Good morning, a warm welcome to everyone here in the room, and to those of you listening in on the webcast. We are glad there's so many joining us for our first-ever capital markets update, and to celebrate one year as a listed company. The plan for today is a recap of Q4 and our full year 2022 results, before going into why we believe Vår Energi is well-positioned to deliver production growth and long-term sustainable value creation. Following the main presentation, including Q&A, we will have a 45-minute lunch break before the deep dive sessions with Vår Energi management. We will open the floor to questions after our CEO, Torger Rød, and CFO, Stefano Pujatti, have completed their presentations.
We will take questions from the room and the webcast, and you can type in your questions in the comment section throughout the presentation, and we will address these in the Q&A. You will also have the opportunity to ask questions in the deep dive sessions after lunch. First, we will give a short video introduction to Vår Energi before welcoming Torger to the stage. Thank you.
Economic uncertainty and the global security situation continue to influence energy markets with wide-reaching effects.
Norway will remain a stable, predictable, and not least, a trustworthy European energy partner.
Vår Energi is a leading oil and gas producer and a major exporter of natural gas from the Norwegian Continental Shelf. Every day, millions of Europeans rely on Vår Energi to light and heat their homes and workplaces. Vår Energi is run by dedicated people with two thoughts in mind: to safely produce cost-competitive oil and gas with some of the world's lowest carbon emissions. We support local communities, creating jobs and industrial development. A diversified asset portfolio and strong organization combine leading exploration results and pipeline of attractive development projects position us for continued growth and value creation, increasing production by more than 50% in the upcoming years. We intend to provide attractive shareholder distributions over time and will invest to secure reliable energy supply to Europe for decades to come.
Whoa! Good morning, everyone. To you here in the audience and to you at the webcast. It is really great to be here and hosting the very first capital market update for Vår Energi. On the picture behind you see us at the Oslo Stock Exchange, because also today we are celebrating one year as a listed company. One year ago, on the day, we were supposed to ring the bell, but we couldn't because the Oslo Stock Exchange, it was closed due to maintenance. Of course, in Vår Energi, we are always looking for good alternatives, and we did it by ringing the bell from all our offshore installations and office locations. That was a really good way of engaging our people to celebrate or to kick off as a listed company. Yesterday we were invited.
We were invited from Oslo Stock Exchange to come and open the market. It was really a boyhood dream come true for us to do the real thing, ringing the bell. You can see a big group of happy people, and that is also what I'm bringing with me today. As I said, it is exciting to be here, and it's also really good to say welcome on behalf of the Vår Energi organization, but also bringing my management team with me here today. As I said, we are really proud and excited. Today, I would like to ensure that you're leaving with the following key takeaways. Number one, we are on track for high value growth, and that means above 350,000 barrels by end 2025.
We have a clear strategic ambition to sustain beyond. Two, we have confirmed world-class exploration capabilities. That means that our hub strategy and our robust portfolio, it really delivers extended value. Thirdly, we continue our attractive distribution. We are confirming together with the Board, $300 million for Q4. That means $1,075 for the full year 2022. We are also forecasting $270 million in distribution for Q1. All of this is enabled with path to ESG leadership and world-class capabilities. We will continue here to present our Q4 results and number, and I will ask you, Stefano, to continue and to do that. Thanks a lot.
Thank you, Torger, and good morning, everyone. It is really a great pleasure for me to present the Q4 and full year 2022 result today. We will keep it a bit shorter than normal due to the capital market update. Let me go straight to it. During the fourth quarter, we delivered a quarter with solid cash flow generations from our operations in a continued strong market environment. We maintain safe and reliable supply of oil and gas, with Q4 production on par with Q3 at 214,000 barrel per day, impacted by operational issues at partner-operated assets. We maintain our material gas share of 37% in the quarter. Our operations continue to deliver strong cash generation.
The realized price was on average $115 per barrel in the quarter, with gas price of $182 per barrel. Cash flow from operations exceeded $440 million, down from Q3, mainly due to significantly higher tax payments. Twenty twenty-two CapEx level ended within the guided level at around $2.6 billion. We can also confirm the dividend for Q4 of 2022 of $300 million to be paid in March. High realized prices and cash generation really underpin our continued strong financial position. With more than $4 billion in available liquidity at year-end, including undrawn facilities and a leverage ratio that was standing at 0.3x at the end of the year.
Vår Energi continues to deliver strong exploration results and ended the year with an exploration success of close to 60% in 2022. Let me mention the Lupa discovery in Barents Sea in December was the largest NCS discovery in 2022 and adds to our strong exploration track record. If we also include Calypso, Snøfonn, and Skavl Stø , sorry, but not the easiest to pronounce for an Italian, we added around 65 million barrels in contingent resources in 2022. You see a summary of key performance indicators in the quarter. We maintain a sharp focus on the safety of our employees and had no serious incidents in Q4. The emissions intensity for operated fields increased marginally to 10.5 kilo per barrel, which reflects high exploration drilling activity in the quarter.
The strong cash generation continued. We will pay dividend according to the guidance. Now to safety. Safety is about people. Vår Energi highest priority is to operate without causing harm to people and the environment, and our target is always zero serious incidents and injuries. Our ambition is. Q4 production was on par with Q3. Fire on Åsgard B and unplanned downtime on Grane had a negative impact. Balder production increased after completion of the plant maintenance during the quarter. As I stated before, we maintain a high gas share of 37%. To enhance value, we continue to reduce NGL recovery to increase gas volumes and gas sales due to favorable market conditions. This led to a net production decrease of roughly 2,000 barrels a day in the quarter, but as I said, higher value realized for the company.
We made also significant efforts during Q4 to rectify the performance issues which affected production in 2022. Rune Oldervoll, EVP for exploration and production, is here with us today. We'll deep dive more into this later. Let me summarize the key items. We resolved the well issues on operated fields, both Balder, Ringhorne, and Goliat. We had a full recovery from the Åsgard fire. We repaired the Sleipner compressor. We have implemented learning from the turnarounds. We ended 2022 with an exit rate above 220,000 barrels per day. Our guiding for 2023 is in a range between 210,000-230,000 barrels per day. Now, let's move to exploration, something in Vår Energi we are very proud of.
Exploration activity was high during the second half of 2022, with strong results in Q4. We made the largest NCS discovery of the year with Lupa in the Barents Sea. We also made a discovery at Calypso in the Norwegian Sea. This adds around 65 million barrels in contingent resources to our portfolio for 2022 at a very low cost. The Countach and Angulata well were spudded in 2022 and extended into 2023. Last week, we got very positive first results with an oil discovery in the operated Countach well. Knowing Torger well, he will not forget to address this more into the details later on. Going forward, we continue to target the high-margin barrels located close to our key hubs, in line with our hub strategy. Now, let's deep dive into the key financials of the fourth quarter.
We generated solid revenues and operating cash flow before tax of close to $2.1 billion in Q4 on the back of continued high oil and gas prices. Full year, we were close to $8.4 billion. EBIT and profit before taxes are at high levels and both increased from the previous quarter. This includes a net exchange gain of $281 million, as the dollar has weakened compared to NOK. Also, we had increased liftings. Due to the cash build in 2022, our financial position is strong with $4 billion of cash and undrawn facilities available at year-end, which is an increase of more than 75% from last year.
Production cost is at $14.1 per barrel compared to $13.4 in the previous quarter, mainly driven by higher maintenance costs and stable production level. Full year production cost ended at $13.5 per barrel within the guided range. Vår Energi has changed the calculation of over-under lift in the financial statements to be in line with other operators on the NCS in response to demand from the market. From the fourth quarter of 2022, over-under lift positions are now both valued at production cost. I will now go briefly into more detail of our fourth quarter financial performance. More specifically on revenues. We generated more than $2.3 billion of revenues for the quarter.
Compared to the previous quarter, revenues were down $166 million on lower product prices, which accounted for a negative contribution of $490 million, offset by higher sold volumes that impacted positively by $324 million. For the full year, we generated close to $10 billion of revenues, an increase of more than 60% compared to 2021. These strong figures are a result of continued favorable market conditions and our large and diversified portfolio with material gas production, which for Q4 represented roughly 50% of revenues.
The average weighted realized price in the quarter was $115 per barrel. We are especially proud of our realized gas price of $182 per barrel, which was above the average of the different hubs for the quarter. Going deeper into the gas sales in Q4, around 40% of the sales were on day ahead basis at around $150 per boe. Around 30% was sold on a month ahead basis at around $235 per barrel. Both month ahead and day ahead were weighted towards the French and the German market. Remaining volumes were delivered under contract with fixed pricing, realizing an average of $163 per barrel.
Going forward, we continue to have a robust sale portfolio with access to several markets, and we have the flexibility in the contracts to decide the split between month ahead and day ahead. For Q1, Q2 and Q3 of 2023, we will have fixed price sales representing between 20%-35% of the gas sales. The price for these sales are approximately $285 per barrel in Q1, and $190 per barrel in Q2 and Q3. Here we see the development in our cash position from end of Q3 to year-end. As you see, the CFFO before tax and working capital changes was more than $2 billion, reflecting strong market conditions. Taxes paid in the quarter amounted to almost $1.7 billion. Cash investments were at high level due to ramp up of the major projects.
We also used cash in financing activities for the final payment to ExxonMobil. Finally, also $290 million were paid in dividends to our shareholders. Taking all these elements into account, the cash position at year-end ended at $445 million, twice the level of year-end 2021. CapEx level was stable year-on-year at around $2.6 billion. Cash flow from operations increased by $1.1 billion year-on-year. Overall, an exceptional financial year for Vår Energi in the first year as a listed company. Vår Energi material cash flow generation support attractive and resilient distributions. We maintain our dividend policy in a range of 20%-30% of the cash flow from operations after tax in 2023 and onwards over the cycle.
We guide, as Torger mentioned, for a Q1 dividend of $270 million. As we did in the past, we will continue to assess the dividend level on quarterly basis, taking into consideration the company performance and macro scenarios developments. Let me also add that we plan to pay approximately 30% of the CFFO after tax in 2023. As far as Q4 of 2022 dividend is concerned, we also confirm the payment of $300 million that will be paid at the beginning of March. With this, I conclude the Q4 presentation and leave the floor back to Torger to go through the capital market update.
Thank you so much, Stefano. Again, it is good to have a one-year celebration as a listed company. The one year, and first, you know, growth and value. That is the theme of today's capital market update, and that is really what Vår Energi is all about. That is also going to be the red thread through this presentation. Back a little bit to the one-year celebration of being a listed company. We are, even though, you know, sometimes it feels like a long time ago, you know, we are still proud of being the third biggest ever IPO on Oslo Stock Exchange, and also representing now as the biggest E&P IPO in Europe since 2006.
I think it's fair to say that it has been an really eventful year and exciting as well. It has been a lot of first ever for both the company and myself when it comes to being a listed company. Of course, this capital market update is one of those. Also, of course, it has been a very serious backdrop to this year, really driven by the war in Ukraine and of course also the energy situation following. Let's look a little bit on the IPO. We are proud of the significant value of the company. Actually, it's putting us in as a top 10 market cap company on Oslo Stock Exchange. Also, as Stefano talked to, and we have mentioned it a few times, you know, we have distributed a significant amount to our shareholders.
Talking about shareholders, I think it's quite striking to see that, you know, we have in a little bit more than a year's time, gone from two very supportive shareholders to more than 30,000. Also, me and being the CEO of Vår Energi, one thing that makes me very happy and very glad is also to see the ownership among our employees when it comes to Vår Energi. Together, they are shareholders together, this is really making Vår Energi our company. Our energy is your energy. Moving on to our value proposition and the creating the leading E&P on the Norwegian Continental Shelf, because that is what we are. We are a pure-play E&P company on the Norwegian Continental Shelf. We have a very diversified portfolio at the best parts on the NCS.
Let me take you through the value proposition. You know, we have a material and diversified production base. That is really maximizing our value through our hub strategy. Also we have world-class capabilities. Yes, Stefano, I will come back to both exploration and contract. Of course, this value, world-class capabilities and this world-class portfolio, it's bringing a significant and tangible growth. Nobody is having a high-value growth to above 350,000 barrels, more than 50% by end of 2025 as Vår Energi. Also, we have a credible path to net zero for Scope 1 and 2 by 2030. Stefano, he showed it. We have a material cash flow generation. We have an investment-grade balance sheet, and this is supporting an attractive and resilient distribution.
Let's zoom in and talk a little bit about the Norwegian Continental Shelf and why that is such a good place to be for an E&P company, pure-play as we are. Really it is about competitiveness. You see it here on this slide. It is about cost competitive. Here you see the green bar, that is the Norwegian Continental Shelf compared to the other energy regions of this world. On production cost, we are very competitive, lower than others. This is paired with a very low emission. We have the lowest emissions of energy regions. Not only that, we are working to bring it further down. Also, which is important when you are into a long-term industry, that is reliable framework. We have it both when it comes to open, transparent, safe, and good working conditions.
Also, what I would like to highlight is really what I call the Norwegian alignment. You know, stable fiscal regime and good alignment between authorities, the regulators, also the industry and even the population when it comes to the importance of oil and gas and how we are going to develop that going further to ensure energy security and low emission. Of course, what really makes our living, there is a significant resource base yet to be produced on the Norwegian Continental Shelf. We like to say that the numbers are 50/ 50. You know, we have been doing this for more than 50 years. We still believe there is about 50% remaining, and so far we have produced about 50 billion barrels.
Just as a small anecdote, you know, I have been in this business for 25 years, and we have always believed that there is about 50% remaining. What is the message by that? That is saying something about our ability to replenish, our ability to develop these resources, and that is also what Vår Energi is going to do. We are going to develop these resources. Also, we are well situated with our proximity to Europe. Never, ever before have Norway had a more important role when it coming to supplying Europe and U.K. with gas and energy than we have in 2020. We are certain this will remain. Here Vår Energi is having a vital role. You know, we have a solid gas sales strategy.
We have long-term contracts, and we have flexible price indexes as also Stefano talked about, you know, fixed pricing, month ahead, day ahead. Not to forget, you know, we have access to the key markets in Europe. You know, you see it in Germany, it's Belgium, it's France, and it's the U.K. On NCS. We are the second-biggest independent oil and gas producer in Norway. You see that through our production. Not to forget our significant resource base. Of course, this gives us a very good resource over production ratio. That is our exploration team and who our excellent exploration team is consistently deliver discoveries and resources. The bottom line of that is that we are building an even more robust portfolio going forward. Talking about robust portfolio. I know. We create high value. And also [inaudible].
Typically in this high barrels, we have a high equity. That means that you are able to influence. Impact and [inaudible] really to summarize. [inaudible] close. We have 17 projects that are sanctioned. They are into development, and they are bringing a lot of barrels to Vår Energi. There is, of course, three that is more key than others. It's the Balder X, it's the Breidablikk and the Johan Castberg. I will come back to those later. We also have a plan for sustaining our production of high-value barrels beyond. Now I have to concentrate on the left side here of the slide, from your side, you see the recipe here. We are going to talk about world-class exploration capabilities. We have infield drilling, increased recovery, and extend the lifetime.
Also we have a high-value product portfolio that we are going to mature further, and we will be assessing value-accretive M&A. This is all about capability. Today, you know, we are a young company, and today we are celebrating one year as a listed company. In December we celebrated four years of age as Vår Energi. We have a very proud history and a strong legacy. We arrived on the Norwegian Continental Shelf in 1963 as part of Norsk Hydro. Talk about capability. For us, capability is about competence, it's about capacity, and it's about way of working. We are really working hard to become and creating the leading pure-play E&P company, and it is about realizing our potential. Vår Energi, it is about people, clever people, and we have clever people.
In November last year, we introduced a new organization to enhance the flexibility and efficiency in the organization, to develop people and to clarify priorities. We also strengthen the management team or the executive team, and we simplified the organization. Further, we have a well-established improvement program. For 2022, we realized synergies and improvements of about $200 million. For the years going forward, we are planning and forecasting an improvement realization and synergies of $200 million-$300 million per annum. Ingrid, our EVP for Technology, Drilling, and Subsurface, she will talk about this later in the presentation. Talking about way of working. In Vår Energi, we believe that the future is about alignment, partnership, and collaboration. We have a strategic priority, which is being the partner of choice to drive performance and create value.
That is also why we are really happy and proud and have big expectations when it comes to the strategic collaboration we enter into last summer with Aker Solutions, with Ocean Installer and Saipem when it comes to the subsea production systems and SURF. We are not stopping there. We are going to continue. We are going to establish this through the entire value chain. That means for drilling services, for maintenance and rigs. Also, what we are talking about the partner of choice. We are working very actively together with our partners and particularly the main partner, Equinor, to build economy of scale. Here I would like to mention, for instance, the sharing of rigs and rig we are doing. One concrete example is what we're doing in the Barents, where we have been sharing their Transocean Enabler. They are using it on Johan Castberg.
We have been using it for infill drilling on Goliat, but not to forget, to drill the exploration wells in the Barents. I think Transocean Enabler have to be the well, the rig with most discoveries, I don't know, in the world, but at least just four in recent time and six in total the last two years. You know, four both in total, Johan Castberg and Goliat. We are doing the same actually in the south with Neptune, where we're going to share rig. What is this giving us? You know, it gives us a warm rig that we know is working with competitive rates. It improved performance, the safety standard, and also it reduces emission. Of course, we have also a well-established business collaboration with Eni.
All this comes with some clear prerequisites and ESG, including safety. That is really core of all our activities. Stefano, he said it, "Safety, safety is about people." That is also why, you know, we can't have any other ambition than being the safest operator. Also, to be clear, this goes hand in hand with good operation, well-executed projects, and strong drilling and well operations. We will never compromise on safe operations. Talking about our clear framework for shareholder value creation. We have high-value production, and we have a high-value production growth ahead of us. We have also low-cost barrels, and we have a clear ambition, which we are on track to bring down the production cost to about $8 per barrel. I will come back to that later in my presentation.
So, really, cost discipline. Yo u saw the big free cash flow, $ 3.1 billion in 2022, also the significant and material dividends. All this could with our investment-grade balance sheet. Really to summarize this, we are bringing cost discipline to our OpEx and CapEx going forward. Vår Energi, we are a unique combination of high-value growth, high-value creation, investment-grade balance sheet, and combining a significant distribution. Also Stefano said it, you know, we are saying 20%-30% of cash from operations, and we want to be clear. For this year, 2023, I talk about approximately 30%. You know, I'm not letting Stefano off the hook on this. Stefano, he will elaborate more on this framework when he's coming back to present our financial framework a little bit later in this session. I take a little bit of water.
My team told me, "Torger, you have to remember to breathe." Now I'm breathing as well. Getting some oxygen to the head is maybe a small thing. Let's go back to the theme, growth and high-value creation. As I said, we have unprecedented growth in front of us, it is tangible, also that I will cover more. We have some really focused projects with very attractive economy. This is really based on your delivery on operational excellence. That is what I will going to cover now in my next session. Continuous focus on operational efficiencies. That what we are stating here, I showed it on one of my previous slides. I said we are working hard to bring down our production cost.
Here it is some certain specific and concrete building blocks. The first and the big building block here is our projects that is sanctioned and in development. They are very competitive, not only when it comes to breakeven, but also when it comes to the production cost. In average, these 17 projects have a production cost per barrel in the area of $4. That will help. In addition, we are working with our capabilities and improving the cost basis. As an example, since 2018, we have been reducing the cost or improving the cost, I think that is fair to say, by $70 million on Goliat alone. Also, we are doing actively portfolio management in our hubs, optimizing as much as we can.
I also mentioned already, you know, our strategic partnerships or strategic collaboration to really create economy of scale to enhance competitiveness. I mentioned rigs. I am not going to take that again, but there is one thing I would like to share with you, which is for me, really exciting. That is that we just recently announced together with Equinor what we call the NLP. NLP, what does that stand for? I don't almost know myself. Yes, I do. It means Norwegian logistic projects. Here we are putting together a pilot, Equinor and us, and we are going to look into how can we optimize, how can we create synergies, how can we ensure that we are getting more efficient in how we run our logistics.
That goes to supply vessels, helicopter bases, the driver here is really to realize synergies, save costs, reduce emissions, because less transport up and down and back and forth. Of course also improving safety because it will be less lifting and activities. Bottom line, of course, this means improved competitiveness in all sense. That is how we are working our production cost. I mentioned our sanction projects. Maybe it's time to talk a bit about those. Here you see what it means for us, and we state here that we see a de-risked portfolio that is driving production growth, and as an unprecedented growth. There is some key projects in this I mentioned already, Balder X, Breidablikk, even Johan Castberg. Those are bringing above 140,000 barrels to Vår Energi.
There is in total 17 projects which has been sanctioned during the last years. This means that we have been sanctioned these projects ahead of the big PO wave that we just recently saw. This means that we are well into execution. We think it's de-risked. It's not risk-free, it's de-risked, less exposed, and that means it's less exposed for future inflation and potential resource constraints. These are projects that in general are cost efficient, close to existing infrastructure and brings high value. I will elaborate a bit more on this in the next slides to come. Here you see it. Here you see it on the map. This is our 17 projects, as I said, that is sanctioned, no sanction risk, and they are well into execution. First they are bringing significant resource base to Vår Energi, more than 500 million barrels.
Due to the well into execution, 11 of these projects, they are more than 50% complete. What does that mean? That means that the subsea installations are on the seabed, they are installed, they are complete. The rigs are drilling. The people are mobilized, the construction workers, the engineers, they are working. Not only that, the key equipment is delivered at site and is installed in the vessels. We have 15 of these 17 projects is what we call subsea tie-backs. In general, the subsea tie-backs, they are building on, let's say, standardized concepts, standardized subsea production systems. That means they're also simpler, they are lower risk, lower cost, lower emission, low break-even, and high- value equation. You could maybe guess that. Here we are talking, and you can see it on the slide.
Here we are talking about a break even in the area of approximately $30 and a very healthy internal rate of return above 25. That is our project portfolio, which is in execution well into development, de-risked. I talked about these three key projects. I will now walk you through those a bit in my next slides. Let's start with Balder X. Starting with Balder X, I have to take a little bit of history, and this is really Norwegian oil and gas history. Balder X, Balder area, that is Production License 001. This is really where the oil and gas history started in Norway. In May 1967, guess what? We were drilling the first exploration well in this area.
Then, 25th of November, same year, the very first oil was taken out of the reservoir. It was the first oil, but it will not be the last oil, as you know. This is really what the Jotun FPSO and the Balder X is all about. It's going to extend the lifetime. It's going to be a host for future subsea tie-backs and infill activities. That means that we are going to extend the lifetime here in this area to more than 80 years, you know, because Balder X is going to be 2045 and beyond. Balder X, and you see the numbers here. Atle Reinseth, our EVP and Head of Project Development and Supply Chain, he will go more into details here.
What I would like to share with you from my point of view is that since we announced the revised schedule, moving the start up from Q4 2023 to Q3 2024. I hope I got that right because that is sometimes missed. Of course, we had a significant cost increase in September last year. We are progressing in accordance to plan. I have to say that it is really exciting to see that our old FPSO is starting to be a very modern FPSO, where everything now is coming together, and we have achieved several important milestones in the period. Among others, the engineering, one of the things that we also mentioned, when we did update, engineering is significantly complete. That means that we have a good grip on the scope of work.
As I said, equipment, the main equipment it is delivered, it's installed. We have just recently concluded our heavy lift campaign. Cranes, helicopter deck and so on lifted in in accordance with plan. Very safe performance. We have mobilized the construction resources that we need. We are getting the efficiency we are after there. Here, the subsea production systems has been installed for a while. You can see it also here on the progress, significant complete, and we are drilling wells, four completed, as we speak. Currently, we are now drilling subsea, sorry, top hole campaigns. That means we feel it's de-risked, and we confirm a schedule confirmation, you know, with our plan start up in Q3 2024. I move on.
I'm not moving very far because I'm moving to Breidablikk, a very attractive subsea tie-back, and that is a subsea tie-back to Grane. Grane, that is the neighboring installations to both Ringhorne and Balder. Same area that's operated with or by Equinor. It's a highly attractive and very cost effective business case. As we understand it's utilizing the existing infrastructure. Here, in order to make it a bit simple, all parts that are talking about the drilling, the subsea, and the topside and activities, we have a high activity period ongoing, is on schedule. Actually, the drilling well is a bit ahead. Here as well, confirming a start-up plan for Q1 2024. I'm coming maybe to my favorite slide here today.
I think it is really difficult to talk about Vår Energi without talk about the Barents Sea and also maybe talk about the Barents Sea without talking about Vår Energi. This is special for me because, you know, I've lived there. I, for my young days at Snøhvit, you know, where I was living in Hammerfest. I really felt it on my body what this means for both the local community and activities and also the, let's say, the exciting area it really is. When you're looking at this slide, you know, where should I start? You know, it's almost hard to know where you are starting here. Of course, I would like to start with our strong position.
We have a very strong position in the Barents Sea, and of course, we are the operator of Goliat. We have a lot of licenses there, and we are of course a big owner in Johan Castberg. This is a very prosperous area. Six discoveries the last two years, a little bit more. Of course, Stefano talked about the Lupa, the gas discovery, the biggest discovery in 2022. We have Skavl Stø and Snøfonn, close to Johan Castberg. Rødhette, close to Goliat. Isflak, also by Johan Castberg. Of course, what kicked off 2023 for us is the Countach. I will take a little bit more about Countach later, but of course, promising, as Stefano said, potential tie-back to Goliat. Really here, I think Johan Castberg fits perfectly.
Where are we when it comes to the schedule here? Very much the same story. You know, here, the subsea is completed. It is installed. The drilling for the Phase 1, the wells that is needed to start up is also completed. That is why we are utilizing the Transocean Enabler. As we speak, the integration of the FPSO is ongoing at the Aker Stord yard in Norway, on the west coast of Norway. Plans start up Q4 2024 confirmed. That is the plans. I have taken the big parts of our high-value growth going forward. There is more. Just to get the equation to, let's say, come together, we have our remaining sanction projects, which is really securing us high return barrels in the core area. Here, we are talking about more than 60,000 barrels.
It's coming from subsea tie-backs that is located in the Norwegian Sea and the North Sea. They are all, as I said, subsea tie-backs to existing infrastructure. Sometimes I'm getting a question, you know, which projects are gas and which projects is oil? To make it a bit easy, you know, those on the upper side here that is in the Åsgard area, they are all gas-related. We have six of these projects that are gas-related. These projects, they are cost effective as it says on the side. They bring high value and short payback time to Vår Energi. That was the growth of high value until 2035. Also, I said in my introduction that we have a clear ambition to sustain beyond and towards 2035 when it comes to high production and high value creation. High value with scale.
Let's look a little bit on how we are going to work that. First and foremost, that is really, I feel it's founded. It's founded on a tradition on NCS. You know, we typically are extending the field lifetimes and size. Big fields are getting bigger. We are going to increase the recovery, and we are doing that by applying technology and innovations to improve, you know, drilling, seismic, production efficiency, really to extend the lifetime. We are going to capture the opportunities for long-term high-value creation. I would like to use Rystad Energy and their assessment of the NCS. Because what they are saying when they are comparing it to the other energy regions of this world, they are saying NCS is number one when it comes to emission.
It's number two when it comes to discovery rates or explore discovery success. Number two on recovery factor, number three on production cost and breakeven. I think that is a very good combination. If you're going to summarize it all, what does it mean? It means longevity. We know that this will require hard work and improvement. The recipe of this you really see on your left. Here, we are talking about value-accretive M&A, continued exploration success, maturing high-value product portfolio, and operational excellence. I will walk you through these topics in my next slides. Hard work is about this. Efficient drilling and improved recovery and operational excellence.
I will start—t here was a lot of number on this slide. I will start and try to focus, you know, piece by piece to explain how we are thinking. First, extend the lifetime and increase recovery. We have a significant resource base, more than 1.6 billion barrels in resources. That is a good starting point. We have also a good track record when it comes to reserve replacement ratio. For the last four years, we are talking about above 160%. We have also seen that historically, based on experiences, through infill drilling, we can improve or we have been improving the recovery factor from existing fields by 7% or more. That is a clear ambition that we are going to continue doing also for Vår Energi, and that represents with above 30,000 barrels from 2025 towards 2030.
To the operational excellence, continuous improvement. We have a strong record when it comes to the operational excellence. We have been working this for years. Again, if I use Goliat as a clear example here, and you saw it on the Q4 reporting from Stefano. Goliat production efficiency in Q4 above 96%. We have improved, in general, more than 10% production efficiency the last four years. We are going to continue that. We are aiming for more. Our clear target is to bring this above 93% for our operated assets. We are going to continue maturing our high-value portfolio. We are talking about here also of our non-section projects, significant resource base, more than 295 million barrels and a low breakeven.
How are we going to do this? We're going to have a standardized, what we call standardized factor approach on tie-backs. All the products you see here, they are subsea tie-backs. You can see they are located in our key hubs. We are going to have a disciplined approach. We're going to ensure robust concepts, and we are going to go counter cyclic. I already said we are going to maintain our ambition of $ 30 in breakeven. Of course, to do this, we are going to leveraging our strategic partnerships. SBS, service, drilling services, maintenance and rigs. We will backfill going further. Taking us to our world-class explorations capability. I said it from Vår Energi that NCS is number 2 in the world when it comes to discovery rate.
The average here is 29%. So, 29%, that qualifies you to number two. In Vår Energi, you know, our discovery rates for the last years have been above 50%. You know, 57% for 2022, 75% for 2021. Based on this, there is no doubt that we in Vår Energi, we are in the forefront. You see it here also on the slide. What is this illustrating? You know, the first one is the size of discoveries per well, and we are number two. We are clearly the lowest and the best when it comes to unit exploration cost in the middle here. Of course, really what matters is the return. We have the highest return per spend USD on exploration than anybody. Summarized, nobody is discovering more than Vår Energi there.
What we like to do when we are talking about exploration, you know, even though we are doesn't sound too modest, we are modest, so we say we are in a good shape, and we have a plan. What is the plan? What is the strategy? Let's take 2023 because Stefano, he already covered the 2022 results. '23 is here. We are going to continue to drill in our hub areas and then a few more words about Countach. Because Countach is really in the neighborhood of Goliat. It is promising. More work is undergoing, so we can't talk about the results because we don't know yet. It is promising. Not only promising for this specific well, but of course also it is promising because it is confirming together with Lupa that, you know, our exploration models are right.
You know, our insights, what we believe. It's starting to be confirmed. It gives good insights for other prospects as well. We are going to drill two high- impact wells for 2023. That is Venus, operated wells, which is in the Barents Sea, about 25 km from Johan Castberg. It's Rondeslottet in the Norwegian Sea. We also got our two wells in the North Sea, which is Angulata and King. This also is really exciting, is the wells we're going to do in the Balder area. We are going to drill three wells there. It's the Ringhorne North, it's the King appraisal, to appraise the big discovery we had in 2021, and then it's Norma.
All this, of course, we are excited because this is really about bringing more volumes into the hub, which Jotun FPSO and Balder X is representing. Also what we are working actively with is this award in predefined areas, APA. We got 12 APA licenses for 2022, five operatorships. We are pleased with that. We are using it actively to get operatorships there. Also, we are pleased to see that authorities are talking about more blocks to be available for next year, you know, 92 in total, then 78 in the Barents Sea. We are, I would say, some excited to see what quality that might represent. Moving further in our exploration strategy and similar to it, this is what we plan to do, you know, in, you know, general, in our strategy.
As we said before, we are planning to drill eight to 12 wells in total, you know, operated and partner operated, and two high-impact wells per year. As you can see in all the dots, we are really exploring in our hubs. Also, of course, we are using this to optimize because we go for quality prospects. I already talked about the APA, also we are in a way getting rid of relinquishment. That word, I can't say, I hope you know what I meant. The recent licenses that we have a drill and drop, we drop them because we don't see the quality that we are after. We're also using this, as I said, actively to increase our operatorship. You saw the number, it is 53.
Actually we have been—w e have doubled our number of operatorships the last years from 24 to now 53, and we're going to continue doing that. I'm coming to one of the last items in our toolbox, and that is pursuing accretive M&A. You know, Vår Energi, we were really, let's say, accreted. We were founded through M&A, shaped and formed. That is as such part of our DNA and our blood. Of course, yes, we might assess value accretive deals, but that is really what it's all about. It's about value, not volume. Whatever we do, we do for value, but of course value with scale. It might be license transactions, as we did last fall, where we acquired four licenses in the Balder area. It could be portfolios or maybe also corporate deals.
What is important for us, it has to be in accordance to our strategy. Means that, you know, we would like to see it in our hub areas, existing infrastructure. We will predominantly like to see some increase in operatorships, and of course it has to be in line with our ESG strategy. It is a tool in the toolbox to support our strategic ambition to sustain beyond 2025 and going forward. I talked about sustaining, I talked about long term. Really to sustain high- value creation, it is important and a clear prerequisite that we are responding to the ESG and being a ESG leader. What is that about? It is about safe operations. It is about minimizing emission and really value creation for society and local communities.
Where we are operating, where we have activities, we are going to create significant activity and value. This is really about becoming an ESG leader. As, and rest assured, this is integrated in our strategy, our business, and who we are. That is really important for us. I hope you know our vision. We are committed to deliver a better future. That is really about energy security and lower emission. Also, we are committed and utilizing the UN sustainability goals actively to really set direction and framework for how we work this. Now I plan a short way to take you through the ESG and what that means for us on a high level. Environmental. We have a clear commitment to reduce our CO2 emission by 50% by 2030 for our operated asset.
I will tell you how on my next slide. Also, we have signed up for the OGCI, the Oil and Gas Climate Initiative, aiming for zero methane emissions by 2030. On the social side, as I said, local value creation and ripple effects. It is really a license to operate. Also here in a way, that means that we are going to create industrial activity, job creation, and competence development in the area. Here also, we are happy that we have created 10,000s of jobs over the last years. I think one good example, and it's really, you know, the spend, the procurement spend we have had. You know, 95% of the spend towards our suppliers was done in Norway for 2032. I think that is quite amazing. To conclude this slide, governance.
Transparency and compliance is of course, key to governance and for a company like ours. We have a solid basis for our ESG reporting and actions. Actually, we are getting feedback, you know, from some rating agency. Among others, Sustainalytics, which is ranking Vår Energi 14th out of 155 E&P companies. I think that is pretty good. Of course, we have a clear mission to improve further, both when it comes to our reporting and of course the disclosure and our actions going forward. Specifically, this chart is showing how we specifically and concrete is working to reduce our emission by 50% and also going towards the net zero by, for Scope 1 and 2 by 2030. How are we going to do this? For us to get to net zero electrification is key.
We have to make it that simple, that clear. As you know, Goliat, not "Johan Goliat", but Goliat is already electrified from the very get-go in 2016. We are working to electrify the Balder area, and that includes Skarvnett. We are going to do this together with Equinor, and we are planning to have this on electrons by 2030. What the Jotun FPSO and the Balder X project is giving us opportunity to do is to optimize the Balder area. That means that we, at that point, will be retiring the Balder FPU. This will bring down the OpEx, and it will bring down the CO2. Towards 2030, around 2030, we foresee that we will be retiring the Balder FPU.
That, by doing those two things, we will get to our 50% reduction and then also enhancing the area. On top of this or in addition, and relentlessly every day, we are working with energy management to bring down our energy, or improve our energy efficiency, to bring down our energy consumption to really improve on everything we can do in our operations and activities. In addition, we are, as required, going to use residual emission or offset. This is my last slide on this, then I would like to take and talk about the key decarbonization initiatives. I will do it very simple because I'm going to summarize this in three items. This is about electrification, either power from shore or offshore wind.
Two, it is about energy management, as I talked about, more efficient, reducing the demand in our activities. Three, it is about joint industry on the projects, also addressing our use of the product. As you can hear, and you have to get ready, Stefano. As you can hear, ESG is embedded in our strategy, our business, and who we are as individuals and colleagues. This is of course then also a case for our financial framework. Stefano, you have to take it from here. Thank you.
Thank you, Torger. I think you saw this slide before with Torger. I like to start off really by quickly repeating our framework. We are set to deliver over 50% of production growth by end of 2025 and achieve a significant reduction to production cost driven by new high-margin barrels. This position has to continue to deliver strong free cash flow and attractive shareholder returns. We have been paying $3.9 billion to our shareholders since 2019, which becomes $4.2 billion if we include the upcoming payment that is expected to be done in early March related to the Q4.
We have a clear and balanced capital allocation framework in place, starting with sustaining production on existing fields and funding CapEx on existing developments and new value-creating projects. Our CapEx policy is flexible and built on the ambition of average portfolio breakeven of around $30 per barrel, as Torger already mentioned. We are committed to maintaining our strong investment-grade balance sheet and a robust credit profile while paying dividends according to our stated policy. Additional free cash flow will be used for extra shareholder distributions and debt repayments. Let me also proudly say that this has been the case since the IPO, where we delivered on our commitment by being able to pay attractive dividends to shareholders and at the same time progress the investment and at the same time de-leverage substantially. We also have clear criteria for any M&A activity focused on the NCS.
I think Torger went quite well through our criteria. We have a very selective and disciplined approach, which is really designed to exploit synergy around the existing operations, but the most important thing for us is really to drive value. If we look to the coming high-growth period in from 2023- 2025, we are very well positioned to deliver attractive and resilient distributions during the peak investment period. If we apply forward gas sales contracts and the forward curve for oil and gas, we deduct taxes and CapEx for the period, we still see strong free cash flow generation, and also a good headroom to deliver on our long-term dividend policy. We also see robust cash generation across various price scenarios.
Looking at the next five years, which includes the high activity period to deliver on our production growth, we have cash flow break even of approximately $35 per barrel, and this is also including the remaining tax payments related to 2022. We also have greater flexibility with regards to CapEx as we mature our portfolio of unsanctioned development projects. These will mainly be low- risk subsea tie-backs , which are simple, standardized, and cost efficient. Let me say most importantly, we will be disciplined in what we bring to FID, which needs to be in accordance with our requirements, which are break even not higher than $30 per barrel and internal rate of return higher than 20%.
Looking a bit more closely at CapEx, we expect between $2.4 billion and $2.7 billion in 2023, mainly tied to the three major developments, development projects that are led by Balder X. We also see approximately the same level for 2024, while 2025 CapEx is set to come in a bit lower based on the current sanction portfolio. Especially as we ramp up production toward our year-end target of above 350,000 barrels a day. Turning to our financing, we have strong balance sheet supporting an investment-grade rating. We have deleveraged significantly over the past year. Net debt to EBITDA has been reduced from 1x at the end of 2021 to 0.3x at the end of 2022, this is well below our leverage target through the cycle.
We are actively diversifying our debt for portfolio as we refinance the $3 billion bridge-to-bond facility that is maturing at the end of 2023 in November. In 2022, we issued three bonds in the U.S. capital markets, raising $2.5 billion. We expect to continue to have access to the bond market going forward when needed. Our Baa3 rating from Moody's and our BBB rating from S&P were confirmed in 2022, both with a stable outlook. Due to strong commodity markets with exceptional gas prices in 2022, we exceeded our dividend ambition at the IPO a year ago, that was set initially as a minimum of $800 million, and we ended with $1.075 billion in dividends for the year 2022.
Final quarterly distribution of $300 million will be paid in March. We maintain our dividend policy of 20%-30% of the cash flow from operations after tax over the cycle. We are guiding for a Q1 dividend of $270 million. As I stated before, the dividend will vary with our operational performance, macro environment, plan is to distribute approximately 30% of CFFO after tax, specifically in 2023. To sum up my section, we are well-positioned to deliver on our growth and cost targets and continue to pay attractive dividends in the years to come. Let me, as a last thing, summarize our key points of the 2023 guidance.
Production is expected to be in a range between 210,000-230,000 barrels per day. Production cost in a range between $14.5-$15.5 per barrel. CapEx in a range between $2.4 billion-$2.7 billion. Cash tax payments are expected to be approximately $1.8 billion in the first half of this year. Dividend, $270 million for Q1 2023. I think it's time to hand over to Torger for some closing remarks before we start with the Q&A session.
Stay tuned, Stefano. This won't take long time. You see it, you almost see it here. As you know, the theme of today, growth and value creation. That is really what Vår Energi all about. I hope you agree to that. Just to repeat my key takeaways that I hope you all bring with you home from today is that we are on track for our high-value growth by more than 350,000 barrels by end of 2025. We have a clear strategic ambitions to sustain this further. We have confirmed world-class capabilities when it comes to our exploration is our strategic hubs and robust portfolio is delivering extended value.
As Stefano just talked about, we continue our attractive distribution, you know, $1.075 billion for 2022, $270 million for Q1 and then approximately 30% specifically for 2023 of our cash flow from operation post-tax. That was really it. I want to say thank you for the attention. Now, Stefano, this Q&A.
Thank you very much.
Marie, you ready?
Thank you very much to you, Stefano. We will now open up for questions. We will start with those of you in the room here before we address questions from those dialing in, and then we'll answer the questions from the chat. Please introduce yourself and try to limit yourself to maximum two questions per person. Thank you. Is that Jørgen?
Thank you. Jørgen Bruaset from Nordea. Just a couple questions around the OpEx per barrel guidance both for 2023 and 2025. On the production guidance, it looks relatively flat this year-over-year, but close to 10% cost drift per barrel. Can you just elaborate a bit on the bridge and the components of driving that cost increase, and how much of that is the increase in power cost?
Yeah.
On the 2025 guidance of $8 per barrel, even if you can obviously play with different scenarios on decline from the current barrels on stream, but it looks like a quite steep cost reduction from the $15 per barrel on the, on the current producing assets to reach the $8 per barrel. Can you just also elaborate a bit on the, on the bridge there?
I will start. I will do my best. start on the production cost for 2023. you are right, you know, for us, it is really maybe three main ingredients this year that is driving this guided number. It's one, we have increased maintenance activities, you know, both operational maintenance and also well maintenance, so that is one and two. Also what you alluded to, you know, we have what we call commodity-driven items in our OpEx . that could be, you know, typical power, fuel, and also CO2 quotes and also some tariffs that is then, you know, going up because of higher commodities. That is about, you know, one-third what we're talking about here.
Of course, just to be clear, and, so Stefano is going to add it if I don't, that, but of course this, yes, this increase is of course by far surpassed by higher commodity prices. It is a consequence of it that we get that increase. That was the OpEx for 2023. Then, you're right, you know, we are starting to get in, you know, fresh and new production already this year. Of course, this deep, we'll say production growth is coming in 2024, and that is of course also the same with the reduction in OpEx when we're getting these barrels on stream, you know, with this average of $4 per barrel. That is the big driver.
Of course, as we also talked about, that we are working relentlessly to bring this down, and of course, also to get effect through this strategic collaboration and the scale, you know, economy of scale that we're getting. So that is really the elements there.
Yes. Maybe one element that is worth mentioning for the OpEx in 2023 is inflation, because that is assumed to be around 4% for 2023, it's also a bit higher. It's also contributing to the increase specifically in 2023.
That's incorporated in the number?
Yes.
That's those 4%.
Okay, perfect. Thank you. A final question from my side. You touched upon M&A. Can you link your thoughts around M&A to your thoughts on capital distribution? Is the payout policy of 20%-30% of CFFO protected in the M&A scenario, or is that something that you will consider depending on what type of M&A scenario you're looking into?
Should I start and you can, you can take the details there? You know, number one, of course, we, we as you always know, we can't comment specifically on this. You know, I said, you know, there is maybe three buckets of M&As that could be assessed, you know. Of course I talked about this prospects, which we have been doing, you know, no impact. It could be some portfolio optimization or bigger things and then a corporate, potential corporate thing. Then, of course, these three differences will also have a different impact on how Stefano and me and the Board is assessing the, the distribution. I don't know if you have anything to add there, Stefano.
No, it very, as you said, it will very much depend on what kind of M&A potentially comes. The point is, if we look at it historically, we have made a substantial M&A, like the ExxonMobil deal, which was a $4.5 billion M&A, the dividend policy has been maintained. I think history always speaks in a positive way.
Yeah. No, I think it is a saying that look to the history to predict or look to the past to predict the future, huh? Yeah.
Yes. We have a question here.
Hi. Thank you. I'm Ruben Dewa of Jefferies. Thank you very much for the presentation, gentlemen. Just a quick one on the $30 a barrel breakeven you mentioned for the projects. I was wondering, have you seen this change much over the last year, given cost inflation and changes in the Norwegian tax regime, temporary tax regime? Secondly, you gave us guidance for the first half of 2023 for tax of $ 1.8 billion. I was just wondering if you could give us a steer on what this may look like for the full year. Thank you.
Yeah. I start on the projects, Stefano, and you take the tax. Starting on the breakeven. No, we haven't seen big differences. That was also, I think, one of the messages that we had is that, you know, our project portfolio, significant part of it is, let's say in, let's say under the interim tax regime. You know, that's a good thing. Also, of course, a lot of these projects are well into execution, and that is helping us because, you know, we have, in a way, shielded them. It's not. They are not immune when it comes to inflations and surprises. They are pretty shielded.
The project that we have in execution, you know, now I'm talking about a portfolio, you know, is this robust and in the range of $30 as we there. That was also very much as we talked about during the IPO as such. I think that is also. We also talked about the ambition we have for our future coming projects and we saw, you know, we see that that is, you know, in the same range. Also you heard Stefano when it comes to the decision thresholds that we are pursuing, and we are within there. Tax?
Yes. On tax, we have, you will find here in the appendix, you find a sensitivity on tax at different oil and gas price scenarios. If we assume a scenario for Q3 and Q4 of this year of around $90 Brent and $140 per barrel for gas, you end up having to pay roughly $500 million in Q3 and roughly $1 billion in Q4. Under that scenario would be an additional in the second half, an additional $1.5 billion. But you can see also there are other scenarios there reflected. Hope this is helpful to predict the tax burden for the year.
Thank you very much.
Question down here from Teodor.
Teodor Sveen-Nilsen, SpareBank 1 Markets. Thank you for the presentation. I have two questions for me. First on financial gearing, you have through the cycle target of 1.3x net debt to EBITDA. Of course, it's significantly lower now, and it looks like with the current dividend you're guiding for, you won't reach that level this year, at least at the current oil and gas price. I just wonder, when should we expect you to reach that level? Will you consider to do any buybacks or other initiatives to come around to the gearing range you're guiding for? That's the first question. Second question is just on economics of electrification. Electrification is important pillar for coming down to net zero by 2030.
You showed a specific slide on that, roughly half of the contribution. Could you just take us through a specific example of electrification, what the CapEx will be and what kind of cost savings, that will imply and also tax savings?
At least the first one, Stefano, is yours. Then maybe we can fight for the last one as such. I will start on the, on the second one. You, you go first on the financial—
Yes. No, you're right, the target is 1.3x. Currently we are at 0.3x, so far below the target. The target we have is a target which is over the cycle. This means that it might be substantially lower in certain periods of high commodity prices like now. It might reverse back or be above 1.3x at a certain point in time later on. What we are really targeting here is to maintain a 1.3x over the cycle, and that is really the ambition from the company or the target from the company. That should be read across the cycle.
Should I start on electrification, Stefano? I think first and foremost, you know, we are investing in, let's say, economical projects, you know, with a back number. I talk about investment and not a cost necessary. That is also what we are pursuing for the electrification project. Of course, when we are building the business case as such, and this you know very well, is that then we are putting in what, you know, we assume as CO2 tax going forward. That is, let's say, the income side of it, if you want it like that. Of course, on top of that comes the CO2 quotas.
It is very, let's say, different from concept to concepts, because, you know, doing this integrated in the very, you know, initial concept like Goliat, of course, then it's incorporated in the business case. It's not really there. Of course, there is some, let's say, doing it in retrospective as there. Still we are pursuing, you know, to have back numbers, you know, and positive rate of return on this project. As such, we also see it as an investment, because this is also about, let's say, the longevity in our in our operations. You know. If we don't put this in place, and this is the time to do it, you know, then I think we will come to, I would say, a U-turn here that realizing that, you know, this will be our requirement.
We act when we can and not when we have to in this, in this regard. I think, and here, Stefano, you can correct me if I'm wrong, we are planning, you know, towards 2030 to use around $1 billion in this type of project if we are pulling it out from the various business cases that we are assessing. There was a question about tax here. I don't know if I see any difference in tax here , maybe you understand it better.
No, I believe the electrification is what you save essentially, I think, you know, for not paying the CO2 taxes. Is that right?
Yeah. Of course, specifically on CO2 taxes. Yes, that's correct.
Yeah. Okay, okay. Yeah. Of course, also, as I said, you know, it incomes there. Also of course, you know, this CO2 is really created by burning gas and diesel. Of course, we are saving that, and that also comes as a income as such. That is what goes into the business case there.
What's that number? You said NOK 1 billion for electrification. Would you dare to give any OpEx savings number that might—
That, again, it varies from installation to installation and from case to case. You don't have one number on that. That I don't dare, since you use that phrase, Teodor.
Okay. That's fair. Thanks.
Sorry, maybe there was a point on share buyback.
Yeah, that is yours.
Yeah. Sorry. I left it. Currently, share buyback is one of the tool that we have, let's say, in the toolbox that can be used by the company. Let's say given the current floating, to be evaluated, whether that is an instrument that serves the best the company and the shareholders. Definitely is a tool that is in the toolbox, and we will evaluate to use. Yeah.
Thank you.
There was a question from James Thompson from JPMorgan.
Morning. It's James Thompson here from JPMorgan. A couple of questions from me. First of all, on 2023, I think a few people this morning were looking for a kind of base dividend in dollar terms from the company for 2023. I think that the, you know, the Q1 print was probably a beat, but obviously there's a bit more nuance about what the outcome for 2023 is gonna look like. I just wondered if, first of all, you could kind of give us your views on why presented in that manner, kind of leaving a little bit of uncertainty there. Just what do you think are the kind of moving parts that can affect your decisions on the kind of remaining quarters for the dividends?
That'd be the first part, then maybe I'll come to the kind of longer- term question after that.
We'll see. I can start a little bit, and then, Stefano, you take the rest of the, you know. Number one, you know, in one again, Stefano talked about it, you know, we would like to be very transparent and very open and very clear that on our dividend distribution and our dividend policy as such. Also, I think we have been that, and we have been distributing, you know, significantly. We feel that, you know, by being clear now that between our dividend over the cycle is going to be 20%-30% our cash flow from operation post-tax, and for this year, approximately 30%.
That we think is pretty clear because then you know you guys, you know, you are doing your assessment, you will see how the cash flow goes, and then you will also be rather clear on what what dividend will be. Then also, of course, one thing as we will continue, as Stefano said, and he will elaborate on it after, is that we do this assessment on a quarterly basis. That to really ensure that we are, let's say, within sequence of the macro, our performance, our production, and other items. All of this will, in a way, let's say, be visible in our cash flow. We continue being transparent, being open, and having a clear distribution policy and delivering solid yield.
You know, I think I talk about 12%-14% now in what we are communicating. Stefano, something to add?
Yes. Maybe the fact why there isn't a floor, which is a good question. The answer is there was a floor in 2022, because in 2022, the dividend policy, we were listed during the year in February. The dividend at that point in time was set as a minimum, which was $ 800 million, and then we were from let's say each quarter as the macro was improving, we were increasing the dividend. We ended up with $ 1.075 billion. We were quite clear that from 2023 onwards, then the 20%-30% CFFO after tax would have been the policy. That is what we are doing.
And, I think, I think, should be seen positively, the fact that we are also giving within the range already, a guidance on, what part of the range we plan to be. And let me also add on top that I think it's even, um, more important to mention that we are doing this, despite the fact, t hat the gas price has gone substantially down compared to what we have seen at least until now at the start of the year, to what we have seen, in 2022 . So I think that is also a sign of resilience of the company.
Thanks both. Just in terms of longer term, you know, you laid out some pretty impressive statistics, shall we say, on the exploration side of things over the last couple of years. Given that, you know, anything you discover now is really not gonna start until very late in the decade, I guess, in the best case scenario, what is to stop you kind of extrapolating that good performance and being a bit more aggressive with your well count, and, you know, could you potentially ramp up from that side? Second or the second part of that would be, of the 13 or so unsanctioned projects, can you give us a picture about how many you'd like to FID in 2023?
Starting with exploration and, you're right, of course, like, you know, we have a very solid track record. I think one of the reasons why we have such a good track record is that we are going for quality and not quantity. What do I mean is that we are using a significant, let's say amount of time to really ensure that we have quality in the prospects. That means that, you know. It's not really about necessarily having more prospects, building more wells if the quality is not there. We believe that, you know, the eight to 12 wells that we're talking about, that is in a way reflecting our ability to create quality prospects. That is what we're going to continue doing. We here see this, you know, we have a plan.
We are in a good shape, and we have a plan. I said that before, and we continue doing that. That is really to rather discover and then drill and drive wells. Of course also to, in a way, don't want to be too carried away. We know that of course, exploration that is some risk and uncertainty to it. As I said, you know, the average on NCS, which is the second best average in the world, is 39%. We have a significant higher. Of course, we are working hard every day to continue like that. I think the key is, as I said, to ensure that we have quality prospect. That is what we have in our, in our, value, funnel going forward.
Just in terms of FIDs for 2023 potentially.
Yeah. There maybe I need some help. I know I hope Atle Reinseth already know FIDs and I think it could be different on FIDs and PDOs, but you can say a little bit about the project plans we have for next year or this year, I mean.
Hello, my name—
I think that's okay.
Okay. Yeah, my name is Atle Reinseth. I'm heading up project development and supply chain. Particularly for FID this year, we are certainly looking at Balder Phase V, which will be the potential tie-back to the Balder. Other than that, there will be additional projects coming on in the consecutive years for certain. Yeah.
That's really the factory approach that we talked about. Of course, on top of that, we're also drilling, you know, infill wells and this kind of activities to enhance our production.
Thank you.
Good. question from John Olaisen here.
Yes, John Olaisen from ABG Sundal Collier. May I ask a little bit on the CapEx guidance indication you have between 2026 and 2030 of $1 billion-$2 billion? A little bit of what's behind those assumptions. If you could specify, for instance, how much CapEx do you expect during that period for projects that are currently in production or under development? I'd presume that'd be a much lower number. Of course, $1 billion-$2 billion if you assume $15-$25 in CapEx for a new, for a new barrel. It's a huge number of new reserves, $50 million-$100 million in potential new development per year. I just wonder what kind of visibility you have on that, please.
Should I start there as well, Stefano? I think, you know, there is a few clear assumptions, and at least one of them I was trying to show on the slide. One of the clear assumption, and that is also tangible, that is, you know, building on the project concepts, and that is substitute tie-backs. You know, we foresee that and the portfolio that we are maturing now and Atle said a little bit about is that is substitute tie-backs. As I said, that is more standard. It's also lower cost. Of course, also it's lower, let's say time to market and that. That is one of the clear assumptions that we don't foresee our Balder X project in that.
Now I'm putting, exaggerating to the other side, of course, you know, but so that is a clear assumption that we are putting in, that we are more building that based on our prospects going forward. That's also what we have in hand.
Yes. Maybe I can add that, for those years, we have a quite, let's say, relatively high share of uncommitted CapEx, of course, in the estimates, which is roughly 70%-75% of uncommitted, while the roughly 20%-25% is the committed. That also is giving you the, probably the, yeah, bit of guidance on the, yeah.
Could you just say one word before you get the second question, John? I think there's one important, in a way, message here also, because I think, you know, we have been, and we are investing quite a bit to increase the production. We are staying flat or reducing the CapEx going forward. Really, you will see a huge growth in production, but a more flattish or even reduction in CapEx. I think that is also a very good, you know, a good message from Vår Energi, you know. Some others, they are investing a lot and the production will come further out there.
That is, you know, I think the right gap to have, that we are increasing the production but staying pretty stable on or even having some reductions in CapEx.
Thank you for that. My second question is a little bit related. You mentioned that there are no assumptions of new Balder X kind of projects beyond 2025. I just wonder on the Norwegian Shelf, are there any? Do you think there will be more big new project developments after NOAKA, Balder X and Johan Castberg? I noticed you. Maybe, I'm not sure you're going to comment on this afterwards, but in the appendix, you show the details for your exploration program this year. There are a couple of prospects.
Yeah.
Are you going to comment on these prospects?
Yeah, I can take it all together, if you want.
Yes, please.
Yes, is the answer. I believe that there will be big field developments on the NCS, for sure. You know, if I take a little bit of history here, I remember when I was a younger boy than I am today, still a boy, but not as young. I was on Kristin field development. That was in Equinor. It was a, let's say, a stated belief within that company that this will be the last big field development. That was in 2005. I think we have the, you know, the history, that is history, have proven that very wrong. I think, yes, you know, there will be more big discoveries, and there will be more big field developments going forward.
To tie it into what you're looking for, because I said that we are looking for high impact wells, which might, we'll say, bring significant resources to Vår Energi. Specifically, you know, Venus is very exciting, you know, which we are going to relate in this year. It might bring, if it, you know, kicks in, significant amount of resources. Of course, as I said, also, we are going to have cost discipline, and we are going to find cost-efficient concepts. We're not going to jump on a standalone development if we can do something else that takes it quicker to the market and cost less and is less, let's say, risk.
I will not exclude it, but that could be a very, let's say, a good discussion to have if we have a big discovery there. That is right. Rondeslottet, that is not operated by us. I think the operator there should think about or should talk about a potential concept. That is also a big structure which might result in a big discovery. I'm sure there is also others. We are working with Nordea to mature other prospects as well. That is also why we are so clear that we want more, we want more acreage. We don't like that we are stopping the 26th round and so on, because that is important to ensure that replenishment I talked about.
If we're going to have a 50-50-50, you know, we can't stop now, and we are not going to stop now.
What kind of pre-drill probability of success are there on these big prospects in your portfolio?
Well, you know, I haven't at least looked into that. No, I don't know, to be honest. You know, we are accumulating and summarizing the big, I would say the total numbers and the overall recovery discovery rate, John. Yeah, I can't talk on behalf of on that question.
Wish you good luck with it so anyway.
That we appreciate.
very last question, just quickly on the $30 breakeven. Is that a real number or nominal number? Are you assuming inflation on top of the $30, $30 today and then inflation on that?
No, it's real.
It's a real number. What kind of inflation are you assuming, if I ask?
We assume 4% for 2023 and 2% for the following years.
Okay. Thank you very much. Thanks, for taking my questions.
Next question from James at Barclays.
Thank you. It's James Hosie from Barclays. I guess probably a quick one here, how much of your capital spending development for 2023, and I guess the next couple of years, is gonna be covered by the temporary tax regime?
I can start, and then Stefano will say, fix this up afterwards. I think the great majority of the investments will be covered by the instrument tax regime. The one I would know that is not covered is Johan Castberg.
I think the temporary tax regime was covering especially, I think Balder, but that was until the end of 2022. I don't think Balder is covered anymore. I think is a minority of the project that is, yeah, of Castberg, yes, remains, but Balder, as far as I mean, is our operated project is concerned is outside.
Thank you.
Thank you. Steffen Evjen from DNB Markets. On your projects, Breidablikk and Wisting seem to be progressing ahead of schedule on drilling. On Balder, you say 35% complete. As far as I know, the rig contract is 60% complete. Bearing in mind that progress might not be linear, how comfortable are you getting that drilling program finished in time?
Yeah, if I start on—t here, I'm very comfortable because we don't, you know, actually, it's more, let's say, we—j ust to be clear, you know, we don't need all wells completed at startup. That was initially, that was not the plan. Now, since we are needing more time to complete, we will have more wells complete than we actually initially planned. That is on the positive side because that means that we have more wells available, which will, you know, add resilience and robustness to actually our building up the production, if that was understandable. That is, we are not, well that is not impacting our startup. You know, the wells are not critical for our startup. Now you have to shake your head if you are disagreeing or agreeing, Atle Reinseth.
He's nodding that he's agreeing.
Just to be clear, when the field starts up, all the wells should come on stream immediately?
No, you know, that I don't say immediately, but my point is that we will have more wells completed with a startup in Q3 2024 than what we would have had, also based on initial plans in Q4 2023. What we have planned in the PDO. We should have more well capacity when we are starting up than what we had in the initial plans.
Thank you.
Good. We'll take the next question from the phone lines. It will be Anders Rosenlund from SEB. Go ahead.
Thank you. You have a target of increasing your leverage going forward, it seems, or leverage through the cycle. During second half of the year, you did raise long-term debt in the U.S. market, and the debt doesn't come cheap. Maybe oil companies shouldn't have that much debt. What's your thoughts on that, and may that change going forward for oil activities to be zero-debt businesses?
I think Stefano could like the—
Yes, sure. Let me say, yes, you are right. We went to the U.S. capital market, that was because we had, let's say overall a $3 billion bridge-to-bond facility. The expiration of this facility is November of this year. We went with the first tranche in May, where we refinanced $500 million, and then we went now in November with placing another $2 billion. It's remaining so far $500 million. That is also something we will need to address by the end of this year, we have ample time to do it. You are right. It's not coming cheap.
At this point in time, the cost of financing has gone up, that is what it is. It's the market that's valid, I guess, for everyone. I don't think it's our target to be a zero-debt business. We think, having debt access is important, and should be part of how we run the business. As I said, this goes hand in hand with having this 1.3x leverage target over the cycle.
Okay. Thank you. If I may have a follow-up, that would be good. This is a quarter, quarterly presentation figure. It's the contract coverage that you have on gas for the first half of the year looks extremely strong, and it seems like you have increased the coverage on increasing prices for the first three quarters of 2023. Could you just talk a little bit around that and how you're able to strike that kind of deals and whether you'll be able to fix more on creative levels going forward? We obviously see the market. Could you just share some thoughts and comments on it?
I can start on high level and then also, of course, I would like to promote the deep dive that is happening after lunch on this with Uwe, Anders. You are right. You know, I talked to the gas sales strategy that we have, where we are also having focus on fixed price, month ahead and day ahead. This is really, you know, due to hard work, you know. Really, you know, we have a fixed price that consists of year ahead. Then on top of that, you know, our team is working to place fixed price, selling the gas, you know, through tranches when we see opportunities and high prices in the market. This have really materialized well, and that is what you see on that slide that we are showing.
That is also why we are, as you are saying, we are in a good position when it comes to the fixed pricing. We are able to place, you know, $ 285 in Q1, $190 in Q2 and so on. That is that is really the hard work and good work we have in our commercial group, that they are seeing the opportunities and then we are placing tranches in the market and finding a buyer. Of course it helps when we have those exit points and those gas sales contracts available. Okay. Uwe or—y eah, you can add something.
Yeah, maybe just to give you, I think we have presented in the presentation that the target is to have, let's say between 25% and 35% of these, in terms of target. Just to let you know, we have, so far we have achieved, I think 25% of this target. It's still work in progress. Of course, this needs to be done at the right moment, when the market is there. It's a tough job that Uwe and the team are doing.
Okay. Thank you very much.
Thank you very much. I'm afraid that's all we have time for today. We're gonna take a 45 minute break, before we'll commence with the deep dive sessions. There will be more opportunities to ask questions, during those. Thank you very much.