Hi, everyone, and welcome to the Vår Energi Q3 presentation of 2026. Today's call is being recorded, and for the first part of the call, all participants will be in listen only. Afterwards, there will be a question and answer session. To ask a question, please press star one on your telephone keypad. I would like to introduce the Head of IR, Ida Marie Fjellheim. Ida, please go ahead. Thank you.
Good morning, everyone, and a warm welcome to Vår Energi's third quarter 2026 results presentation. I am gathered here today with Nick and Carlo, who will take you through our results. Afterwards, we will open up to questions. With that, I will hand it over to Nick.
Well, thank you, Ida, and good morning to you all, and great to have you all join us today for our third quarter 2026 results presentation. I am pleased to report strong financial results in the third quarter, which is supported by high realized oil and gas prices. As a result of the strong performance, we are increasing shareholder returns, and we are doing this whilst continuing to build long-term value. Now let us look at the highlights for the third quarter. Production in the quarter of 369,000 bbl of oil equivalent per day was impacted by plant turnarounds and some unplanned outages, which are now resolved. We saw solid performance at our operated assets, and we expect higher production in the fourth quarter now that our main turnarounds are completed and with new projects and wells coming on stream.
We continue to strengthen our financial position with significant CFFO post-tax in the quarter of $1.5 billion. We completed a successful issuance of $2.5 billion U.S. dollar bonds and have record high available liquidity of $7.5 billion. We have increased resilience. We have materially reduced net debt over the year to $3.1 billion, and our leverage ratio is down to 0.3 net debt to EBITDAX. We are well-positioned to capture further upside from the continued higher commodity prices. We continue to unlock long-term value. The combination with BlueNord is on track to complete around year-end. We completed both the DNO swap and the Pandion acquisition in the quarter, strengthening our positions in the Gjøa and Åsgard areas and consolidating our position in the Ringhorne North discovery. Our King development in the Balder area started up on schedule and is producing as expected.
We are pleased to announce a high-impact exploration collaboration, which was established between Vår Energi, Equinor, and Aker BP with the aim of targeting the next major NCS discovery. Lastly, we are increasing our dividend with an extraordinary component. As a result of the continued high prices and our strong financial results, we confirm an increased dividend distribution for the third quarter of $400 million, compared to guidance of $350 million, with the additional $50 million representing the extraordinary component. We are guiding the same also for the fourth quarter. Both the third and fourth quarter dividends will be attributable to shareholders of the combined company following the BlueNord transaction, pending closing. This means for the full year, we will have paid $1.45 billion compared to $1.2 billion for 2025.
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%-30% of cash flow from operations after tax over the cycles. We have a track record of delivering this, having paid stable or growing dividends now for the last 19 quarters. A recap on the combination of Vår Energi and BlueNord, which we announced in the summer. This is a complementary transaction for both sets of shareholders, and we have seen both companies outperform the market since the combination was announced. The merger creates a stronger, more diversified company with increased scale. You can see it adds growth with the strategic assets on the highly compatible Danish continental shelf. It adds value with a raised long-term production target of around 450,000 bbl per day.
It increases returns with limited near-term additional investments. We are leveraging Vår Energi's strong balance sheet to create significant financial synergies. The transaction is accretive on a per share basis to reserves, production, cash flow, and dividend capacity. As I mentioned already, we are on track to complete around year-end with the transaction subject to customary conditions precedent, including partner and authority approvals. The combination of Vår Energi and BlueNord builds the largest independent producer of oil and gas in Europe. It increases our exposure to the European gas markets and strengthens the company position as a reliable and secure supplier of energy to Europe. On the NCS, Vår Energi has a diversified asset base in all areas of the basin. Our portfolio is opportunity rich, providing the basis for growth and long-term value creation, and we are moving at pace to realize this value.
Now looking at some of the details, starting with 2026 production. Production for the first nine months averaged 383,000 bbl per day. Second and third quarters production reflects the impacts of plant turnarounds, with all major turnarounds now completed. Additionally, production in the third quarter was impacted by operational issues at the Johan Castberg FPSO due to outage of the power generation system. An extended turnaround at Jotun FPSO due to failure of the gas compressor requiring a replacement to be installed. Production irregularities at the Åsgard area due to curtailments at the Kårstø onshore gas processing plant. The issues at Johan Castberg and the Jotun FPSO were all resolved by early August. None of these main production impacts are reservoir related and have been managed effectively. We have three new project startups this year.
Eldfisk North in the Ekofisk area came on stream in the second quarter and is producing as planned. Our Ring development and extended reach well from the Ringhorne platform came on stream as planned in August, and is also producing as expected. Also in the Balder area, our Balder phase VI project is on track to start up in the fourth quarter. So far this year, we have started up 34 new production wells, which is in line with plan, although some key wells started up a little later than scheduled. We remain on track to start up a total of over 50 new production wells during the year, with many of the remaining wells in the final stages of completion.
We expect higher production in the fourth quarter and a strong exit rate for the year now that our main turnarounds are completed, and with projects and wells coming on stream. As we announced in our trading update, we now expect full year production of around 390,000 bbl per day compared to the original guidance of 390,000-410,000 bbl per day. Looking now at operational performance, you can see we are continuing our trend of improving our deliveries. We have seen strong safety performance during the year across a range of metrics. We have now had zero material incidents for over two years. This takes hard work every day. We continue our trend of reducing carbon emissions intensity, and we are ranked in the top 15% of the industry globally.
We continue to be recognized for our ESG leadership, having recently received our first ranking by MSCI at AA leader level. For production efficiency on our operated assets, we continue the strong trend with 91% for the first nine months. Noting that the year-to-date figure is disproportionately impacted by the planned turnarounds. On production costs, we achieved $10.9 per bbl in the first nine months, compared to our guidance of around $10 for the full year. The increase was primarily driven by strengthening Norwegian krone, and we are updating our full year guidance to around $11 per bbl. We have good control on underlying costs on an absolute level. Long term, including BlueNord, we expect operating costs to be in the range of $10-$11 per bbl. Technology is moving fast, and we are moving with it to continue to transform our delivery.
By combining new ways of working technology and AI, we are delivering significant value. It is what we call our BEST1 Initiative. Our project factory approach is a great example of this, where we are significantly reducing project cycle times and increasing value creation. We have momentum across the whole value chain, which will continue to transform how we deliver on our strategy. Our material resource base underpins our value creation. Following the BlueNord combination, 2P reserves will stand at 1.5 billion bbl, which supports current production levels. We are much more than that, with 2C contingent resources of around 900 million bbl, where development plans are being progressed. We also have an exciting NCS exploration portfolio of around 700 million bbl of net risk prospective resources.
Putting this together, the combined portfolio has over 3 billion bbl of resource potential, and crucially, with over 50% of this yet to be developed. There is more to come. We have a track record of continuously growing reserves and resources with around 280% replacement ratio over the last three years. For 2026, we see that we will have an organic 2P reserve replacement of over 100% for this year. Developing this material resource base is how we will deliver on our increased long-term production targets of around 450,000 bbl per day for the combined company.
You can see the levers that will drive this, maximizing recovery from our high-quality producing assets, delivering on our portfolio of projects in execution, progressing our significant portfolio of early phase projects towards sanction, and then unlocking more value with our focused NCS exploration program that is adding new projects all the time. Continuing to add to our portfolio of value accretive M&A, such as the BlueNord combination and the six transactions we have announced so far this year to high grade our NCS portfolio. We are delivering all of this at pace. Looking now at how we deliver on our long-term production target. We have 15 high-value projects in execution.
All of these are subsea tiebacks or facility enhancement projects, and you can see developing around 370 million bbl net with strong economics, where the average break even is around $30 per bbl and rates of return are around 35%. So far this year, two projects have started up, King and Eldfisk North, with performance in line with expectations. All ongoing projects are progressing on track as communicated. Realizing the value from our portfolio is enabled by our project factory approach, which combines standardized solutions, parallel working, pre-commitments, and strategic partnerships. Our Balder phase VI project, as you can see here, is a great example of this approach in action. Balder phase VI was sanctioned in June in 2025, is now in the final stages of completion for start-up before the end of the year.
Around 18 months from sanction to first oil, with the project generating significant value with a break-even of around $30 a bbl and payback in less than one year. We have repeated this short cycle approach with the recent sanctions in June of the Balder Next New Wells project and our Gjøa subsea projects, where for both projects, we will see first production in 2027. I think you already know we have a large portfolio of around 30 early-phase projects that are moving towards sanction. Also, these are subsea tie-backs to existing infrastructure or facility enhancement projects. You can see low cost, short time to market, high returns with average break-evens of around $35 per bbl and rates of return above 25%. I am pleased to say we built significant momentum with the sanctioning of 10 projects in 2025 and a further four projects so far this year.
We are working towards a further four potential project sanctions by the end of the year. When we look forward to 2027, we expect to sanction around a further eight projects, providing more than 100% organic reserve replacement also in 2027. These projects demonstrate our ability to mature and execute a portfolio of high-quality developments. We have the people, the equipment, the contracts in place to deliver the planned project program. Delivering on this portfolio will develop, as you can see, around 500 million bbl of contingent resources and will deliver on our long-term production target. Now turning to our exploration program, where you can see we have a strong track record of unlocking value. We have continued its success in the first nine months of the year with four commercial infrastructure-led discoveries out of eight wells drilled.
We have six exploration wells remaining in the year, with three wells in the Balder area and three wells to be completed in the Gjøa area. In August, as I mentioned earlier, we are pleased to announce the establishment of a high impact exploration collaboration between Vår Energi, Equinor, and Aker BP, targeting the next major NCS discoveries. We have agreed to combine expertise, data technology, and exploration capacity. Over the next five years, the companies plan to mature and test a portfolio of approximately 20 to 25 exploration opportunities with our ambition to drill around five high impact exploration wells annually. This program will start from 2028. Looking ahead, we have a significant exploration position in all areas of the NCS, and we will have an exciting exploration program in 2027 with some important high-impact wells.
That rounds off my operational update, and I will now hand over to Carlo to review the financials. Thank you.
Thank you, Nick, and good morning, everyone. Let us start by summarizing the key financial highlights of the third quarter. We achieved an average realized price of $103 per BOE and generated a significant CFFO of $1.5 billion. Our financial position continues to strengthen. Available liquidity reached a record high level at $7.5 billion, with net debt further reduced and our leverage ratio improved to 0.3. During the quarter, we successfully issued $2.5 billion of senior notes at an attractive pricing, further strengthening our liquidity position and extending the maturity profile of our debt portfolio. Such issuance materially contributes to the early achievement of the financial synergies announced in relation to the BlueNord transaction. Free cash flow was approximately $0.8 billion in the quarter. We continue to deliver attractive returns to our shareholders.
Underpinned by continued high prices, strong financial performance, and our strengthened balance sheet, we are acting on our decision for an extraordinary distribution, and we are increasing the dividend to $400 million for the third quarter and guide the same level for the fourth quarter for the combined set of shareholders. Each quarter consisting of $350 million base dividend and $50 million in extraordinary dividend. This $100 million extraordinary dividend distribution comes on top to the Q2 dividend increase, where we added for existing shareholders $50 million to our previous run rate. This brings total shareholder distribution for 2026 to $1.45 billion, up from $1.2 billion in 2025. Our long-term dividend policy of 25%-30% of CFFO after tax over the cycles remains intact.
We generated revenues of approximately $3.6 billion in the quarter, 70% higher from the same quarter last year, driven by higher volumes sold and higher prices, achieving a weighted average realized price of $103 per BOE. Our realized crude oil price was $103 per BOE per bbl, representing a premium of approximately $6 per bbl to Dated Brent. Towards the end of the quarter, premium differentials for medium and light sweet oil qualities from the NCS have materially increased. Since these grades represent approximately 50% of our crude oil portfolio, we are well-positioned to benefit from such increase. As cargoes are normally sold weeks ahead of delivery, those premiums will be reflected in our fourth quarter results. Should the market situation continue as it has been so far in October, differentials are expected to be in the range of $6-$10 per bbl for the fourth quarter.
Vår Energi has always had a proactive and forward approach to shipping. This approach is protecting us from the material shipping rates increase currently affecting the market while maintaining fleet availability to support our lifting plan. We have secured ample shipping capacity beyond 2030 at an average shipping cost of $2-$3 per bbl. The realized price for gas was $108 per BOE in the quarter, approximately $18 below the average spot market reference price. This was due to a combination of volume sold forward on a fixed price basis and volume sold with a month ahead indexation in a rising market. The impact will be the opposite in a descending market.
For the gas year ahead that started 1st of October, we have sold around 18% of our gas volumes at year ahead contracts at around $76 per BOE, running until the end of the third quarter 2027. Including additional fixed price tranches, approximately 30% of our gas production for the fourth quarter 2026 and the first quarter 2027 is sold at an average price of around $82 per BOE. A brief update on our financial hedging position. We continue to retain significant exposure to price upside through a disciplined hedging strategy. For the fourth quarter, 13% of our post-tax oil production is protected through collar options, with an average floor of $75 per bbl and an average cap of approximately $140 per bbl.
For gas, 15% of the fourth quarter post-tax production is protected at an average floor of approximately $83 per bbl, with a cap of approximately $220 per bbl. We are also taking advantage of the current supportive market environment to secure attractive hedging levels for the first three quarters of 2027. Through the use of collars and three-way option structures, the company has protected approximately 12% and 11% of its post-tax oil and gas production respectively. Our 2027 hedges protect an average floor of $71 per bbl and $83 per BOE for oil and gas respectively. For hedged volumes, the gas price are capped at $206 per bbl, while the oil is maintaining partial price participation above $100 per bbl. Vår Energi generated material cash from the third quarter.
Cash flow from operations after tax was approximately $1.5 billion, down from the previous quarter, mainly reflecting higher trade receivables resulting from the strong prices realized for our September sales that are already collected as we speak, and higher cash tax payments. CapEx for the quarter, including exploration, was $725 million. The strong operating cash flow covered the CapEx with a solid margin, and CFFO to CapEx coverage was 2.1 in the quarter. Our full 2026 development CapEx guidance remains unchanged at $2.5 billion-$2.7 billion. Our liquidity position strengthened further during the quarter. We ended the quarter with a significant cash balance of approximately $4.75 billion and a record high available liquidity of $7.5 billion. Looking at the development of our cash position in the quarter, we generated $3.1 billion of cash flow before tax and working capital movements.
Working capital had a negative impact of approximately $440 million due to higher trade receivable at the end of the quarter, which have already been collected. Taxes paid amounted to $1.21 billion, with a cash outflow of $828 million in investment into our high-value project portfolio, including approximately $100 million related to the Pandion acquisition and the [Linoz plot]. In the fourth quarter, we expect to close the previously announced divestments in Fenja and Goliat, resulting in a cash consideration to be received of up to $350 million. During the quarter, we raised $2.5 billion from the issuance of U.S. dollar senior notes and repaid $500 million of bonds maturing in 2027. The average weighted coupon for this issuance is approximately 5.8%, hence materially contributing and de-risking the early achievement of the financial synergies announced in relation to the BlueNord transaction.
Also, in September, we distributed as planned, $350 million in dividends related to our second quarter results. The company ends the third quarter with a very strong financial position. We continue to reduce our leverage ratio. Net interest-bearing debt over EBITDA is now down to 0.3 at the end of the quarter, significantly reduced from 0.8 in the same quarter last year and remaining well below our over-the-cycle target of below 1.3. We remain committed to maintaining investment-grade credit ratings and continue to hold the rating from Moody's, Standard & Poor's, and Fitch, all with a stable outlook. In the third quarter, we paid approximately $1.1 billion in cash taxes related to 2026 result, while for the fourth quarter, we expect cash tax payments of approximately $1.7 billion. For the first half of next year, we give sensitivities based on 2026 estimated profits at different price scenarios.
We remain committed to delivering long-term attractive returns to our shareholder, and our track record now demonstrates 19 quarters of stable or growing dividends. Underpinned by continued high commodity prices, strong financial performance, and on the back of the BlueNord transaction, we are acting upon our decision for an extraordinary dividend and we are increasing shareholder distribution for the third quarter to $400 million. We get the same level for the fourth quarter. It is comprising $50 million of extraordinary component, and is subject to audited financial results with sufficient equity and general meeting approval of dividend. The $100 million extraordinary distribution comes on top of the Q2 dividend increase, where we added, for the existing shareholders, $50 million to our previous run rate, bringing the total 2026 dividend at $1.45 billion, compared to $1.2 billion in 2025. We continue to maintain a disciplined approach.
We will continue guiding dividend level on a quarterly basis, in line with our long-term dividend policy of 25%-30% of CFFO after tax over the cycle. Vår Energi continues to build the resilience and flexibility, supporting long-term value creation and attractive shareholder returns. With that, I hand it back to Nick for final remarks.
Well, thank you, Carlo. I have just one final slide to summarize. We strengthened our investment proposition, building the largest independent producer of oil and gas in Europe when the combination with BlueNord closes. You can see we have increased reserves and resources of 2.4 billion bbl, which supports increased long-term production of around 450,000 bbl per day. We are opportunity-rich and are investing in a large NCS portfolio of high-value, short-cycle projects that will increase returns. We have stronger cash flow generation of between $8 billion-$13 billion of free cash flow over the period 2026-2032. We continue to improve the business for increased resilience and flexibility, with a free cash flow breakeven of around $40 per bbl supporting investments through the cycle.
We have increased our dividend payout again for this year, and you can see that we have the capacity to fund long-term attractive shareholder returns. On completion of the BlueNord transaction, our share free float will increase from 37% to around 43%, increasing the liquidity of our stock and potentially increasing the weight in the various stock exchange indexes. Finally, the global conflicts amplify the strategic importance of Norway and Denmark as secure and responsible suppliers of energy to Europe. All of these factors have combined to deliver significant shareholder value, with a total shareholder return since the IPO four and a half years ago of around 270%. These are our third quarter 2026 results, another reasons to be invested in Vår Energi. I will finish there, and thank you for your time, and we would now like to open up for your questions. Thank you.
Thank you very much, sir. As said, sir, now we will start our Q&A session. If you would like to ask a question, please press star one on your telephone keypad. If you wish to withdraw it, you may do so by pressing star two. Please respect only two questions per participant, and afterwards, you can reenter the queue for more questions. There will be a brief pause while we register your questions. Our very first question today is coming from Tianhong Bi of Citi. Please go ahead. Your line is open.
Morning, guys. Thanks for taking my questions. The first one, Nick, there has obviously been plenty of speculation around a potential transaction in Norway. I appreciate there may be limits on what you can say, but if we take a step back, how do you think about Vår's long-term strategy around Ekofisk? You have consistently increased your ownership in and around the hub over time. Does that strategy ultimately include an ambition to pursue operatorship of Ekofisk? A second question, perhaps for Carlo. On cash taxes, you are guiding to around $1.7 billion in Q4. But looking back, Vår seemed to have made additional tax payments in late 2022, which helped reduce cash tax obligations in subsequent quarters. How should we think about that flexibility today, and is there any scope for further prepayments that could influence the cash tax profile into 2027? Thank you.
Good. Well, thanks for the leading question. What I will say is that we do not comment on acquisition activity, so I cannot say any more than that on that. Carlo?
Okay. When it comes to tax cash, yes, you are right, in 2022, this was managed at the end of the year. It is not a straightforward process because the process in the country is quite regulated on when we can revise our tax schedule, and this has been already done when possible, exactly to reflect the increasing trend. So we will see whether there is a possibility with the tax authority. But it would be out of the process, so I am not guiding or anticipating anything with that regard.
I just may add to that, we've already increased the second half's this year from NOK 25 billion- NOK 27 billion , so we've taken up the payment somewhat.
We took already the window. Clearly, the price is continuing going on the higher end, so can't keep the pace all the time.
Thanks.
Okay.
Thank you very much. Well, thank you, sir. Next question will be coming from Victoria McCulloch of RBC. Please go ahead.
Morning. Thanks very much. Thanks for the color on new production and wells being added in Q4 that helps us bridge to revised guidance. Can you help us a bit with the color as to how much your existing production is expected to increase in Q4 due to the lack of interruptions? Maybe connected to this, when do you expect Ormen Lange to subsea compression issues to be resolved? I guess somewhat connected to this, my second question.
How much of OpEx is FX related in Q3? How much was the difference from the $10 BOE guidance versus the unplanned interruptions, which I'd expect had an impact on OpEx as well. Thanks very much.
Victoria, good morning. Just to cover off Ormen Lange, I think it's expected to start up around the end of the year is our understanding. If you look to fourth quarter, all the turnarounds are behind us. Actually, we have new projects coming online. Balder phase VI, for example, will come online very shortly. We have a lot of production wells coming online this year. Some of them have been a bit later than expected, but we're actually on track in terms of total numbers so far. We've got 34 online, and we expect around 50 by the end, or actually over 50 by the end of the year. Many of those are in the final stages of being completed. We've got good visibility on that. We're going to see higher production in the fourth quarter.
We've set out that we're going to be around 390,000 bbl a day for the year, which is the bottom end of our original guidance. You can do the sums as well as I can, which says we have to be around 410,000 bbl a day in Q4. I think we're in good shape to be able to do that. We will see good exit rates from the year actually, because a lot of things coming online towards the end of the year. That's how I would characterize our production in the fourth quarter. Carlo, maybe pick up the OpEx question.
Yes. Your question about the OpEx. We have a year to date quarter, which is around $11 per BOE, and approximately $0.50 is due purely to Forex effect, so strengthening of NOK compared to our assumptions of NOK 10 per dollar.
Super. Thanks very much. That's really helpful.
Thank you, Victoria. Next question will be coming from Teodor Sveen-Nilsen, calling from SB1 Markets. Please go ahead.
Good morning, and thanks for taking my questions. First question, that is on the exploration collaboration with Equinor and Aker BP. Which by the way, looks like a very positive initiative. Do you expect, or how do you expect that collaboration to impact your total exploration spending over the next few years? Second question, that is on third quarter cash flow. Looks like you made some significant working capital investments in this quarter. Is that purely related to higher oil and gas prices? Should we expect that effect to reverse over the next couple of quarters? Thanks.
Yeah. Good. Teodor, I think the ambition is that between us, we drill up to five wells, high impact wells a year. Each of us had an exploration strategy which was around 20% of our exploration spend directed towards high impact opportunities. The reality is we haven't been fulfilling that because, for various reasons, we didn't necessarily get partner support to do things. It's precisely why we put this collaboration together, which is the three of us wish to go and do these things. We're going to work together to build the license position to be able to make it happen. The first wells will come in 2028. I don't see a material uptick in our exploration plan. I mean, our exploration budget, it goes in cycles a little bit, depending on the quality of the opportunities and how they come forward.
I would expect us to work within the range that we have. The more success we have, the more we can spend, and the less success we have, the less we do. We adjust as we go. Carlo, do you want to deal with the-
Yeah, sure.
Other question.
On the working capital, Teodor, yes, I confirm with your understanding. The increase of working capital is absolutely mainly driven just by the increase of price versus June, where you remember the price was actually a bit going down, and then it picked up again. If you look at our financials for the quarter and the detail of working capital, you can pick this up very quickly. That's why it's a pure temporary effect. As I was mentioning, those receivables are obviously already being collected as we speak because there is no risk under that perspective. So that's the reason.
Okay. That is clear. Thank you.
Thank you very much. Next question will be coming from Alejandra Magana of JP Morgan. Please go ahead.
Hi. Good morning. Thank you for taking my questions. On the Q3 production interruptions, you provided some additional color and prepared remarks, but can you help us understand what should give us confidence that these were isolated events rather than pointing to any recurring reliability issues? My second question is on BlueNord. With closing still targeted around year-end, has anything from the integration planning changed your confidence in either the synergy target or the timing of realization? Thank you.
Good. We mentioned three main events that impacted Q3 production. First of all, at Johan Castberg, we have had some challenges with the power generation system. I think we are in just over a year from startup. It is the time that you start to see issues with the facility that come evident, and I think that is what we have seen. So that issue is managed and behind us, and we do not see a risk from it looking forward. The second issue is around the Jotun FPSO. We had an extended shutdown. The reason we extended it is that when we started up, we had a failure of the gas compressor, and we had a spare, which we do have, and it just required us to replace it. So actually, we have had a good track record with compression there.
It was a bit disappointing, but I think that issue is also behind us. At Åsgard, the majority of the issues here have been around some curtailment from the onshore gas processing plant, which again, has a good trend of uptime. But we had a problem with a valve and some other problems at the terminal. I think again, those issues are behind us. None of these are reservoir related. They are all sort of one-off facilities issues, and I think we should be comfortable that these things will get managed properly going forward. Your second question, perhaps you repeat that?
Yeah, just-
Oh, the BlueNord transaction. Look, we are expecting closing around the year-end. I think we are in a good place to achieve that. We have seen nothing out of what we have seen so far that makes us think there is any less positive than we were when we announced it. I am sure we are going to create a lot more value out of this when we get it. But we cannot really start to work that until we become the owner of it. As I say, that will happen around the year-end.
Maybe on this, if we can just highlight again that if you remember when we announced the transaction and we guided $250 million-$300 million synergies, a material part of it was driven by the refinancing. Actually on that, we took an early action as we issued back in September a very compelling coupon. So at this point, we also see those synergies to be very much de-risked, I would say, realized.
Appreciate the color.
Thank you very much. Our next question will come from John Olaisen of ABG. Please go ahead, John. Your line is open.
Thanks for taking my questions, everybody. Two questions from me. The first one is regarding the Balder field. I did wonder, will there be any production interruptions in Q4 when Balder phase VI is being hooked up? That was my first question. The second question is regarding tax payments, and the question is related to slide 18. You have quite a wide spread in the potential payments in the first half of 2027, and I realize that is all related to the payable tax for the tax year 2026. I just wonder, the scenarios you have with different oil and gas prices, are those oil and gas prices average prices for 2026, or is it average prices for the remaining of the year?
Good. I will deal with the Balder question. We would generally expect no disruption from the startup of the well. Actually, we did earlier on see disruption, but we have put in some processes to manage that for future startups. So I am hopeful that we will not see disruption as a consequence of starting up the Balder phase VI. Carlo, do you want to deal with the tax question?
Yes. Referring to the slide you just were referring to, so slide 18. If you look at the full note, those assumptions are reflecting the average realized price for the year because, as we know, we make an accrual estimate for the entire year, and then we pay half of it. I appreciate that there is a relatively wide range. On the other hand, the price are moving up, but this can be quickly down. That is the reason why the wide range. But is the average expected price for the year, not just for the quarter.
Thank you.
Thank you, sir. We will now move to Nash Cui of Barclays. Please go ahead, Nash.
Hey, good morning, everyone. Thanks for taking my questions. The first question is on distribution. Nick, you previously suggest a potential special dividend was more likely to come at Q4 results. I wonder what have changed to give you the confidence to bring that forward, and how should the investor think about the sustainability of this higher distribution level? Do you think there is even more room for more special dividend this year? My second question is on oil realizations. We realized $6 per bbl premium to Dated Brent in Q3. I would like to hear your view on whether this premium can be more structural. If I hear it correctly, Carlo mentioned that Vår Energi has locked shipping costs around $2-$3 per bbl, which is really great. But is that for your entire sales volume? Thank you.
Nash, good morning, and I will deal with the distribution. I think we wanted to take you by surprise by giving a bit more in this quarter. The reality is that we are almost at the end of the year, and what we said is that if the higher prices continue, then we would look at an extraordinary dividend when we came out with Q4. We are actually almost at the end of the year, so we chose that now was a good time to do it. We will continue to announce dividends on a quarterly basis and guide on a quarterly basis. This time round, we increased at the last quarter results to account for the BlueNord transaction from $300 million- $350 million, which was accretive, which is paid just to the existing shareholders.
Then we guided $350 million for this quarter, and now we have lifted it by $50 million- $400 million, which is $50 million of extraordinary dividend. We are guiding Q4 at $400 million, which if you take the run rate of $350 million, is another $50 million. So overall for the year, we will be a payout if we do the guidance level at $1.45 billion compared to $1.2 billion last year.
I think what we will do is, as usual, we will look at where we are in the quarter end, which will be in February, and think about where the business is at and the outlook is at, and make judgments then as to what to do. But this is how we see it today, and we are not going to get ahead of ourselves guiding forward. But I will just remind, we have delivered 19 quarters now of stable or growing dividends.
It is our focus as a company to continue that trend long term. I think we have the capacity and resilience of a company to do that, and that is what we intend to aim to do. Carlo,
Yeah.
Do you want to deal with shipping costs?
Sure. Realization and shipping costs. To your point, we see, again, a premium in our oil portfolio. It's going to be structural. If you remember, we discussed in Q1, we started to see this premium coming for April and May. For us, we had the same discussion, and we saw it was very much linked to how the geopolitical tension was evolving. In fact, it went down during the summer, and then picked up again while the geopolitical tension continues to, and almost situation has continued to impact. I believe that it's very difficult to predict whether this premium will remain structurally for a longer period or for a long period. We don't factor this in our analysis. What I believe we can consider a structural positioning for us is two things.
First of all, is the exposure to the light sweet oil qualities that have proved to be positively reacting to this, and this is because it's part of our oil mix. As you were mentioning about our shipping cost, we have a $2-$3 average on the entire oil portfolio, managed through a number of arrangements and contracts on a long-term basis. What we wanted to give assurance is that as a company, we have both the fleet capacity, so we don't see any risk when it comes to the availability of vessels for our lifting plan, and at the same time, at a competitive price, so we don't get exposure to what is happening now in the market. This, I believe, is positive for shareholders and investors in terms of resilience also on this specific part of the value chain.
This is very helpful. Thanks, Nick. Thanks, Carlo.
I might add, we locked all these shipping rates in for our volumes some while ago before the spike in prices that we saw in February or March. We have them under long-term contract. We're in a very advantageous position on this as a company.
Yeah. Great. That's a good call.
Thank you.
Thank you very much for your questions, Nash. We'll now move to Tom Erik Kristiansen calling from Pareto. Please go ahead.
Thank you. First question to you, Nick. On the exploration cooperation. Of course, it's good to see big companies coming together and more wells being drilled. At the same time, could you talk a bit about how you find these targets? Because through your time in Lundin, for instance, the giant Sverdrup field was discovered because someone was able to think differently. Is it kind of a risk here that you get too much of a cooperation between the three big companies and too much consensus thinking within that part of the exploration work that you get too few of these special voices that find something that has been overlooked before? The second question on the finances. The long-term dividend guidance has unchanged, 25%-30% of operating cash flow through the cycle.
In an upcycle where we clearly are now, how strong would you allow the balance sheet to become? How much cash would you build before you say that this is, we have to put it out there. Is there a net debt kind of level on an absolute basis that we should look at, or some kind of metric compared to a more normalized oil and gas price, in that kind of term of seeing how we should think about dividends, especially going into next year? Thank you.
On the exploration collaboration, I think the three companies that have come together to do this, we each realize that actually not many of these wells are getting drilled. First of all, you can't drill wells 100% here in Norway, but we've found that we reached getting licenses and various reasons we weren't able to move them forward. The way we're working is that we're joining together with our expertise and our data and ideas, putting it together to come up with a portfolio. The company that brings the idea forward is going to operate it. We have applied in the recent APA round, which we'll get awarded next year for some blocks we had previously that we wanted to drill, but we weren't able to do because we couldn't persuade the partnership that we had at the time to do it.
We're going to get to drill those, actually on a lower working interest than we probably would have had previously. I think it's a really positive thing to do. The reality is you've got to do these things. You don't find oil unless you drill wells. I think we've stepped out to say we're going to do this. I think, yes, you can see a negative with joining forces and doing it together, but I think it's actually far more positive than that because we're sharing ideas and we're backing each other's ideas. Fundamentally, we're going to make things happen and drill some wells. On dividend debt, we want to maintain long-term stable or growing dividends, and we want to maintain investment-grade balance sheet long term.
Within those parameters and within the parameters of the cycles of the oil price, we'll manage the company to achieve long-term resilience. We're not going to get ahead of ourselves and project dividends, and we're not going to get ahead of ourselves and project debt levels outside of that. But we've looked to deleverage a bit, which we will clearly do this year and have done so far, and we'll balance those two objectives. Really are balancing three objectives. One is funding our growth, maintaining investment-grade balance sheet, and then maintaining stable or growing dividends long term. We will find the right space within that to achieve those three objectives.
Thank you very much. Can I have one short follow-up there?
Sure.
All the companies that you previously saw that you had as partners, that you are not able to move these wells forward with, which of course, seems like a very good reason to do this collaboration, of course. The obvious one, was that mainly, call it, international large companies, majors, that wanted to hold back on spending, but still had interest in those licenses? Or was it the smaller, independent North Sea-focused companies that did not have the capital or did not want to take the risk on drilling these more speculative wells?
It is a bit of both, really. I just do not want to comment too much on the specifics, but the reality is getting alignment on doing these things, and you just have to look at the market. Who is drilling exploration wells here? There are really three very active players, which is ourselves, Aker BP, and Equinor, then there is a few other players that are participating, but most of them are not doing the high impact activity. That is why we have aligned together to make this happen.
Thanks a lot.
Good.
Thank you, sir. We'll now go to Alice Winograd of Morgan Stanley. Please go ahead, Alice.
Hi. Thank you and good morning. A follow-up on the dividend, please, if I may. Regarding the new $400 million run rate or the $100 million special for four years, how do I reconcile it with the 25%-30% CFFO payout range? Because just thinking of what you're likely to achieve for a full year 2026 CFFO, it strikes me that a $100 million special is definitely less than what you could afford and maybe even below the 25% payout floor. But simultaneously, maybe the $400 million is too high for a new permanent run rate. Can you maybe spell this out a bit more? What's the bar for the $400 million to go up and down ultimately if commodity prices normalize? Thank you.
Okay. Sure. Thanks, Alice. I'll take this. It's a good question, and it's also an opportunity to clarify this. We have a policy which is over the cycle, 25%-30% over the cycle. In particular, I believe that we all appreciate high prices or the big discontinuity in prices can create a lot of variances. Specifically what happens is very driven by how the Norwegian tax, which is a material impact on the CFFO, works. You pay 50% of the tax bill the year after. So in the year where you realize high prices, you typically have a CFFO, which is not fully discounting what is happening from a tax perspective, but it's just moved a few months after. So if you look on over the cycle basis is where you can have a temporary discrepancy, is what I'm trying to say.
That over the cycle is normalized. The way we look at it is, again, over the cycle, knowing that there is a tax bill that will be paid immediately after in February and so on and so forth. The price discontinuity we had this year is pretty material because compared to 2025 is a material spike. So I hope this gives you the thinking that goes a bit beyond the 12 months specific period when it comes to the policy.
Yes. Thank you.
Thank you very much, Alice. Ladies and gentlemen, as a reminder, if you have any questions or follow-up questions, please press star one at this time. We'll be taking a question now from Anders Rosenlund of SEB. Please go ahead, Anders. Your line is open.
Thank you for taking my question.
I was wondering if you could help us on page eight of the presentation where you give indications for future production. The light blue area, which says the 3P reserves, how should we think about that compared to the two areas which says current forecast, which includes improved recovery and 2C contingent resources in early phase and the BlueNord volumes? Are we fair to assume that you're indicating that production will drop from 2027 and in 2026 and drop to 2027 and 2028?
First of all, we are not guiding production for next year just yet. This is the long-term outlook, and it is the way we have been showing it for some time. We showed this at our capital markets day, and what we have done since then is update our current forecast and long-term outlook. We have of course added BlueNord on top since then. We will guide in February what we see for next year. The reality is there is a range around this, and it depends on the level of activity and funding that we choose to put. We are putting our plans together at the moment and when we get to finalize that and with our partners, then we will have a clear understanding of what the outlook for next year looks like and the future years. I think it is reflecting here that there is a range.
I think you should look broadly at the base, the dark blue plus the gray, as being the base. There is an upside on this, which depending on the amount of capital we put in and can achieve quite a bit more. I do not really want to guide much more than that at this stage.
Okay. Thank you.
Thank you very much for your questions, Anders. Ladies and gentlemen, as we have no further questions, I can call back over to Ida for additional or closure remarks. Thank you.
Thank you. That concludes the third quarter presentation for Vår Energi. Thank you very much for joining us today, and we wish you a good rest of your day. Thank you.