Good morning, everyone, and a warm welcome to Vår Energi's Third Quarter 2023 Results Webcast. The presentation today will be given by our CEO, Nick Walker, and our CFO, Stefano Piatti. Nick and Stefano will present the results, and afterwards we will open up for Q&A. I will now give the word to Nick.
Thank you, Ida, and good morning to you all, and welcome to our third quarter 2023 results presentation. This is my first quarter presenting as Vår Energi's CEO, and for me, it's really great to be back involved in Norway. What has been created in Vår Energi as one of the fastest growing E&P companies in the world is extremely impressive. And what I see in Vår is a team of exceptionally talented and motivated people who are passionate about our business, and for me, it's very exciting to be part of this tremendous team. I'm pleased to report a quarter with strong financial performance, continued material dividend distribution, and we're on plan to deliver high growth and value creation. First of all, the key highlights.
We're set to double our production from today's levels, accelerating our growth target to around 400,000 barrels a day by the end of 2025, inclusive of the Neptune transaction. We're happy to announce that we've had two projects starting up in October, Tommeliten Alpha and Breidablikk, adding fresh barrels from this quarter onwards. Our remaining project portfolio is progressing according to schedule, with five projects more than 50% complete. The Neptune Energy Norge acquisition is expected to close in the first quarter of 2024. We're also delivering on production and improved OpEx. With our new projects, we're set to exit this year at over 230,000 BOEs per day. Production costs are on track to beat guidance, with $14 per barrel in the quarter. Our gas sales strategy continues to realize above-market prices, resulting in strong financial performance.
The realized gas price of $91 per BOE in the quarter was around 40% above market average, and this provides strong cash generation of $975 million cash flow from operations for the quarter, and we maintain a strong investment-grade balance sheet. Lastly, we continue to deliver attractive and predictable shareholder distributions. We confirm a dividend of $0.11 per share to be distributed in November, and Q4 dividend guidance of $270 million, resulting in total dividends of approximately $1.1 billion for the full year. Now, focusing a little bit on the Neptune acquisition, which we announced in June, and is progressing towards completion. This is a value-accretive deal that adds scale, diversification, and longevity to our portfolio, and as we like to say, it's a perfect fit.
Neptune's portfolio consists of twelve high-quality, NCS assets, which produced 66,000 barrels in the first half of this year and are located in our existing hub areas, as you can see on the map, making them highly complementary to our existing portfolio. Through the acquisition, we're increasing our operatorships and amplifying our position in the Barents Sea, with access to the Snøhvit field and the Melkøya LNG facility. The assets are cost efficient with low emissions and with limited near-term CapEx, making the deal highly cash accretive and strengthening future dividend capacity. Also, the deal cements our position as a leading E&P independent, with the third largest operator on the NCS, and we become the second-largest producer of gas from Norway into Europe.
And we're making good progress on closing the transaction, having obtained the necessary approvals from the Ministry of Petroleum and Energy and the Competition Authority here in Norway. And as I said earlier, we anticipate closing in the first quarter of next year. On completion, Neptune Norway will be merged into Vår Energi, and all Neptune Energy employees will become employees of Vår Energi on consolidation of the two companies. And Neptune has a team of highly skilled and energized professionals, and we're looking forward to welcoming all our new colleagues, colleagues into Vår Energi to create one team. And now looking longer term to our growth outlook. From the current level of production of 210,000-220,000 BOEs per day, we're set to double production to around 400,000 BOEs per day by the end of 2025.
This will come from delivery of our portfolio of high-quality projects, which in total deliver 170,000 barrels per day of new volumes. Closing the Neptune acquisition adds 65,000-70,000 BOEs per day, which is flat for some time. As we said previously, we'll dispose of some non-core assets to high-grade the portfolio. For example, the Brage disposal we recently announced. Putting this together means we'll grow to around 400,000 barrels per day by the end of 2025. Beyond 2025, we'll sustain value creation through, firstly, infill drilling and improved recovery from our core assets, secondly, maturing a high-value project portfolio to move our significant discovered resource base into production, and thirdly, drilling out our exciting exploration portfolio.... and on top of that, we'll continue to look at further opportunistic M&A opportunities.
So I'd like to say we're on track to deliver significant production growth and create value. Now back to the Q3 results. Here's a summary of the key performance indicators for the quarter. We're delivering on production. Unit OpEx is below guidance despite a quarter with high maintenance and turnaround activity. Cash flow from operations was $975 million on the back of strong realized prices. We confirm a dividend of $270 million for the third quarter. At the same time, it's continuing to invest in a high-value portfolio of growth projects, with CapEx of $650 million in Q3. We maintain a strong balance sheet with a leverage ratio of net debt to EBITDA of 0.5 times, slightly up on the previous quarter.
So I think strong financial results for the quarter all round. Looking now at production, Q3 came in at 210,000 BOEs per day, an increase from Q2, mainly due to higher contribution from new fields. The Fenja, Hyme, and Bauge fields that started up earlier in the year are through their start-up phase and now have good regularity. And as we previously announced, we expect to exit the year at over 230,000 BOEs per day, which is driven by two things: that we have no major turnarounds in the fourth quarter, adding 10,000 barrels a day incremental over Q3, and of course, the Breidablikk and Tommeliten startups adding fresh new barrels. And so we're on track to meet our full-year production guidance of 210,000-220,000 BOEs per day.
And now an update on our operated assets, which delivered solid performance in the quarter. At Goliat, we've had good success improving uptime and performance, and we're pleased to see the positive trend on production efficiency at 99% in the quarter. This being the fourth consecutive quarter above 90%. We're actively working to unlock the significant potential around Goliat and also the Barents Sea gas prospectivity, and have secured a rig for a significant exploration program starting middle of next year. At Balder/Ringhorne, production efficiency of 79% in the quarter was impacted by the planned maintenance shutdown, and without that, it would have been at over 90%. And we're continuing to unlock upside potential at Ringhorne through infill drilling, where we also see good results.
Now looking at production costs, you can see that we're on target to beat full-year OpEx guidance. The seasonal maintenance period impacted quarterly unit production costs. However, with that, we delivered $14 per barrel, which is below the guidance range, and we reiterate our end 2025 target to reduce unit operating costs to approximately $8 per barrel. The main drivers is a fourfold. Firstly, new projects coming on stream, which have relatively lower unit operating costs to what we have today, our active cost improvement program, the rationalization of our portfolio that I've talked about, and the Neptune assets, which improve the overall trend. Our belief is that it's important to position the company for the energy transition to maintain relevance and invest ability long term, and we're doing just that.
You can see that we have a clear path to 50% operational emissions reduction from our operated assets by 2030. This is driven by a focus on investments in reducing emissions and electrification of our assets. A similar path is being followed for our non-operated assets. Of course, safety performance is top priority for us, and we have a good trend on improving our performance with zero actual serious incidents in the quarter. We're also getting recognition for our ESG leadership with rankings in the top 5% for Sustainalytics and an A+ rating for ESG 100. I think this is leveraging to how the company is viewed.
Now, focusing a little bit on what's going to drive the growth, our quality project portfolio is key to delivering our growth strategy, unlocking more than 500 million barrels of reserves and adding new production of around 170,000 barrels a day at peak. After the recent startups of Tommeliten and Breidablikk, we have nine projects in execution, with five of those more than 50% complete. And let me remind you that most of these projects are subsea tie-backs. This means more standardized concepts and execution, and thereby less complexity and more predictable delivery. This project portfolio drives our growth trajectory and creates significant value, which you can see with breakevens of around $30 per barrel.
So Balder, of course, is a core production hub for Vår, and as you can see, over 500 million barrels has been produced to date from the area, which is over four times the original PDO. But as you can see, we have the potential to produce as much again, and we're making good progress towards delivering on this ambition. Breidablikk has just come on stream. Balder X is scheduled to start up in Q3 next year, and I'll talk about both of those in my next slides. And we continue to explore and appraise the area. The Norma discovery was announced in the quarter and is currently being assessed. In Q4, we will drill the Magellan and Hubert wells to appraise the King and Prince discovery. Hopefully, this will set up another tieback development.
Ringhorne North drilling is now pushed into early 2024, and the Svalin Solar prospect will also be drilled in Q4 this year. This is a very prolific area and where we will be drilling for many years to come, with the potential to extend production from the Balder area towards 2045. It's also key to our decarbonization plans, where we're working with Equinor to assess the electrification of the whole Balder, Ringhorne and Grane area. Now, I want to focus on our three major projects. Firstly, Breidablikk, which came on stream in October, four months ahead of schedule and within budget. Breidablikk, a subsea tieback to the Grane platform, holds almost 200 million barrels of recoverable oil and is expected to pay back in less than two years.
We'll see higher initial production than expected, as the number of wells available at start-up has increased to eight wells from the originally planned five wells. And of course, drilling is going to continue through to the end of 2025, with additional development wells to come on through that period. You can see peak production from the field is expected at up to 60,000 barrels a day gross, with Vår Energi's net share being around 20,000 barrels. The successful completion of Breidablikk is an important milestone for the company's strategy for growth and value creation. And if we go to the next slide, please. Thank you. So now to the Jotun FPSO. It's a key enabler to continue our to deliver material future value in the Balder area. We're making good progress on the project and are maintaining start-up in Q3 2024.
Jotun FPSO, which you can see in this recent picture, successfully met key milestones with the refloat and heavy lift installations completed on plan in the summer, and the FPSO is now over 85% complete, and the focus is on executing the remaining construction work and commissioning. Drilling and subsea activities are progressing according to schedule, with nine of 14 wells having been drilled, and all these wells, all 14 wells will be available at start-up. And on the subsea, three of five subsea installation campaigns have been completed, with the fourth ongoing just now. However, this has been a difficult project, and to mitigate schedule risk and to improve construction productivity, we recently announced a capital, CapEx increase. This...
You can see this project unlocks gross production of around 78,000 barrels a day with low operating costs of below $5 a barrel. So is again an important contributor to our growth trajectory. And the third major project is Johan Castberg, which is on track to achieve first oil in the fourth quarter of 2024. Capital costs were recently increased to protect the schedule and recognizing current market pressures for services and equipment. The drilling and subsea aspects of the project are progressing to schedule, and completion of the FPSO is well advanced.
Johan Castberg is a key catalyst for Vår Energi's growth profile, and you can see the plateau production from the field is around 190,000 barrels a day, gross, with Vår Energi's net share being around 55,000 BOEs per day. These are high-value barrels, with OpEx of around $4 per barrel and break-even economics of $35. We see further value upside from extending the plateau through area tieback opportunities, and I think there are quite a number of potential opportunities to come. Now I want to move on to our exploration. Our 2023 program continues to yield results. During the quarter, we made discoveries at Kim, Crino, and Norma, representing an 80% success rate with our program year to date.
For the remainder of the year, we have three further wells, all in the Balder area: two appraisals at King and Prince, and the Svalin well that I talked about earlier. The Ringhorne North well is delayed from this year into early 2024. And looking forward, I, I'm really excited about the company's exploration portfolio, which has over 1 billion barrels of net risked resources. And coming into the company, I see a company that we have an amazing portfolio, with lots of optionality and growth opportunities, and we're working to move this forward at pace. That rounds out my operational update, and I'll now hand over to Stefano to review the Q3 financials. Thank you.
Thank you, Nick, and good morning, everybody. Let's go into some key financial highlights of the quarter and see why Vår Energi is a unique combination of value creation, extraordinary growth, distribution capacity, underpinned by an investment-grade balance sheet. We realized a strong average price of $85 in the quarter, driven by gas, where we continue to outperform the market. This lays the foundation for high cash flow generation. Our financial position stays strong, with a leverage ratio at 0.5, and $3.1 billion in cash and undrawn facilities. We confirm the third quarter dividend of $270 million, and plan to pay another $270 million for the fourth quarter. I will now go into more details of our third quarter financial performance.
We generated more than $1.6 billion of revenues, up $184 million versus the previous quarter, mainly due to higher volumes and higher oil prices. The realized price for oil in the quarter was $87 per barrel, where we benefited from high liftings in September, where when prices were higher. We continue our strong gas price realization of $91 per barrel. Year to date, the average realized price is $124 per barrel, which represent a premium of $47 per barrel compared to spot. This amounts to more than $800 million in extra sales revenues in the first nine months. Taking a closer look at the gas sales in Q3, around 44% of the sales were on day ahead basis at roughly $60.
Around 33% was sold on a month ahead basis at $60 per barrel, and both months ahead and day ahead were weighted toward the French and the German market. The remaining 23% was delivered under contracts with fixed pricing, realizing an average of $193 per barrel. Going forward, what can we expect? We continue to have a robust sale portfolio with access to several markets, and we will have flexibility in the contracts to decide the split between months ahead, day ahead, and fixed contracts. We will continue to have fixed price sales, representing around 20% of the gas sales. Prices for these sales are $126 per barrel in Q4 2023, and $128 per barrel until the end of Q3 2024.
I would also like to mention that our oil production is fully hedged on a post-tax basis up to Q3 2024, with monthly put options at a strike price of $50 per barrel. Cash flow generation from operations in the quarter was $975 million, higher than the second quarter, due to less tax payments and higher production. For the first nine months, we have generated almost $2.6 billion in cash flow from operations after tax. Our CapEx for the quarter is $650 million, where Balder X and Johan Castberg remains the largest contributor with 63% of the total spend. Strong operating cash flow covered the company CapEx with good margin. CFFO to CapEx coverage was 1.5 in the quarter.
Year to date, CapEx is $2 billion, and we expect to be within the guidance of $2.4-$2.7 billion for the year. Tax payments for the third quarter ended at $260 million. For the fourth quarter, we expect to pay around $600 million. This has been revised since the second quarter, up NOK 1 billion, due to stronger commodity prices. We have included a tax sensitivity for the first half of 2024 related to 2023 results at different price scenarios, which we hope can provide some guidance on tax going forward. Important to state that this excludes any tax effects from the Neptune acquisition. Here we see the development in our cash position from Q2 to the end of the third quarter.
We generated $975 million in cash flow from operations after tax and working capital, significantly higher than last quarter due to lower tax payments, higher sold volumes, and higher oil prices. We further had cash outflow related to investments in our high-value growth projects, and we had net cash inflow of $426 million from financing activities. We also distributed, as planned, $270 million in dividends to our shareholders. In summary, the cash position at the end of the quarter stood at $595 million, and our available liquidity was at $3.1 billion at the end of Q3, in line with previous quarter, meaning we are maintaining a strong liquidity position. We are committed to maintain our investment grade rating.
The leverage ratio, net interest bearing debt on EBITDA, ended at 0.5 at the end of the quarter, slightly up from 0.4 at the end of Q2, but well below our over the cycle target of 1.3. In September, the working capital revolving credit facility was extended from November 2024 to November 2026. The new facility has similar terms as the previous facility, and is provided in equal proportions by 14 international banks. The facility will be used for general corporate purposes and working capital, as well as providing a liquidity reserve. The refinancing is a testament to our entity's access to attractive bank financing, and supports a continued strong liquidity position. The average time to maturity of our debt portfolio is now almost five years, supporting the execution of our growth strategy toward end of 2025 and beyond.
The strong financial position lays a solid foundation for continued material shareholder distribution and growth. Strong financial performance supports attractive and predictable dividends. We confirm $270 million in dividend for the third quarter, which is equal to $0.11 per share, to be paid 16th of November. The dividend guidance for the fourth quarter is $270 million, which implies a full year dividend expectation of $1.08 billion, in line with total dividend paid in 2022, despite a lower commodity price environment, showing the commitment and resilience of the company to attractive shareholder distribution. Beyond 2023, we maintain our policy of 20%-30% of the CFFO after tax, and reiterate that the Neptune acquisition will be cash accretive, and therefore dividend accretive as well. Now, a recap of our 2023 guidance.
Production narrowed the range to 210,000-220,000 barrels per day. Production cost is expected to beat guidance of $14.5-$15.5 per barrel. CapEx guidance is maintained between $2.4 billion-$2.7 billion. Exploration and abandonment costs are expected at $250 million in total. Cash tax payment, approximately $600 million in the fourth quarter, and dividends of $270 million for Q4 of this year. That will bring the total dividend for the year at approximately 30% of the CFFO after tax. That concludes the financial section. I give the word back to Nick for some concluding remarks. Thank you.
Thank you, Stefano, and I think, you can all see the strong financial results in the quarter. I've just one final slide to summarize. We're one of the fastest growing E&P companies in the world, and we're delivering on our strategy for growth and value creation. I want to leave you with the following key messages to support this. Firstly, we're accelerating our growth target, which including Neptune, sees us double production from current levels to around 400,000 BOEs per day by the end of 2025. Second, this year, we're delivering on production, and we're delivering improved OpEx. Third, we're continuing to achieve strong financial performance, as you've seen, supported by increased commodity prices and our flexible gas sales strategy. Lastly, we continue to provide attractive and predictable shareholder distributions. So those are our third quarter 2023 results.
Thank you for your time, and we'd now like to open up for your questions. I'd also like to say that we have Torger Rød, our Chief Operating Officer, on the line, who will participate in the Q&A. I think at this point, I now hand over to our operator to take us through the process. Thank you very much.
Thank you. We'll now start the question and answer session. If you do wish to ask a question, please press five star on your telephone keypad. If you wish to withdraw it, you may do so by pressing five star again. There will be a brief pause while questions are being registered. The first question will be from the line of Vidar Lyngvær from Danske Bank. Please go ahead. Your line will now be unmuted.
Thank you. Congratulations on the quarter. Thank you, and congratulations on the quarter, and welcome to Nick. Good to have you here. You mentioned you're working on Equinor to look at the electrification of Balder/Ringhorne area. Could you shine some light on what kind of parameters you look at in such investments and what kind of payback one could expect on such a project?
Yeah, maybe I'll start and then Torger can step in. But, I mean, you know, we want these projects to make money. And, you know, first of all, you know, of course electrification allows us to stop paying carbon taxes, both in Norway and the EU ETS, but of course, we get more gas to sell and it improves maintenance. But of course, there's some capital investment there. So it's a bit early days to talk about this whole project. It's in the concept stage, but you know, you know, we want investments to make money long term and you know, I've experienced in the past of being able to achieve that. So I think we should be able to do that here.
Maybe, Torger, do you want to add any more light on where the project's at?
Yeah, I can add a little bit. You know, first and foremost, you know, we are making sanction on projects that is profitable. So that is also our clear expectation when it comes to the Balder electrification. And as also said, we are going to do this in collaboration with Equinor, which is also, of course, making it able to create synergies. So really, what's driving the business of this is, of course, reducing the CO2 and the CO2 taxes. It's more available gas to be sold to the market, and it is, as well, the maintenance part. So but we are going to frame this, and as I said, we are sanctioning projects with profitability, and that will also be the case in this regard.
Great. Thank you. And, and another one, if I may. Your OpEx guidance of $8 in real terms for 2025, can you indicate what the inflation on just the $8 per barrel is today, or what kind of inflation you baked into the estimate for 2025? We're now halfway almost between 2021 and 2025. We're looking for what kind of inflation you expect. I realize it hasn't changed from before, but just looking for some color on it.
Stefano, do you want to try?
Yes, sure. We are assuming 4% for 2024, and then, 2% flat for the following years.
All right, brilliant. Thank you so much.
Thanks.
I'll requeue for any further questions. Thank you.
Thank you, Vidar. The next question will be from the line of Lydia Rainforth from Barclays. Please go ahead. Your line will be unmuted. We can't seem to hear Lydia, so I'll just move on to the next one, next one. The next one will be Teodor Sveen-Nilsen from SB1 Markets. Please go ahead. Your line will be unmuted.
Morning, and thanks for taking my questions, and welcome back to Norway, Nick. I have three questions. First of all, on dividend for 2024. This year, you will pay a dividend, which is slightly above a 30% operating cash flow. How should I think about 2024? Should we expect you to pay dividends in the mid, in the middle of the 20%-30% of operating cash flow range, or should we expect you to stay in the high end or maybe above the high end? That's the first question. Second question is on the Breidablikk. Good to see that there is ahead of schedule start ahead of schedule, but what will be the production contribution for Q4 specifically?
Third question, that is maybe more on a personal to Nick. I just wonder what kind of experiences do you bring along from Lundin that you think you can apply in board and making more an even better company? Thank you.
Well, thanks, Teodor. Good questions, and maybe Stefano will take the first one on dividends.
Yes, thank you. Thank you, Teodor, for the question. So, dividend of 2024, I think, the guidance is still there, is unchanged, and that is, let's say, to have a dividend, which will be in a range between 20%-30% of the CFFO. Now, let me say something. What you should be considering is the fact that in 2024, we will also have the Neptune deal, and that will be cash accretive from day one. So that will add on CFFO, and therefore, will be adding on dividend.
Yeah, so I think that is a little bit the way to look at it, but we will provide more, let's say, color when we will give guidance on 2024 during the Q4 year-end, the presentation at the beginning of the year.
Okay, and then maybe I'll capture the Breidablikk question about what is the production rate for Q4 this year. Of course, it's just come online, Teodor, and it will ramp up, and of... You know, it's going to take a little bit of time to do that. So, and, you know, as I've put in my presentation, when we get to peak production, it's going to be about 20,000 barrels a day, but it's gonna take some months to get there and some more wells to get there. So it's early days, but, you know, I'll step back to the guidance that we provided, which is we expect to exit this year at over 230,000 barrels a day, and that involves a component of Breidablikk in there, as well as other things.
So, we're not going to guide, you know, short-term production on that, but, you know, what I'm saying is that longer term, this gets to a peak rate net to us of around 20,000 barrels a day. And then, your third question on a personal note.
What I?
Sorry?
Could I just follow up on that one? So then, I interpret that you won't reach plateau by year end this year on the Brage. We should expect that to occur sometime in first quarter next year.
I don't think I can. I mean, I'm not—I don't think you can assume that, but I think it's going to depend on a number of factors on well performance and uptime, and so it's too early in the life of the field to say what that's going to be. But you know, I think you know, during next year, we would expect to get there, so on the base case, but you know, things can go quicker sometimes. So we have some assumptions baked into the numbers we've given you, and as it's you know, as I say, it's only just started up a few days ago, so it's too early to really comment in detail about it. And thanks.
In terms of, on a personal note, you know, I think what I said when I came in was that what I see is an amazing team of people in Vår, and, you know, a lot of passion and a lot of focus on the business. And I also see an amazing set of assets. I mean, it's an extraordinary position in Norway. And I was really pleased to see the quality of the exploration portfolio, and we also have a big contingent resource base.
And it's those two things that go together, you know, nothing's delivered without people, and, you know, what was created in Vår was driven by people and teamwork and, you know, coming into this, you know, I believe firmly in teamwork and people driving the outcome. And, you know, what we—what I would like to see happening in the company is that, is us maximizing the value from this amazing portfolio. And, you know, we've got this tremendous growth trajectory to 400,000 barrels a day by the end of 2025, and then we need to bring more projects in and drive the exploration, and hope I can bring some more energy to that and help that along.
But what we have, as I say, an amazing team of people driving it, so I'm only one of many. So as I say, excited to be here, and I think as a team, we can create a lot of value for all stakeholders. Hopefully, that covers it, Teodor.
Yeah, absolutely. Thank you.
Thank you, Teodor. Next, we'll try to see if we got any audio from Lydia, from Barclays. Your line will now be unmuted.
Hello there. Hopefully, this works a little better this time. Yeah, good morning, everybody. I've got two questions, if I could. The first one just on the cost side, and that's, that's for the target of $8 per barrel. You mentioned, I think, four different levers to actually get there. How... What sort of relative importance are they in terms of, is it all 25% each, or is it the portfolio, of the new projects in between the bigger part of that? And then secondly, Nick, you talked just then about adding value, in terms of like kind of focusing on value optimization. So what is there to actually do in that? So I'm not quite sure in terms of what you, what you meant by that. Thank you.
Okay. On the cost side, I mean, we're not going to guide the components that drive that up, and, you know... But as I listed four items that drive it, and they're all important and components about driving down a unit cost. Of course, new projects coming in with lower, relatively lower, unit operating costs improve the position. We continue to focus on driving costs down, and actually, when we bring Neptune in, it creates more synergies and opportunities for us to reduce costs. The Neptune assets themselves are also relatively lower unit cost. All of those things contribute to driving the cost lower over time. As I say, we're not going to guide the component elements of that.
In terms of creating value and adding value, what I see in the company is, you know, we talk externally about the combined Neptune and Vår having 1.3 billion barrels. But beyond that, there's, we have a significant contingent resource base, which we have no defined projects for in a large part. So we need to bring those opportunities forward to create value, and that's one of the things we're starting... we're working on hard, is turning the significant contingent resource base into projects and into value.
Then the exploration portfolio, yeah, I mentioned that we have a portfolio of over 1 billion barrels of net risk resources, and again, we have an ambitious exploration program, significant program in the Barents for the coming years, and also around the Balder area, but also around our other areas of our business. Which will largely lead to, I think, subsea tie-back opportunities, because that's the type of things that we're drilling, except for perhaps in the Barents. And so that creates a number. We expect that to create a number of other opportunities to create value. So the whole focus is how do we turn this significant resource base, both discovered and contingent resource base and exploration into value? And that's really what I'm talking about.
Hopefully, Lydia, that covers your question.
It does. Thank you very much.
Thank you, Lydia. The next question will be from the line of Sasikanth Chilukuru from Morgan Stanley. Please go ahead. Your line will be unmuted.
I think we're not getting that, operator.
You can't hear what Sasikanth is saying or?
No. No.
Nothing at all?
No.
Okay.
No.
Then I'll just move on to the next one. Sasikanth, you can just try to re-enter the queue, and we will take you afterwards. The next question will be from the line of Matthew Smith from Bank of America. Please go ahead. Your line will be unmuted.
Hey, morning, everybody. Morning, Nick. Hopefully, you can hear me well. I had a couple of questions, if I may. The first one would be around Balder X and Johan Castberg. So part of the CapEx increase there, you put down to mitigating schedule risks, 'cause I think you highlighted that again today. I was just wondering if you're able to add a bit of context around that really, you know, what that involves, and if you're able to add any confidence intervals around the first oil timelines. I appreciate they've both been maintained at the moment. And then the second question would be on the new 2025 production target, net of disposals.
Just wondering, you know, I appreciate you probably won't talk specific assets, but are you able to characterize for us the sort of assets that might be deemed non-core? What are the key metrics or risks that you're looking to mitigate or improve through the actions of disposals from here? Thanks.
Yeah. So, Torger, why don't you do the first one, then I'll, Matt, I'll take the second one, and nice to speak to you again, Matt.
Yeah, I will, and thank you for your question, Matt, here. And you know, it goes a bit for the same for both Johan Castberg and Balder, so I will in a way use Balder as example here, because as you know, these projects are schedule-driven, and here we are talking about the FPSO. And as you said, we are maintaining the targets started for both Balder and Johan Castberg, and that means for Balder, you know, a start-up in Q3. And here, you know, what we have, the expenditure adjustment that we talked about just recently, it is really three items that is pinpointed. It is, one, it's related to the market and market adjustments.
Two, it is related to productivity and to drive productivity and improve that. And three, it is related to schedule mitigations. And when it comes to specifics for Balder, what we are doing is that we are accelerating some of the activities on the schedule to... And that means that we are installing some of the work we are doing this year, some of it we will be doing early next year. That is, among others, installing the risers, removing work from the critical path. As well as to add efficiency in the hookup and offshore commissioning, we are also including a flotel, which will be used for the hookup activities offshore.
So really then, let's say, improving and adding resilience to the offshore schedule. Then, lastly, also, which goes to productivity, we are also, let's say, adding and amplifying the supervision, also really ensuring that we have not only the manpower, but also the supervision that is required to drive both schedule and a timely completion of the work. So that is really how we are driving it. I will say this is also very similar to what is happening at Johan Castberg at the moment. You know, the three buckets of cost adjustments is the same.
And then also Equinor, which of course is better to talk to this than I am, you know, are doing the same to really ensure that they are having a timely delivery of the Johan Castberg FPSO, you know, and a sail away next summer, and then a start-up in Q4, which is the date for Johan Castberg. So I think I stop there, Nick and Matt.
Thanks, Torger. And, you know what? I will to add a little bit on Balder is that, you know, when you look at it, the critical path runs through the FPSO completion. And when you look at this, first of all, we're well advanced. We're over 85% complete. You can't take that away. So there's only 15% to go, and it's, when you look at it, the number of man-hours, it's, it's not that, not that significant, given the scale of the workforce that we have available to us and the supervision. You also look, and you see that the engineering's complete, and we have all the materials and equipment. So, this is perfectly doable in the timeframe that we have.
It's all about just delivery of the work that we've got, and then, as Torger said, we've increased the supervision and capability at the site to make it happen. So I think we have a degree of confidence around making this happen. Your second question, Matt, was around the disposal. So if you look at the trajectory of the company, it's over 200 now. We add our projects, and then we add the Neptune assets. So it'll take us somewhere over 400,000 barrels a day by the end of 2025. And the reason we come back to approximately 400 is around this disposal package. And our intent is to dispose of assets that are sort of non-core to us. And what do I mean by that?
Sort of late life, low perhaps working interest, you know, but late life means high cost, high carbon emissions, and perhaps not much remaining potential, so, and maybe low-ish working interest. They don't fit strategically in the organization. You know, anyone can look through our portfolio and see different things that are in there, and there's... We have a number of these assets. We're not going to guide which they are, but they're, you know, Brage, which we announced the disposal of recently, is a sort of good example of the type of thing that probably is better in someone else's portfolio than ours, and there's an opportunity to high grade.
As I say, you know, when you look at the numbers, it's not a huge portfolio that we're looking at getting rid of, because we want to settle around approximately 400,000 barrels a day at the end of 2025. Hopefully, that helps answer your question, Matt.
Perfect. Thanks, Torger. Thanks, Nick. Much appreciated.
Thank you, Matt. We'll try to give Sasikanth from Morgan Stanley a second go. Your line will now be unmuted. They still can't hear-
We still can't hear S...? No, we still can't hear him.
Yeah. On that note, I will just hand it over to Ida for any written questions.
Thank you. The next question is from Anders Rosenlund at SEB. Assuming the Neptune transaction is closed sometime during Q1 2024, from which date will the Neptune assets be reflected in the P&L? From the date of closing or some other date? Thank you.
Stefano is best qualified to answer that one.
Yes, yes, and thank you for the question. The transaction has an effective date from 1st January 2023. This means that what will happen is that we will be paying the consideration when we go to completion. Let's assume that is end of Q1 for sake of example. All the cashflow until that point in time will be deducted from the $2.3 billion consideration. Until that point in time, we will not be booking the production. Production, assuming, for sake of example, a completion 1st April.
From that point in time, we will start, let's say, accounting for the barrels. And that will be from that point on, we will start consolidating the company in the Vår Energi financial statements.
Thank you. I've now gotten the questions from Sasikanth at Morgan Stanley in writing. The first question is related to the ambition for long-term production post 2025. It was previously guided that the company intends to sustain production at end 2025 levels, which was 350,000 barrels a day, with the end 2025 production target now raised to 400. Does that mean the ambition for sustaining production level is raised to 400, or does the company previous guidance still hold? Thank you.
Thank you, Ida and Sasikanth. That's a good question. I mean, what I'll say is that, you know, when we get to 400,000 barrels a day, our aim is to sustain value creation longer term. And, as I said, I see that coming from a number of areas. It's around infill drilling and improved recovery from our core assets, and there's still lots of opportunity to continue to do that. It's about continuing to mature new projects, where we have a material a contingent resource position, not just what Vår had, but also what we will get through the acquisition of Neptune. And, we need to turn that into value. So we want to create projects out of that, high-quality projects, and bring that through to production and value.
And then we have, as I said, a very material, I think, exploration portfolio. We've got, over 1 billion barrels of net risk resources, in some exciting prospects over all of the basins that we're involved in, and, and all of the hub areas we're involved in, and that has a material opportunity to create a lot of value. And, and we want to drill that out and obviously bring that into production as quickly as possible. And we're involved in a lot of assets, so a lot of these things will be tie-backs and quick cycle projects into the things that we, we're already in. And so we think that has a portfolio opportunity to, to continue to create value for us.
I think it's a little early for us to say how we see the longer term outlook on top of this, and we will come back at Capital Markets Day and talk about that. But you know, I think we have a significant opportunity. And I think when you look at the numbers, we have 600-700 million barrels of contingent resource on top of our 2P, and we have, you know, there's about 1 billion barrels of net risk resource in the exploration portfolio, which is considerably more than the resource base that we have booked. So I think there's a lot of opportunity in the company to create value and longer term.
I think we need to come back and guide when we put the two companies together and tell you how we see this.
Thank you. Sasikanth, two more questions related to CapEx. Firstly, for 2023, the range is kept at $2.4-$2.7, as we now have two and a half months left of the year. Can you give some more flavor on, on where we'll end up within that range? And then finally, the third question was related to CapEx for next year. With the further CapEx increases highlighted at Balder X and Johan Castberg, there was a question whether there's any guidance you can provide on the likelihood of 2024 CapEx levels. Thank you.
Stefano, do you want to take this, too?
Sure. Thanks for the question. Yes, we are maintaining the guidance as in between 2.4 and 2.7. What you might be expecting is to be landing in the middle, let's say, side of the middle range for this year. As far as next year is concerned, at the Capital Market Update, we guided in a range of $1.5-$2.5 billion per year in 2024 and 2025. With 2024 being in the upper end of the range.
Now, even with the CapEx increase of Balder and Castberg, we do not envisage the previous guidance on 2024 to be materially changed. But of course, as you are aware, we are consolidating the RMB budget. We are preparing the... We are collecting the data. We are preparing the, let's say, the budget and the plans. So we will revert with an updated guidance for 2024 as part of our Q4 and the full year results at the beginning of next year, where we will also be including Neptune.
Thank you. Next question from John Olaisen at ABG Sundal Collier. This is related to Balder X. Are there any near-term milestones for the Jotun in Johan Castberg FPSOs that we should look for? Thank you.
I think the simple answer to that is that we need to get these completed onshore and taken offshore in the summer of next year for both projects, and those are the key milestones. I think both of them are in the place where it's about final completion, and you know it's leading up to taking both vessels offshore in the summer next year.
Thank you. Next question from Kate Somerville at J.P. Morgan. We've seen news reports speaking of deepwater rig exodus from Norway towards other regions. As global rig supply is already tight, should further work materialize in those regions, is there risk to execution on your current or upcoming projects, or are you comfortable with your capacity? Thank you.
Thanks, Kate. It's a good question. I think the simple answer is we're comfortable. We've secured rig capacity, and for us in the next few years, actually. So for the projects that we have out, we've got all the rig capacity that we need. And so for us, we're in a good place. But of course, it's a worry for the industry, and we need to maintain an active rig fleet here in Norway to meet requirements longer term.
Another question from Kate on the production outlook for 2025. Can you confirm that there is no change to your expectation for your portfolio, excluding Neptune? And would you consider additional portfolio optimization of Neptune's assets, or have you already reviewed these? Thank you.
Well, first of all, the simple answer, again, Kate, is no change. And, you know, our portfolio optimization considers all of the portfolio when we put it together. So that's how we will consider this as one portfolio. And, and the sort of targets and, and aims that we set out previously for the Vår-only assets hasn't changed from what we've said previously.
Thank you. And last two questions from Ruben at Jefferies. First of all, given the production target by end of 2024 of 400,000 barrels a day, including Neptune, can we assume that 2026 is your peak production year in your current portfolio? Second question is, I see your base portfolio production is roughly flat, low decline between 2023 and end of 2025. What are some of the levers you are able to pull to maintain base portfolio production at these levels? Thank you.
Yeah, Ruben, and I'll try this. I mean, first of all, your question said, 400,000 barrels a day by 2024. It's actually, end 2025, just to, to clarify. And, y-you know, I don't think... We are, we're not guiding beyond that point, so it's, a- and we're going to hold off guiding beyond that point until, till we come to our capital markets update next year. So, but I think, you know, we can sustain at that level for a period of time after then, given the assets. But of course, at some point, we have to add new things in, and we'll talk about that when we get to, to a capital markets update.
In terms of the base assets, of course, we continue to invest in these and drill infill wells and opportunities, and we have a program to do that, so that will continue. That's why we show relatively low decline on many of our base assets. Hopefully, that answers the questions.
Thank you. That wraps up the Q&A and Vår Energi's third quarter results webcast. Thank you very much for dialing in, and we wish you a good day ahead. Thank you.