For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I will now turn the call over to the speakers. Please begin.
Good morning, everyone, and a warm welcome to Vår Energi's Q2 Results Webcast. The presentation today is, as usual, given by our CEO, Torger Rød, and our CFO, Stefano Pujatti. Torger and Stefano will present the results, and afterwards we will open up for Q&A. I will now give the word over to Torger.
Thank you, Ida. Good morning, all. I am pleased to report a quarter of strong safety performance, high uptime on operated assets, solid price realization, and good progress on our development projects. Q2 production was 202,000 barrels, driven by solid performance on operated assets, but with impact from seasonal maintenance. Our operated fields have delivered a solid production efficiency in the quarter, and we also see a strong development within our drilling and well performance, seeing results from our enhanced improvement agenda. We were, for the quarter, affected by some partner-operated turnarounds, which extended beyond plan, as well as irregular production from our new fields, Fenja, Bauge, and Hyme, mainly due to issues at the new area host. Our gas sales strategy continued to realize strong prices. The realized gas price of $98 per barrel was well above market average.
This provided strong cash generation, although reduced from the previous quarter due to lower revenues and higher tax payments. We also maintain a low leverage and have strengthened our balance sheet through issuance of EUR 600 million in senior notes in April. Stefano will cover this later in the financial review. The strong balance sheet supports attractive distributions. We confirm the Q2 dividends of $270 million. Further, our plan is to distribute a dividend of $270 million also for Q3. The main development projects are progressing per schedule. This includes the Balder X, where the Jotun FPSO was refloated out of dry dock in June, followed by installation of the turret. You can see the refloat on the picture with the water flowing into the dry dock, an important milestone achieved for the project.
Overall, the project portfolio development supports our production growth of more than 50% by end 2025. This target is excluding the acquisition of Neptune Energy, Norwegian oil and gas, and gas assets, which we announced in June. We are delivering on our strategy. The transaction will accelerate growth and value creation for the company. By adding scale, robustness, diversification and longevity to our portfolio, we underpin our production growth and strengthen future dividend capacity. Neptune Norge is a perfect strategic fit for Vår Energi. Bottom line, we maintain our overall guidance for 2023. Just let me reiterate why Neptune Norge is a great transaction for Vår Energi. It is value, cash, performance and capability accretive.
We are acquiring Neptune's oil and gas activities on the NCS for a cash consideration, on an enterprise value of $2.275 billion. Neptune's portfolio consists of 12 high quality NCS assets, which produced 67,000 barrels in Q1 and are located in our existing hub areas as you see on the map. This makes them highly complementary and being the perfect fit to our portfolio. Through the acquisition, we are increasing our operatorships and amplifying the position in the Barents Sea with access to the Snøhvit field and Melkøya LNG facility. These assets are cost efficient with low emission and with limited near-term CapEx, making them highly cash accretive. The closing of the transaction is now pending customary regulatory approvals, and until expected completion in Q1, we will remain as two separate companies.
We will come back to the targets and outlook for the combined company at a later stage. I can reassure you, we will be a bigger and more profitable company, we will strengthen our cash flow and our future dividend capacity. Back to the Q2 results. Here is a summary of the key performance indicators in the quarter. Safe operations is our license to operate, and we experienced no actual serious incidents for Q2. This is also the case for the last year of operations. Our target is always zero serious incidents and injuries, and our ambition is to be the safest operator on the NCS. Estimated emission intensity of 11.5 kilo per barrel for operated field is a reduction from previous quarter.
Production cost per barrel has increased from previous quarter, mainly due to turnarounds and seasonal maintenance. Cash flow from operation of $231 million reflects higher tax payments. We confirm a distribution of $270 million in dividend for the Q2 . We go to the operational performance of the quarter. We start, as always, with safety and emission intensity. Vår Energi's highest priority is to operate without causing harm to people and the environment. We have a strong focus on implementation of safety initiatives, and this continued through the Q2 , with a particular drive to improve the trend for serious incident frequency, SIF, by preventing dropped objects. The 12-month rolling average SIF rate was stable at 0.6 in the quarter and 0.4 for the first half of 2023.
In the first six months of the year, we have recorded 0 actual serious incidents, meaning all recorded SIF incidents were related to potential incidents. This means we see a positive trend, which reflects significant improvements related to dropped objects compared to 2022. We are also experiencing a positive trend on the total recordable injury frequency, with a 2.8 for the quarter compared to 3.8 for Q1. Improvements driven by consistent proactive safety work related to yard activities and on operated assets. On CO₂ emission intensity, this improved to 11.5 per barrel, kilo per barrel, driven by effects from emission improvement initiatives and lower exploration activity in the quarter.
As part of the Oil and Gas Climate Initiative, aiming for zero methane emissions, the company has, in the first half of 2023, also reduced its methane emission with 50% compared to last year. The reduction is achieved by actions to reduce flaring at Goliat and increase uptime of our gas compressors at Ringhorne. In June, Vår Energi also achieved an updated ESG risk rating from Sustainalytics, placing the company in the lowest risk group in the industry, representing the top five percentile and ranking Vår Energi as 12th of the 300 rated oil and gas producers. We feel that this is really confirming our ambition of becoming an ESG leader. An update on our operated assets, which has delivered solid performance in the quarter. On Goliat, we have actively worked over time to improve uptime and performance.
We are pleased to see a very positive trend, with production efficiency at 93% in the quarter, this being the third consecutive quarter above 90%. For Balder-Ringhorne, we restarted the previous shut-in riser in May ahead of plan. This riser was temporarily out of operations in the Q1 and will be permanently replaced during the planned turnaround and ongoing high activity period at Balder FPU in the Q3 . This also includes key maintenance and upgrades for the future production resilience at Balder FPU. Overall, production efficiency was 83% for Balder-Ringhorne, up from 80% in Q1, including planned maintenance. We see a strong development within our drilling performance, particularly in the Balder area. This proves the results from our relentless focus on improving our activities and strive for operational excellence.
The seasonal maintenance further impacted quarterly unit production cost, which ended at $15.5 per barrel. For the first half of the year, we are at $14.3 per barrel, and we maintain the full year guidance of $14.5 to 15.5 per barrel. We also reiterate our end 2025 ambition of reducing OpEx to approximately $8 per barrel. The main drivers are the high-value growth projects, with lower unit costs coming on stream and effects from the improvement program. Turning to our development projects, and more specifically to the Balder X, we are continuing to progress this complex project. The upgrade of the Jotun FPSO is ongoing, with high construction and commissioning activity at the Rosenberg Yard, and the project met key milestone as planned in the Q2.
This includes the refloat of the FPSO as planned in June. After almost three years in the dry dock, for refurbishment, the Jotun FPSO was out, was floating again, and also it includes the installation of the turret, as you see on the picture. The turret weighs about 1,000 tons and has less than 25 millimeters of total clearance to be installed. I have to say that I'm very pleased that the complex heavy lift and installation was completed safely and with no technical issues. Drilling is also progressing well, with seven out of 15 wells completed. The last drilled well at the Balder X project is actually the longest reservoir section drilled in the Balder area ever, with a total reservoir length of above 1.1 kilometer or 1,100 meters.
The SPS and SURF activities are substantially complete and the installation campaign for this season are progressing according to plan. We are as well front-loading activities to 2023 to optimize the project schedule and safeguard the startup. We are maintaining planned startup in Q3 2024. Still, overall, the Jotun FPSO is on a critical path. Our key focus areas are to execute the remaining construction and commission scope to optimize schedule towards planned sail away in Q2 2024. Then ultimately the production start up in Q3 2024. We are here working very close, in close collaboration and integration with the contractors to achieve good productivity and progress for the final phase of the project. Zooming out, as you know, we have a robust development portfolio of projects well into execution, which overall are progressing according to schedule.
These projects will unlock more than 500 million barrels and support our high value growth to more than 350,000 barrels by end 2025. With a portfolio average break-even of around $30 per barrel, they are very robust and resilient. Let me also remind you that most of the projects are subsidy tieback. This means more standardized execution, including standard concepts and building blocks, and thereby less complex. On progress of the specific projects, we are pleased that Åsgard, low wellhead project, Øst, Bauge, Hyme, and Fenja developments started up in Q1 and Q2, respectively, providing approximately 12,000 barrels for 2023. For the Equinor-operated Breidablikk and Johan Castberg, these are reaching milestones towards planned start up. Breidablikk, the tieback to Grane platform, is progressing per plan.
The high activity period on Grane topside has been completed and hotel demobilized. Drilling remains ahead of plan, and planned start up is Q1 2024. For Johan Castberg, construction and commissioning activities are progressing at Aker Stord, with planned start up in Q4 2024. For Hywind Tampen, the first production of power to Snorre was achieved in May, with a gradual phasing to fulfill full available capacity expected in Q3. As you can see, the activity level is high in Vår Energi, and the same is true for the NCS overall. We see that supply chain is moving towards full capacity utilization, driven by the many PDOs submitted during 2022. This is driving increased prices and rates for certain products and services across the industry. We also see this as a risk for future capacity constraints and potentially reduced productivity.
This may lead to additional cost pressure for ongoing and future projects. I think it's important to stress this, Vår Energi's portfolio is well progressed, with five projects recently started production, and seven of the remaining projects are more than 50% complete. Actually, we have a total of 10 projects with planned start up before end 2024, meaning that we have a very well advanced and mature project portfolio. This reduces the risk of material impact from supply chain constraints, resource constraints, and inflation. To summarize, we are on track to our unprecedented high value growth to about 350,000 barrels per day by end 2025, and we are confirming our CapEx guidance for 2023, or $2.4 to $2.7 billion.
In Vår Energi, we have a strong exploration capability and an active exploration campaign for 2023. There have been some updates to our campaign for the year since Q1, and you see here the updated exploration campaign for 2023. Some events to highlight. The Aker BP-operated Rondeslottet well was spudded in June, but due to technical challenges, the well has been temporarily suspended and has therefore been plugged and abandoned. Drilling will commence at a later stage. Vår Energi support the decision and refers to the operator for further information. Equinor has also spudded the Grieg well, and results here is expected in Q3. In Q4, we look forward to drilling the two King- 2 exploration wells related to the King and Price discoveries from 2021. During Q2, we also acquired stakes in the Kaldfjell well, which will be drilled in 2024.
Following the drilling sequence and rig utilization, the operator Venus well in the Barents Sea and the Ringhorne North in the Balder area, have both been shifted into 2024. Overall, we are active in exploration and target high-value barrels in existing hub areas to maximize value creation. I will round off my operational review, and I will pass on the word to Stefano, which he will cover the financials for the quarter. Thank you so far. Stefano, your turn.
Thank you, Torger, and good morning, everyone. Let's start with a high level view of some key financials for the quarter. We achieved solid revenue, EBIT, and cash flow generation on the back of strong realized prices in the quarter, although impacted by lower commodity prices, higher tax payments, and lower sold volumes in the quarter. In addition, profit before taxes is also reduced from the previous quarter due to a net foreign exchange loss of approximately $47 million, as the NOK has continued to weaken compared to the dollar. With operating cash flow before tax at nearly $1.3 billion, we have maintained a solid leverage ratio of 0.4, slightly up from the previous quarter. At the end of June, our available liquidity stands slightly above $3.1 billion.
Production cost is at $15.5 per barrel, compared to $13.1 in the previous quarter, driven by lower volumes and high maintenance activity in the quarter. I will now go into more detail of our Q2 financial performance. We generated more than $1.4 billion of revenues for the quarter. Compared to the previous quarter, revenues were down $657 million, mainly due to lower volumes and lower prices. The spot prices on gas came significantly down in Q2, due to reduced demand from industries and high availability of LNG. However, gas continued to be a strong contributor to revenues, accounting for 41% of revenues and 36% of total production. The average weighted realized price in the quarter was $82 per barrel.
We continue our strong gas price realization of $98 per barrel, which was significantly above the average of the different trading hubs for the quarter. Comparing our realized gas price to the average spot price for TTF during Q2, we have realized $180 million in extra revenues. Taking a closer look at the gas sales in Q2, around 42% of the sales were on day-ahead basis at $67 per barrel. Around 36% was sold on a month-ahead basis at $74 per barrel, both month-ahead and day-ahead were weighted toward the French and German markets. The remaining 22% were delivered under contracts with fixed pricing, realizing an average of $193 per barrel. Strong results from our gas sales strategy for two consecutive quarters in a row.
Going forward, we continue to have a robust sale portfolio with access to several markets, and we will have the flexibility in the contracts to decide the split between month-ahead, day-ahead, and fixed contracts. We continue to have fixed price sales, representing around 20% of the gas sales. The prices for these sales are approximately $189 per barrel in Q3, while the pricing for Q4 and Q1 2024 is not fully known before the beginning of October. However, current estimates indicate a price of $130 per barrel. I would also like to mention that our oil production is fully hedged on a post-tax basis, including Q2 2024, with put options at a strike price of $50 per barrel.
Cash generation from operations in the quarter amounted to $231 million dollar, a decrease from the previous quarter, mainly due to high cash tax payments we made in April and June. For the first half of the year, we have generated nearly $1.6 billion of cash flow from operations after tax. CapEx for the quarter stood at $687 million, up from $642 million in the previous quarter. The three largest development projects, Balder X, Johan Castberg, and Breidablikk, represented around 70% of investment in the quarter. Year to date, CapEx spend is at roughly $1.3 billion, and as Torger mentioned, we expect to be within the guidance for the full year at between $2.4 billion and $2.7 billion.
Tax payments for the Q2 were around $1 billion, up from $577 million in the previous quarter, due to the two tax installments paid in Q2. These payments relate to the very strong 2022 results. For Q3, we have one planned tax payment, estimated to be around $250 million , and two additional planned payments for Q4 at roughly $500 million, bringing the total cash tax payment estimate for second half of this year to just below $800 million. Here, we see the development in our cash position from Q1 to the end of the Q2 . As you see, we have generated nearly $1.1 billion in cash flow from operations before taxes and working capital. This is largely the same amount as we have paid in taxes in the quarter.
We further had cash outflow related to investment in our high value growth project, and we had net cash inflow of $73 million from financing activities, as we completed in April, the refinancing of the dollar bridge to bond, which I will soon come back to. We have distributed, as planned, $270 million in dividends to our shareholders. In summary, the cash position at the end of the quarter stood at $111 million, and our available liquidity was at $3.1 billion at the end of Q2, meaning we are maintaining a strong liquidity position. We are also maintaining a strong financial position.
The leverage ratio, net interest, billing debt on EBITDA ended at 0.4 at the end of the quarter, slightly up from 0.3 at the end of Q1, but well below our over the cycle target of 1.3. As earlier mentioned, we have further optimized the capital structure in the quarter with the successful issuance of EUR 600 million senior notes in April. This was issued under the recently established Euro Medium Term Note program, and marks our debut access in the Euro bond market. The proceeds were used to fully complete the refinancing of the short-term debt. That means to repay the remaining $500 million of the bridge to bond. This means we have a solid debt financing structure with diversification of maturities, instruments, currencies, and debt providers.
The average time to maturity for our bond portfolio is now six years, supporting the execution of our growth strategy towards end of 2025. We remain committed to maintaining our investment grade credit rating. Wise, we are heavily investing in developments which are fueling our growth, continue strong shareholder distribution, and optimizing our balance sheet. Now on dividends. Vår Energi strong cash flow generation supports attractive and resilient distributions. In the last four quarters, we have distributed more than $1.1 billion. We confirm $270 million in dividend for the Q2, which is equal to $0.11 per share, to be paid on 14th of August. For the Q3 , the dividend guidance is $270 million, maintained on the same level as Q2 and Q1.
For the full year, we confirm our dividend policy with an expected dividend of approximately 30% of the cash flow from operations after tax. Lastly, let me revisit our full year 2023 guidance, which is unchanged. We maintain our production guidance in the range of 10-30 thousand barrels per day. Production cost is expected to come in a range between $14.5 and $15.5 per barrel. CapEx between $2.4 billion-$2.7 billion, excluding exploration and abandonment costs, which are expected at $250 million in total. Cash tax payments, approximately $800 million in the second half of 2023. Dividends of $270 million for Q3 of 2023. The plan is to distribute approximately 30% of the CFFO after tax for this year.
That concludes the financial section. I give the word back to Torger for some concluding remarks. Thank you.
Thanks a lot, Stefano. To summarize, Vår Energi saw solid performance on operator assets in the quarter. We continued realizing strong prices on the back of our gas sales strategy, and our main development projects are progressing according to schedule, confirming an unprecedented 50% high value growth by end 2025. We are walking the talk through the Neptune acquisition, a perfect strategic fit, which will accelerate growth and value creation for the company. By that, I thank you all for listening in, and give the word back to the operator for the Q&A. Thanks.
Thank you. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. There'll be a brief pause while questions are being registered. The first question will be from the line of Matthew Smith from Bank of America. Please go ahead. Your line will now be unmuted.
Just different folk. Morning, guys. I'm sorry. Hopefully, you can hear me now, and thank you for taking my questions. Just wanted to focus on the dividend, really. I think last quarter you said the ambition was to maintain the $270 million quarterly dividend, subject to any surprises on the commodity side and whatever else you've stated. Good to that word this quarter, and I guess sort of my question is, should we think about the Q4 through the same lens or through the 30% CFFO policy? Perhaps I'll come back on the second one.
Yeah. Good morning, Matthew, and thanks for your question. I think, you know, let's say, quickly answered, you know, given, you know, that the commodity market, and performance stays as is, you know, I think, you know, you can expect, quite a similar, policy also for Q4 going forward.
Okay, and perhaps just, sorry, following up on the same topic, into my second and final question was really, you know, how important the stability and the resilience of the dividend sort of is to the company? I suppose it's apparent in the recent history, you know, three quarters now over $270 million. If we look at the totality of last year's dividend and this year's dividend, you know, about the same amount, actually, just over $1 billion USD in total.
Yeah, I guess that's sort of focus of my follow on, sort of where, what priority do you put on the stability of the current dividend levels versus the policy of, you know, 20% to 30% CFFO, which arguably, you know, leaves quite a wide range of outcomes. Your philosophy around that sort of policy and that communications would also be useful. Thanks.
Yeah, and I, Yeah, I will start there, and I'm sure, Stefano might fill me in as well on this. You know, we have a solid track record in Vår Energi when it comes to, you know, distribution to our shareholders, and that is something we will continue with. You know, when we have a clear, dividends, policy, and we are saying that, you know, through the cycle, we are going to have our 20% to 30% distribution of the cash flow from operation post-tax. What we are doing, you know, when we are. That we will continue. Having a good distribution to our shareholders is important for Vår Energi.
That is part of our, let's say DNA and value proposition here. How we do this, you know, we are assessing it on a quarterly basis, and then through the cycle. Given where we are, both on the liquidity side, on the leverage side, you know, that is really the assessments we are doing when we are deciding the distribution. Then, of course, our focus is, to ensure a good production, then to fuel our high value growth with our projects, and then to reduce debt and share with our and distribute our shareholders.
I think if you are reflecting a little bit on last year, you know, we, as you said, we had $2.5 billion in investment. We reduced our debt by $2 billion, and we had a good distribution of about $1.1 billion to our shareholders. That is really the policy also going forward here. That is important. Of course, all this combined with an investment grade balance sheet. Stefano, anything to add here?
Yes. Maybe just to confirm, along the lines you are confirming, Torger. The capital allocation from a company perspective is unchanged. Let's say investing for our growth and sustaining the future production and being, let's say a company that then can, let's say share the cash flow between operational investments and debt reduction and, let's say, dividends is really, it's really what we are looking after, and we successfully did so, as Torger mentioned last year. T o some extent, this goes really to why Vår Energi is a unique investment proposition. We can combine big growth and big cash flow generation.
All right. Well, thanks very much, guys. Much appreciated. I'll hand it over.
Thank you, Matthew. The next question will be from the line of Teodor Sveen-Nilsen from SB1 Markets. Please go ahead, your line will now be unmuted.
Morning, and thanks for taking my questions. A couple of questions from me. You repeated your 2025 ambition of 350,000 barrels per day. I just wonder, following the Neptune acquisition, what should we expect that new number to be? Second question is also on the Neptune acquisition. I expect you will go through the portfolio and maybe identify some non-core assets. Could you please just discuss around what kind of characteristics you're looking for the assets that you potentially will divest? Thanks.
Good morning, Teodor, and thanks for your question. Yes, you know, we are confirming our about 350 by end 2025, and that is, as we also expressed, you know, excluding the Neptune acquisition. Here, you know, the answer is a little bit the same as we gave when we announced the deal. You know, we will come back to the combined numbers, but we will do that at a later stage, and that will really be when, you know, the post-closing. Now you know that we are now going through the, let's say, application process and approval processes, we are expecting a closing in Q1, and that will be the prudent time also to, let's say, present the updated numbers.
As I said in my presentation, Teodor, is that, you know, we are going to be a bigger and more profitable company. That is clear. That takes me to your second question. You know, we've also been saying that we are going to be not only a bigger, but we are also going to be, we see this as an opportunity to also to be a fitter company. As part of that, we might do portfolio optimization. What are we then looking at is of course, as we said, you know, the Neptune deal is really also ticking all the boxes. It's value accretive, it's cash accretive, and it's performance accretive.
But, of course, the combined portfolio may give some assets that is, let's say, not that important or not fitting that well with the strategy that we might then assess. T hat might be both when it comes to the size, the longevity, that also in accordance to our ESG strategy, also it might, you know, we will assess the total equity in the various assets and so on. That will be the assumption that we will be doing in very much in accordance to our, let's say, set strategic priorities. Then there might be some assets that we would like to either dispose or adjust the equity stake in.
That also we will come back to, you know, later, because this is of course, will be a work in progress going forward. Of course, again, you know, we are working to close, do the closing, as described. Again, just to reiterate how, well, how pleased we are with the Neptune deal. As I said, it's a perfect fit.
Okay, thank you. Just one final question from me on your comments around the supply chain and the tightness you observe there. How does that impact your additional $8 OpEx per barrel in the long term?
Yeah. We, we feel that, you know, where the activity level is today and heading, you know, I think Vår Energi is in a very good position given the maturity of our product portfolio. When it comes to the OpEx and the production cost, you know, which is almost $8, you know, real 2021 terms, I think we said. You know, here, Teodor, our focus is really to focus on what we can impact and influence, and that is the big building block, is to bring these very competitive barrels on stream, as we talked about. Further to optimize and streamline our operations.
Here, you know, we are working to really improve the cost basis through economy of scale, through new technology, digitalization, and so on. That is our really our focus to bring that on. We also have to assess, you know, what the let's say, the inflation in the market is doing with it. We still believe. Also here, when the Neptune asset is being incorporated, you know, that will also contribute to bring this number down towards the $8 we have set as our target. We are relentlessly working towards that going forward.
Okay, thank you. That's all from me.
Thank you, Teodor. The next question will be from the line of James House from Barclays. Please go ahead. Your line will now be unmuted.
Hi there. Good morning. A couple of questions. I guess, just firstly, you kept production guidance 210-230 for the year, but you've averaged just below that during H1, and you mentioned some planned maintenance, but 12,000-15,000 barrel a day impact in Q3. Just could you outline or provide any color of where the production growth can come from during H2 that could get you to the upper end of that range? My second question is just on the gas sales portfolio, the slide 17, that portfolio mix for H2, it looks like you're shifting volumes to France, particularly maybe a little bit to the U.K., away from Germany and the Netherlands. Is that due to contractual requirements or there's physical constraints where you can make deliveries in the second half of the year?
Yeah. Let's start on the production side. Yes, we are maintaining our guidance. If you first start on the turnarounds and the maintenance, you know, you're right, we are expecting more or less the same turnaround and maintenance activity in Q3 as we had in Q2, but no maintenance activities in Q4. You know, what we really expect for the second half of this year is strong production, strong performance. Really, one of the big building blocks there is that, you know, as we mentioned in our presentation, you know, we have started up five projects. There is two more to come during the second half.
The first half and particularly Q2 was, let's say, heavily impacted by, let's say, startup issues and irregularity, and in particular, this is related to the Hyme, Bauge, Fenja. This, of course, have been worked and rectified to a significant degree. Here we see a big contribution coming, and then we are talking, you know, a 15,000+ level. Then also, there will be You know, we have been increasing the production potential through through wells. I mentioned the good well performance we have had for operated, but also this is happening on the non-operated.
That, that means that we will get more infill wells coming on stream. This is in combination that let's say, gives the basis for maintained guidance and higher production in the second half than we see what we experienced and saw in the first half. In particular, you know, of course, in the Q4, where we do not have any planned maintenance and turnarounds activities. To the gas sales strategy. They are really, I think, you know, when it comes to shifting, you know, what we predominantly did was to shift volumes away from UK.
We delivered, you know, our main portion of gas to continental Europe, and then also, you know, towards France, you know, the PEG index. That I will say was the predominant deliveries for Q1. Stefano, maybe you would like to elaborate on this topic.
Yes. Maybe just to add, that the flexibility depends very much also on the periods. In winter periods, there is a limited room to move volumes between the hubs. During the period of maintenance, there is more opportunities. Overall, just to remind that in 2022, in the full year 2022, we realized $100 million in additional sales revenues, that were obtained through the exit point arbitration. It was a quite a successful outcome. Of course, it's always a challenge to achieve these good results, but that is also, of course, what we will try to achieve this year as well.
Thank you very much.
Thank you, James. As a reminder, if you have a question for the speakers, please press five star on your telephone keypad. The next question will be from the line of Sasikanth Chilukuru from Morgan Stanley. Please go ahead. Your line will now be unmuted.
Hi, thanks for taking my question. Most of them have been answered. I was just wondering on the Rondeslottet exploration well. A couple of weeks back, the operator highlighted that the well, the drilling was ongoing, and we should expect a result by the end of this month or early next month. You have not highlighted today that it's plugged and abandoned. Just wondering if the decision to do this was taken more recently, if you could confirm that, and also, if possible, provide any details as to what happened here? The second one was slightly related to exploration as well. You highlighted a couple of wells going into Q1, but you kind of maintained the exploration CapEx guidance unchanged.
I was just wondering if you could comment on what was going on there as well?
Thanks. Good morning, thanks for your questions. Talking first about Rondeslottet, you are right. You know, this is a pretty recent decision that was made. That means, you know, let's say last week, so to speak. I'm sure this was not, we didn't know about this before that. Really, you know, of course, the right persons or the right company to answer more detailed questions about Rondeslottet is, of course, Aker BP being the operator. Now, of course, we, the operator together with the partners are doing assessments to understand the technical issues and how to proceed.
I'm sure, when the time is right, you know, Aker BP will update more about the schedule and the way to proceed there. When it comes to the exploration guidance, you know, two main comments there. You know, one is as you also see that, you know, we have also been adding some exploration activities for this year. That is one. Two, also, you know, given the recent update on Rondeslottet, you know, following the assessment that will be done, we also will then have a better understanding, you know, what will be, let's say, the next step there.
It is too early at this stage to do any changes to the, to the guidance for the, for the exploration as such. Stefano, anything to add?
Yes, maybe just also the Countach is important to mention the Countach well, because that was due to the fact that it was successful, it had a bit of carryover cost and some activities that were brought forward in Q1 of this year. So that added to the let's say, to the cost. As Torger mentioned, yes, there are two wells that potentially might fall out, but there is Green and Keen that are new entries. Overall, we are maintaining the eight wells for the year.
Of course, the guidance is something that we are monitoring, and we will revert at a later stage if a revision of the guidance is necessary.
Great. Thank you very much.
Thank you, Sasikanth. The next question will be from the line of Anders Rosenlund from SEB. Please go ahead. Your line will now be unmuted.
Thank you. First on debt. How much debt do you think you can take on before your credit rating is affected?
Yeah, I feel that is going in your direction, Stefano, so, maybe you will answer Anders on that. Good morning, by the way, Anders.
Yes, sorry.
Good morning.
Sorry, I just lost a piece.
How much debt you can take before?
How much debt you can add before it impacts your credit rating? Do you think you could add up to 1.3 times EBITDA before it has any impact on your credit rating?
Yeah, no, it's a good question. Thanks for your question. Actually, of course, we're meeting the rating agencies periodically. What has been also confirmed in their reports is the fact that they see the company quite comfortably, let's say, in the current investment grade. Moody's has also stated, once we did the Neptune deal, has also stated that the Neptune deal is credit accretive, let's say, from their perspective. Even with the deal of Neptune, let's say, we don't envisage to go above the 1.3 target.
We will stay. Our expectation is to stay within that target. Let me also add, if we should go above that target, that target is still something that will be looked at over the cycle. This means that if we go above, but as it is the case, we have the perspective of a fast deleveraging. As you know, and as Torger was mentioning before, the deal, the Neptune deal will be cash flow accretive and production accretive since day one.
This fast deleveraging will also be seen positively from the credit rating agencies, and it's written in the report if a big M&A will occur, if a fast deleveraging is envisaged, then this would be still fine in their view. Yeah. Not concerned on that front for now.
Okay. I have another question as well. That goes to the assets, which you said Torger said would be brought on stream in the second half. Which two assets are you referring to when you made that comment?
Yeah, I'm referring specifically to the Statfjord, IOR project and, then, the Aasta Hansteen compression project, that is coming, on in Q3 and Q4. Those are the specific asset I was, referring to.
How much will those projects add?
You know, we, well, we, Aasta Hansteen area, you know, we might see, compared to this first half, we see a potential of 5,000 barrel-ish for the second half here. What I didn't mention when I was asked on that question earlier, is also, of course, that we, that I think it was James asking from Barclays, is that we also, of course, see a good operation performance on operating fields, which is also part of the basis for higher production in the second half.
Okay. Thank you.
Thank you. As there are no further questions from the telephone conference, I'll hand it back to the speakers to handle any written questions.
Thank you very much. I've got another question from Teodor at Sparebank 1. Assuming that CFFO decline for second half of the year, for example, due to lower prices, how much above 30% of CFFO are you willing to pay as a dividend? 35%, 40%, question mark?
I think, you know, somewhat above 30 is still approximately 30% in our mind. As we also said earlier today, you know, we are doing an assessment, you know, yes, on a quarterly basis, but also over the cycle. Of course, Stefano Pujatti mentioned it, you know, we see, of course, a big increase in production, and that also means both through our organic growth projects and also following the cash accretive Neptune Energy. Of course, that means that we also, through the cycle, will see a significant cash flow from operations going forward.
These two things will be, let's say, put into consideration when we are deciding the dividend, both for the next quarter and for Q4, and going forward. Stefano, I'm sure you will add some here, please.
Yes. No, maybe just to add on the fact that on top of the additional production, significant additional production that will also be coming next year, we have a $3.1 billion of liquidity reserves at 0.4 leverage. And also Neptune that is expected to come in in 2024, and that would be CFFO and cash flow accretive since the very start. All these elements are exactly bringing us to what Torger is saying. You need to look at it a bit more in a wider perspective.
I know, finance people is quite precise, but we won't be deterministic, in the percentage. That is what I can say.
We see robustness in our distribution. That is what we are saying.
Thank you. Next question from Ruben at Jefferies. You mentioned the Neptune Norge acquisition is pending approvals. Do you have a timeline of when the different regulatory approvals will be roughly achieved? It requires approvals from both the jurisdictions concerned on the Vår side and the United side. Could you please comment? Thank you.
Yeah. I can. It won't be very much more than I have already said, so to speak. You know, one, we, as we stated also on the 23rd of June 2023, this is to let's say there is a dependency between these deals. That means that we are doing a let's say a mutual closing. As also Ruben are stating, you know, it's various jurisdictions and of course with various timelines, how this will be done and closed. Really, what we are working on is of course on our timeline towards the Norwegian authorities.
And what we see is that we, you know, we maintain the closing for the entire deal, Q1 2024. Not much more updates to be given on that topic here at this stage. You know, if things change, changes, we will come back to it, but we don't expect that necessarily to happen.
Thank you. A question on fixed price gas contracts. Could you give some more color on who was on the other side of those transactions, if there is any risk to these entities to try to negotiate or break these contracts at any point? Thank you.
Yeah, I can start here, and maybe Stefano, you know, you fill me in if I forgot something. You know, I think first and foremost, I think it's important to understand, you know, the relation Vår Energi have with our gas sales, let's say, purchasers. You know, we have long-term gas sales agreements, you know, and some of these clients, you know, have been with us for 30 years, you know, in December this year, 30 years. And, and that is also important to state that this is very, let's say, very solid companies. All of them have solid investment grade ratings. And really what is important for them is predictability. Yeah, that means that they are getting a secure and reliable delivery with, let's say, a predictable price index.
I don't see any big risk here, or I see a very limited risk that these, let's say, contracts entered into with the various price indexes will be, let's say, changed or not concurred to as such. Because this is really building on long-term relations and, let's say, a tight knowledge and a good collaboration between the parties here. We will continue this, and as I said, we will create value, as also Stefano mentioned in his part of the presentation.
Thank you. The final question from Steffen Evjen at DNB. Related to your comments on the NCS supply chain constraints, could you emphasize what subsegments within services you are seeing the highest cost pressures and productivity risk? Thank you.
Yeah. thanks for the question, and, as I said, also a little bit to Teodor's question, you know, one, you know, the overall portfolio stance, you know, I think Vår Energi is in a, is in a good position because we are so well matured and, you know, the main purchase or all the main purchases are done, you know, the assets are secured, and we are also well progressed in both the construction and commissioning activities for most of our projects. So that is a decent, good position to be in, reflecting where the current activity level and where the activity level is heading then. That is in a, in a way, a good thing.
There is a high activity level in Norway now, and maybe, you know, we see this is shifting to the value chain. What do I mean by that? Is that we see that now the, related to both engineering and yard activities, construction, and so on, we see that, you know, it's started to be a resource constraint, which we have experienced earlier, that might impact the cost level and the productivity. It is more related to, let's say, the physical activities. Also we have experienced that also goes for, let's say, offshore installations, you know, and also some increase in the offshore installation vessel rates as such.
Those are the segments that we, let's say what we are monitoring the closest and working to mitigate the risk related to. Again, you know, given the where we are, you know, I think we are in a decently good position, but we are not, let's say, de-risked, but not risk-free, as we have said before. Of course, we are not immune to this kind of impact either.
Thank you very much, Torger and Stefano, and thank you to those dialing in. That concludes the Vår Energi's Q2 2023 presentation and Q&A. I'll hand it back to the operator to close the call. Thank you.
Thank you. This now concludes the conference call. You may now disconnect your lines.