Aker BP had already planned to execute all of these projects, as is clearly stated in every market communication we've had for a long time now. I think the fact that we are now onboarding and joining forces with Lundin, and we're also getting access to more people, better teams in total. I see no reason that this merger should not in fact reinstate or reinforce our determination to execute these projects. I think we're actually quite a lot better off at this point in time than we were just a few days ago.
Very good. Thank you. Second question. Just on the renewables piece, I mean, obviously this has been a leading kind of component part of the Lundin equity story, allowing you know a very accelerated pathway to net zero. You know, the investments so far have obviously given them more capacity than they have emissions. So I just wondered why Aker BP is not interested in that particularly. I mean, it would help actually reduce your own emissions. It maybe give you a more aggressive net zero target. So just interested to understand why that part of the portfolio is not of interest.
Was the question about whether or not we have not acquired a renewable business?
Renewables.
Well, it was not for sale. That's the short answer.
Yeah, I think so.
Indeed.
We wanted to retain it and to grow it. We're looking forward to doing that.
Okay. All right. Well, that's clear enough. Just one final for clarification. The $1.9 a share dividend, that will be retained when the new shares are issued? So it'll be on the register share count as well, just to confirm.
We will increase for Aker BP to $1.9 per share as of January 1st. The two first payments also in 2022 will also be $1.9 per share. It will also be the proposed dividend for the combined company as well.
Maybe I'll just clarify. We announced...
Okay.
...in our 3Q results that we're increasing our dividend for next year. The intention is that we will pay that increased dividend until the companies combine. We have one final dividend in January at the current level, but it will step up from April on until we close.
Gentlemen, we're running.
Okay. That was all from me.
Sorry. We're almost running out of time. That means that we have time for one more question, operator. Please, the last question.
Certainly. We'll take our last question now.
Hi, this is Paul Davey from Alls pring Global Investments. I just wanted to double-check when you're saying Lundin Energy is staying debt-free. I presume that means the current dollar bond is gonna move across to Aker BP. I know you said there's no change in control, and you talked about repaying term loan, but is that bond got any special treatment attached to it?
Could you repeat the last part of that question? If there's anything with the bonds is?
Yeah. I was just wondering is the Lundin bonds moving to Aker BP?
Yeah.
Are there plans to repay it?
No, they're moving to Aker BP. And then, we are assuming that this transaction is credit accretive also for the bondholders. But of course, if needed, we will also refinance them. The plan is to keep the bonds as is.
That's it. Thank you very much.
Well, it's my pleasure to thank you all for attending this presentation today. I hope we have been able to answer some of your questions. We will communicate with the markets in the days to come. Before that, I would like to wish you all a Merry Christmas, and I hope you all will be able to take some days off. Thank you.