Var Energi ASA

OSE:VAR

Earnings Call Transcript 2023-Q1

[Ida Fjellheim, executive]

Thank you very much. It is my pleasure to welcome you to Vår Energi's First Quarter 2023 Results Webcast and Conference Call.

Joining us today is, as usual, our CEO, Torger Rod; and our CFO, Stefano Pujatti. Torger and Stefano will present the results, and afterwards, we will have a Q&A session.

I will now hand the word over to Torger.

[Torger Rod, executive]

Thank you, Ida. And good morning to everyone listening in on the call today.

We delivered another quarter with strong cash flow generation. We have maintained a safe and stable-supply oil and gas, with Q1 production flat from previous quarter of 214,000 barrels per day, including a continued material gas share of 38% in the quarter. We maintain our full year production guidance of 210,000 to 230,000 barrels per day. We are happy to see new production coming in from new fields on stream with the successful start-up of Frosk in March, Hyme and Bauge in April; and Fenja expected soon to start up.

We have -- exceptional price realization for gas is driving strong cash flow generation in the quarter. The realized price was on average $116 per oil equivalent in the quarter, with $176 per barrel for gas which is due to a well-executed gas sales strategy and represents a significant enhanced value compared to the spot market for gas in the quarter. This provided a solid cash flow from operations of nearly $1.4 billion. We continued to have strong balance sheet, with a leverage ratio of 0.3x at the end of Q1, which was the same as year-end 2022.

The dividend guided for Q1 of $270 million is confirmed. And our forecast for the second quarter is to maintain a dividend of $270 million.

Our main development projects are progressing according to plan. We are on track to deliver more than 50% production growth by end 2025, and we also achieved important milestones in this quarter. We continued to deliver exploration success and see high potential ahead. We started the year with exploration success in the Countach well in the Barents Sea. And we have an exciting exploration program ahead of us this year, with wells with high impact potential commencing during the year.

Here you see a summary of key performance indicators in the quarter. Safety is a prerequisite in all we do, and we are pleased that we experienced no actual serious incidence for Q1. This is also the case for the last year of operations. Our target is always 0 serious incidents and injuries and our ambition is to be the safest operator on the NCS.

Estimated emission intensity of 13 kilo per barrel for operated fields reflect high exploration activity in the first quarter combined with well interventions at Goliat. Production cost per barrel is reduced from previous quarter mainly due to less maintenance and currency movements. We delivered a quarter with strong cash flow. And we confirm a distribution of $270 million in dividends for the quarter, as forecasted during the CMU in February.

Then we move on to an operational review of the quarter. Safety is about people, and safe and responsible operations is a prerequisite for all we do. Vår Energi highest priority is to operate without causing harm to people and the environment. The company's strong focus on the implementation of our safety initiatives continued through the first quarter with a particular drive to improve the trend for serious incident frequency, SIF, by prevent dropped objects. We are pleased to see that the 12-month rolling average SIF rate was 0.5 in the first quarter, an improvement from 1.0 in the fourth quarter of last year, this really confirming the improvement work ongoing.

Q1 production was in line with Q4 with our continued high gas share. Our operated assets delivered 38,000 barrels with an improved production efficiency of 89% in the quarter.

We had some impact from operational issues at the Balder FPU, which I will soon revert to. In the North Sea, the Sleipner and Fram fields delivered strong performance, while shut-in wells reduced production from the Statfjord and Snorre fields. In the Norwegian Sea, production increased as the partner-operated Frosk project started production in March, only 18 months after submitting the PDO, so well done to Aker BP. Production from the tieback fields Mikkel, Morvin and Kristin was also fully restored after the fire incident in the fourth quarter at Åsgard.

We have an unprecedented high-value growth in front of us. And as a beginning of this, we are very pleased to have the partner-operated Hyme and Bauge fields on stream in April, with Fenja expected to follow soon. These fields will have a positive contribution to our production from Q2. So to summarize: We maintain our production guidance for the year of 210,000 to 230,000 barrels per day.

Then an update then on our operated assets. Goliat continues to deliver strong performance and was for the second consecutive quarter above 95% in production efficiency. Our improvement program pays off. In the Balder area, production was positively impacted by the completion of the repair to the subsea systems late 2022. However, the previously communicated riser integrity concern which occurred in February continued to reduce their production by approximately 5,000 barrels per day. Work is ongoing to conclude if accelerated production recovery is possible before the riser is permanently replaced in Q3.

As earlier communicated, we are planning an extended maintenance campaign by use of floatel, starting in May, this year for the Balder FPU. This is to enhance the operational resilience going forward and to improve the efficiency and uptime of the asset. Balder FPU will, as part of this, also conduct a turnaround, which is planned for in August. This will actually be the only operated turnaround this year.

On the unit production cost. This improved to $13.1 per barrel for Q1 mainly due to less maintenance activities. We maintain the full year guidance and our medium-term ambition of reducing OpEx to approximately $8 per barrel.

Then on to our projects. We have a robust development portfolio of projects well into execution which overall are progressing as planned. These projects support our high-value growth to more than 350,000 barrels by end 2025.

Going into details. Our own operated Balder X project is progressing towards planned first oil in Q3 2024. There has been high construction activity at the yard, and I am pleased to see good progress with an improved safety performance. The project reached the ready-for-refloat milestone as planned in the quarter, and we are planning for the physical refloat out of the dry dock in Q3. The focus now is to execute a high construction volume and optimize the sequence of the remaining work. The consequences of the strike is being assessed, but the project is ramping up activities again.

On Breidablikk, the tieback to Grane platform is also progressing on plan with a high activity period ongoing at Grane topside. And drilling remains ahead of plan. For Johan Castberg, construction activity also progressed at Aker Stord during the first quarter, with planned start-up in Q4 2024. Johan Castberg was also affected by the strike, as activity was stopped at the yard there as well.

And as mentioned earlier, the Bauge and Hyme development successfully started up in April, with Fenja expected to come on stream later in Q2. The fields tied back to Njord A platform were somewhat behind the original schedule due to operational issues at the host, but combined, the fields will contribute with approximately 10,000 barrels per day for 2023, so overall, we are on track for our end-2025 production target of about 350,000 barrels per day.

In Vår Energi, we are proud of our exploration capabilities. And this was recognized by the Norwegian Petroleum Society awarding us the NCS Exploration Revived Award in March, as the best explorer.

As communicated in February, we discovered oil in the operated Countach well in the quarter, which is nearby the Goliat field. First results indicate a size of 3 million to 13 million barrels of recoverable reserves. We are excited about finding oil close to Goliat and see a significant follow-up potential in the area between Goliat and Countach. We are currently evaluating to drill an appraisal well on Countach and potentially other nearby prospects to explore the potential and how to best develop the resources. The discovery adds to many discoveries and proven resources we have in this highly prolific region.

Further, the Lupa and Countach discoveries confirmed our exploration models and serves both as potential play openers. And just to reiterate: The Barents Sea has a high potential not only for oil but also for gas, as proven by the Lupa discovery last year. Gas has, however, been a long-lasting challenge in the Barents, where the lack of infrastructure and export capacity has been a constraint. Last week, Gassco presented their updated view on the potential for increasing the gas export capacity from the Barents. In this report, Gassco concluded that a new pipeline from the Barents Sea is the best solution and that a development likely will represent a positive social economy. Gassco also indicate that further exploration activity is required to make the resource foundation for development more robust. And as you understand, this fits very well with our view and our Barents Sea strategy.

Regarding other exploration activity this year. We are excited about the high-impact wells Rondeslottet and Venus and well -- as well as the infrastructure-led exploration in the Balder area.

I then round off my operational review; and give the word to Stefano, who will cover our financial results for the first quarter. Thanks a lot.

Please, Stefano.

[Stefano Pujatti, executive]

Thank you, Torger. And hi to everyone on the call today.

Let's start, as usual, 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. Profit before taxes is reduced from the previous quarter due to lower sold liquids volumes; and unrealized ForEx loss of $175 million, as the NOK has continued to weaken compared to the dollar.

With operating cash flow before tax at nearly $2 billion, we have maintained a solid leverage ratio of 0.3x, stable from the previous quarter. We have strengthened our cash position in the quarter, and available liquidity stands at nearly $3.8 billion at the end of the period.

Production cost is at $13.1 per barrel compared to $14.1 in the previous quarter.

I will now go into more detail of our first quarter financial performance. More specifically, on revenues, we generated more than $2 billion of revenues for the quarter. Compared to the previous quarter, revenues were down $265 million mainly due to lower sold volumes. Gas continued to be a strong contributor to revenues, accounting for 55% of revenues and 38% of production.

The average weighted realized price in the quarter was $116 per barrel. We are especially proud of our realized gas price of $176 per barrel, which was significantly above the average of the different hubs for the quarter. In fact, comparing our realized gas price to the average spot price for TTF during Q1, we have realized $500 million in extra revenues compared to selling on spot. This is a strong testimony of our gas position and sales strategy.

Going deeper into the gas sales in Q1. Around 42% of the sales was on day-ahead basis at roughly $100 per barrel and 24% was sold on a month-ahead basis at around $145 per barrel. Both month ahead and day ahead were weighted toward the French and German markets. The remaining 34% were delivered under contracts with fixed pricing, realizing an average of $283 per barrel, overall strong results from our gas sales strategy in the quarter.

Going forward, we continue to have a robust sales portfolio with access to several markets. And we will have flexibility in the contracts to decide the split between month-ahead, day-ahead and fixed contracts. For Q2 and Q3 2023, we will have fixed-price sales representing around 20% of the gas sales. Prices for these sales are approximately $190 per barrel in Q2 and Q3. I would also like to mention that we have now fully hedged 100% of our post-tax production of crude, including Q1 of 2024, with put options at a strike price of $50 per barrel.

We had continued strong cash generation from operations in the quarter amounting to nearly $1.4 billion, an increase of $915 million from the previous quarter mainly due to less taxes paid.

CapEx stood at $642 million, down from $800 million in the previous quarter, with the 3 largest development projects Balder X, Johan Castberg and Breidablikk representing around 70% of the investments in the quarter. CapEx for the quarter was well covered by generated cash with CapEx coverage of [ 2.1 ]. We expect to be within the CapEx guidance for the full year at between $2.4 billion and $2.7 billion.

Tax payments for the first quarter ended at $577 million, down from $1.6 billion in the previous quarter due to only 1 tax installment paid in Q1. For Q2, we have 2 planned tax payments estimated to be around $1.2 billion.

Here we see the development in our cash position from Q4 to the end of the first quarter. As you see, the cash flow from operations of [ $1.1 billion ] before taxes and changes to working capital has contributed to a strong cash build. We further had limited cash outflow from financing activities in the quarter; and distributed, as planned, $300 million in dividends to our shareholders. To summarize: The cash position at the end of the quarter stood at $769 million, an increase from $445 million at the end of Q4.

Our available liquidity stood at $3.8 billion at the end of Q1, close to the $4 billion in the previous quarter. This is a strong result given that the 2 bilateral RCFs of $600 million in total expired during the quarter, as these were taken during the particular times of COVID pandemic in March 2020 and therefore not renewed.

With a strong cash generation in the quarter, we have maintained our strong financial position. And the leverage ratio, net interest-bearing debt on EBITDAX, ended at 0.3x at the end of the quarter, on the same level as at the end of Q4. We remain committed to maintaining our investment-grade rating whilst are heavily investing in developments which are fueling our growth. And we continue strong shareholder distribution and strengthening our balance sheet. We have a solid debt financing structure with diversification of maturities, instruments and debt providers.

The strong financial position lays a solid foundation for continued material shareholder distribution and growth. Vår Energi's strong cash flow generation supports attractive and resilient distributions. For the past 4 quarters, we have distributed more than $1.1 billion. We confirm $270 million in dividend for the first quarter, which is equal to $0.11 per share, to be paid 10th of May. For the second quarter, as anticipated by Torger, the dividend guidance is $270 million, unchanged from 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 summarize our 2023 outlook and guidance. We maintain our production guidance in the range of 210,000, 230,000 barrels per day. Production cost is expected to come in a range between $14.5, $15.5 per barrel; CapEx in a range between $2.4 billion, $2.7 billion; cash tax payments of approximately $1.2 billion in Q2; and dividends of $270 million for Q2 2023. And the plan is to distribute approximately 30% of the CFFO after-tax for 2023.

That concludes the financial section, and I give the word back to Torger for some concluding remarks.

Thank you.

[Torger Rod, executive]

Thanks a lot, Stefano.

And to summarize. Vår Energi continues to deliver safe and reliable operations. We continue to generate strong cash flow from operations on the back of strong realized prices. Our main development projects are progressing according to plan, confirming an unprecedented 50% production growth by end 2025. And we continue our exploration success, with high potential for the campaign ahead.

So by that, I thank you all for listening in and give the word back to the operator for the Q&A. Thanks a lot.

[Operator]

[Operator Instructions] Our first question today will come from Matthew Smith from Bank of America.

[Matthew Smith, analyst]

My first question, tackle the gas sales, in particular, the first -- the fourth quarter rather, where the fixed sort of price element is listed as TBD. Has there any progress sort of be made on place in those fixed price volume so far? or is there anything to do with ability to execute or perhaps looking at optionality in terms of leaving more volumes unhedged in the fourth quarter? That would be my first question.

And then the second question would be around the CapEx range for the year considered that the guidance is unchanged. I'm just wondering for months in if you have a feeling for where you sort of might end up at this stage.

[Unknown Executive]

Yes, first, quickly in response to your question about the Q4 and fixed pricing. Here, I think I stated also in the quarterly reporting, we are planning as properly gas year ahead to normalize 21% to fixed price for the gas year ahead in Q4 though the pricing we will know when the gas year '23 stop are on October 1. So we will maintain the fixed pricing regime also in Q4 for about 22% of our gas. And then also, we will assess if you could do further tranches sold on Aker fixed price. Then to your question about CapEx, here I think I will read to what we said in the presentation, and that is that we are within our guidance of $2.4 billion to EUR $2.7 billion for the year. I will not say where we're heading in the range here. I would confirm the guidance. So yes, that is, Matthew.

[Operator]

The next question comes from Teodor Sveen-Nilsen from SpareBank 1 Markets. Teodor, your line is open. Please go ahead.

[Teodor Nilsen, analyst]

The 3 questions for me. First of all, balance in the infrastructure. Of course, you have a couple of on the old storage side that need to be developed. So I just wonder, are there any alternative exit routes other than a new pipeline there? And will more consider to actually put capital behind our pipeline there and become infrastructure investors. And...

[Operator]

Our question that has disconnected. We will move on to the next one and wait for him to requeue. The next question comes from Anders Rosenlund from SEB.

[Anders Rosenlund, analyst]

On the Balder X, you write that it's progressing according to schedule. Could you comment whether it's progressing according to costs as well?

[Unknown Executive]

Yes. The same is for the high cost. We are progressing for Balder X in accordance to the set cost and the test plan.

[Anders Rosenlund, analyst]

Okay. And if I may have a follow-up as well. You announced that you having fixed income meetings just before Easter or week before Easter, but no transaction followed and obviously, as the market turned extremely sour with bank crisis and so forth. Are you expecting to relaunch that process? And how do you think about raising debt in the current market, is the opportunity there?

[Torger Rod, executive]

Yes. Thanks for your question. I pass this board to Stefano. Yes, Stefano.

[Stefano Pujatti, executive]

Yes. Absolutely, you are correct. We met some investors, we received a positiven feedback at that point in time, then of course, things happen, especially on the banking sector in the U.S. and in Switzerland which created a bit of turmoil. So -- and the markets were a bit nervous, so we decided to just wait. Luckily, we are in a position where we can -- where we have time. And so we established and we have established a European medium-term note program in March. That is the first step toward issuing bond in the euro market. The program has a limit of EUR 3 billion, and we will -- after the completion of the Q1 and in the future months. We will monitor the market and see if there is a good wind of opportunity.

[Operator]

The next question comes from Vidar Lyngvaer from Danske Bank. Vidar, your line is open. Please go ahead.

[Vidar Lyngvær, analyst]

Congratulations on a strong quarter. First off, I would like you to comment to here -- if you have a comment around the 2023 production. You're guiding 210,000 to 230,000 barrels per day. what could drive you above in the high end of that range? And what could drive you in the low end of that range. To clarify, I'm now looking for factors driving the difference between 210 to 230.

[Torger Rod, executive]

And as we said in our presentation, we are confirming our guidance to between 210,000 and 230,000. And really what can drive the high end and the low end here. Those are assets of operational factors that is impacting this both on the potential on Godden and Ormen Lange. One of them is the stop of all the projects that is coming in. We mentioned some projects that has stopped up, which is, of course, positive. And there was a few more projects that is planned to start during the year to come.

So -- and also we mentioned Fenias Bonoyen, that is close to us. So of course, the timing of the projects coming in is important. That could bring plus, and it could bring minus to the equation. Then there is the turnarounds. We have planned high turnarounds this year and also the same there, the timing and the duration of the turnarounds shorter or more time than planned. It will impact it.

We are also drilling infill wells that will bring; production and same there thatis both depending on the timing it takes and what the rest response to the activities. And then on top of that is, i would says, the general operational performance that could also be plus and minus. So these are elements that is always being assessed when we are giving our guidance and which could brings opportunities or also some downwards to the total number.

[Vidar Lyngvær, analyst]

That's very helpful. Second last question for me would be on the P&L tax rate it seems a bit high to me in the quarter. What drives this -- is the currency effect? Or what's the driver of that?

[Stefano Pujatti, executive]

Yes. Thank you for the question. Yes, the effective tax rate in Q1 is 85%, which is higher, as you correctly said, before it was 73%. The increase is mainly due to the exchange rate movement of the devaluation due to the fact that there is a devaluation of the NOK versus the dollar. So we have an exchange rate loss, which is mainly unrealized and that is not deductible in the special tax regime.

So -- but I would say the effective tax rate guidance that should be used on the short to medium term and net of these effects will be the, let's say, ForEx effect should be around 78%.

[Operator]

No further questions at the moment Vidar. So you're line is still open, if you'd like to continue.

[Vidar Lyngvær, analyst]

Okay. Great. Since there is no one back on mine, I would continue on his question. I believe he was asking about gas exports and potential alternative to pipeline and if more, it would potentially become an infrastructure investor day or if there will be any CapEx for on work side? Anything you could contribute to at this point would be appreciated.

[Torger Rod, executive]

Yes. Thanks a lot for the question. And of course, what you and Teodor was alluding to is the Gassco report that was just announced. And there Gassco, I think they are really assessing 3 main alternatives and that is extension of LNG as it is the pipe solution and then it was also the baron's blue or the ammonia solutions. And I think in all, let's say, great scheme of things. I think they are covering the most likely scenario almost likely concepts in their report in Gassco, and also what Gassco is saying, they are really assessing what will be the best area solution and to it, having the capacity and also the flexibility to extend and then as you could -- I'm sure you all read this, they conclude that the gas -- or the price solution -- or the pipe solution is better. And also it has the best social economics.

As you know, we -- in we have a big strong foothold in the bond. Also, we have a significant, what they believe in it. They are very exciting with all discoveries just before Christmas and just after Christmas, we live by in Countach -- and of course, we are assessing this also see -- and Gassco is in the report talk about a big potential of gas in the open area. And of course, we will -- what we will do is that we will continue our exploration. We'll continue to turn the stones that the minister asked for and of course, and amplify our dialogue.

And really, what we would like to see is that they are able in parallel with that because also Gassco said that more studies will be done -- and in parallel with this, we will be, I would say, maturing more prospects because we get better insight now and look by encounters are confirming our exploration models. And then, of course, we would like to see that we are able to mature of these reserves, making it let's say, economically and also from our business perspective. Then, of course, we will do the dialogue and really consider to be part in, let's say, infrastructure and area solution in the Morvin's.

[Vidar Lyngvær, analyst]

Yes. Last question I had on the [indiscernible scheduled for Q2. Previously, it was scheduled for Q1, Q2. I know it's not you guys doing that, but any material updates to that or just brief time in issue, or just going behind it.

[Torger Rod, executive]

Yes. As you're right, it's [indiscernible] for that. And our understanding now is that the [indiscernible] is expected plan to happen during May. So Hopefully, that's will be the case.

[Operator]

Before we move on, it's worth pointing out that we have had a technical issue on the webcast. So anyone who wanting to participate in the live Q&A will need to dial in to the conference call. We are working to resolve the issue. Thank you for your patience. The next question comes from Ruben Dewa from Jefferies. Ruben just ahead, your line is open.

[Ruben Dewa, analyst]

Thank you for the update and thank for taking my question. I just want to ask a quick one with regards to projects which aim to getting production towards 350,000 by the end of 2025. Just really looking at the sanctioning projects -- have you seen any changes in the cost profile of these projects? And do you maintain a $30 per barrel average breakeven which you communicated to your capital markets update?

[Torger Rod, executive]

Thanks Ruben and really, the quick response is that we don't see any big changes compared to the CMU presentation there. So overall, we see things are moving in accordance to the plan as we communicated in our presentation. So just to add one other and we would say we are also clear on that in the CMU is that, of course, we do think for us is that the significant part of this project is well into execution, being more than 50% complete. And the number at the CMU was 11%, and we are accounting 12% now. And and then 3 poles has topped up. So of course, that is, let's say, reducing the exposure of cost and inflation. But of course, as I said, also we are not immune to it. So of course, it's something we are monitoring and going forward as well.

[Operator]

We have no further audio questions at this time. So I'll hand over to Ida for any tax questions.

[Ida Fjellheim, executive]

I've got a question on your gas price strategy. Can I have any color on price dynamics going into 2024? Do you fix volumes with similar coverage as in '23? And if so, level of prices are we looking at? Any preference for more swaps versus longer contracts going into a more normalized year than where we came from.

[Torger Rod, executive]

Yes. Thanks for the question. And [indiscernible] I think there is some -- so the same items that we have experienced. I think number one, the commodity market in particular gas, it will be volatile and dynamic also going forward is very much driven also by the vendor. And then of course, we also have some other macro items. And one of them, which will be exciting to see is what will happen with the pricing when Europe is going to, let's say, refill their storages now without any Russian gas. Because last year, we had a significant among of Russian gas until August last year. And of course, the question mark is related to the restart in China, and I think we see that the consumption is picking up there, both industrial and private and the same in then Europe. The consumption there, the demand will be a restore of the industrial demand and also the private demand.

All of those things will what they influence the gas pricing and commodity pricing going forward. So what do we believe -- I think that is very much aligned with also what we see others are expecting that we will see strong prices in the second half of '23, but that's driven and impacted by the factors I mentioned. And that will also be the case into '24. And again, if you put a little bit of the longer lenses on. The gas, we expect to be strong but volatile also towards 2026 and then on par or above the oil.

Then a little bit to what we're really doing. And I mentioned it previously as well. We are continuing and paying on our gas sales strategy. We have a very good gas strategy with where we can try on the indexes, fixed pricing day ahead and months ahead, and we're going to continue doing that put our efforts and in excess we think we can create the highest value. And as we always said, we would like to protect onsale and take advantage in the upside. And I also mentioned already for the for the fourth quarter this year, we are planning as part of the gas ahead to have a fixed price sale of above 20% -- held the price at 1st of October.

And then, of course, for '24, we have to get better clarity in the activity and maintenance program before we are start to pace the fixed pricing going forward. And as I said before, a gas sale strategy that is really 70% is based on long-term contracts and then 30% on short term. So we have a very, very good gas sales agreements with long-term clients, and we will continue building on that also going forward.

[Ida Fjellheim, executive]

Good. Another question on OpEx per BOE. Can you say something about the distribution per quarter, given that you start off the year below guidance and with low maintenance. Which quarter should have the highest OpEx for BOE according to current plans?

[Torger Rod, executive]

Yes. Thanks for the question again. And this is really, as we said in the presentation as well, this is really in a significant degree driven by the maintenance activity or the turnaround activities. And then it's really 2 quarters that stands out, it is the -- this one, the Q2 and then it's the Q3. So I think we -- and also, as we mentioned in the presentation that the high activity period at Balder FPU is planned to start in May. So then we will have the high activity period and 5 turnarounds happening in Q2 and Q3. So those will be the course with the highest activity and the highest OpEx cost as such.

[Ida Fjellheim, executive]

Question from John Olaisen in ABG. The Jotun FPSO physical refloat is set for Q3. Could you elaborate a little on this? What is the plan from here? Will the vessel still be located at the yard? What will be the key remaining work post physical refloat? When is the plant hookup time? And do you have any view on how much a gas -- or we can start with that, and we can take the gas question afterwards.

[Torger Rod, executive]

Okay. Thanks for the question. When it comes to the physical refloat, as said, that is happening in Q3. And what will happen then is that we really --we opened up the dry dock and we let the water in and then, of course, FPSO will float out, and we will then place it at the key side at Rosenberg. So then the activities will continue to complete the construction work of the commissioning -- do the mechanical incomplete and stop the commissioning activity as such.

And then the -- what are the remaining main milestones is similar to what we announced in the CMU. So we will then go take it offshore during the spring of next year, it will be and then do the hiccup offshore. So making it ready for startup in Q3 2024.

[Ida Fjellheim, executive]

Then a second question from John Olaisen in ABG. Do you have any view on how much a gas pipeline to the Barents Sea would cost? Would Var Energi would be interested in an equity stake in the gas pipeline to the Barents Sea, i.e. would we be willing to participate in the investment.

[Torger Rod, executive]

Yes. here when it comes to the estimate, I really have to refer to the work that is done by Gassco. And also, of course, as Gassco said, they will be continuing doing more studies and also we will do more dialogue. So that is really the answer there. And of course, for us, having a big question in the Barents and for us that having been ambitions to discover more and develop more if the gas pipeline is proven to be the best solution to create value for this -- with these resources. We will participate accordingly. But first, there's some work to be done there, both from the Gassco side.

And also, of course, as I said, we are very excited about the discoveries and we will mature now more prospects and continue our activity in the balance to find more reserves going forward.

[Ida Fjellheim, executive]

Question from Jorgen Bruaset in Nordea, regarding dividends. payout for Q1 is 20% of cash flow, and you continue to guide for approximately 30% for the full year. Could you say anything on the dividend curve in nominal terms? Will you aim to keep it at flattish, stable as possible, i.e., can we expect a higher payout in percentage terms in H2, where cash flow is slightly lower than H1. How do you see H1 dividends relative to second half of this year dividend?

[Stefano Pujatti, executive]

Yes. Thank you. Thank you for the question. So let me clarify that at current market conditions, really the expectation is to maintain the current dividend run rate. This should leave us around the communicated level of approximately 30% of the CFFO that we communicated that we paid as per dividends for 2023. As you know, we have done in the past that we will be doing. We are doing quarterly assessment, where we take into consideration the macro development in terms of scenarios, the investment plan the cash flow outlook, the balance sheet strength and the operational performance. And all of this then, and of course, will be factored into the decision.

But as I said before, really if the current -- the market conditions remains what we are seeing today, all other things being confirmed and according to plan, then the ambition is really to maintain.

[Ida Fjellheim, executive]

Thank you. A third question from John Olaisen in ABG. On your 2023 exploration program, which 2 to 3 wells do you regard as the most exciting? Could you elaborate a little on The Shelf exploration well, please? As I understand it, it understood that The Shelf is an appraisal of the Ellida discovery from 2003. Is that correct? What are the key uncertainties about the well? And when will it be spotted? When can we expect the result?

[Torger Rod, executive]

Thank you for the questions. The most exciting wells we have this year is the one we call High Impact, also high risk, high reward. And is really too defined in that category this year, and it is dimensional under softer, and it is the Viennese and under softer is in the Norwegian Sea. And I think it's more prudent that the operator Aker BP is what they're giving all the insight and the technical details there. But we also have or as we communicated as this year that is a potential big structure. So of course, if there is anything, then it will be, hopefully, a good discovery. But I think there are more technical details and history, it is better to Aker BP to answer.

Then the second one is the Venus, which is operated by Var Energi, and that is in the Barents Sea not too far away from Johan Castberg. And the same here, it's a big structure. And if we all say, confirms hydrocarbon, it could be big discovery, which is -- but of course, when we are saying high risk high reward, it means also that the probability for the discovery is not the highest. But those are the two that is the most exciting.

And if I want to mention one more is, of course, nice to be doing the near field exploration in the Baron -- Balder Area with what we call a King Appraisal. So that will also be exciting. So I stop there.

[Ida Fjellheim, executive]

Then a final question from Teodor Sveen-Nilsen at Sparebank 1 Markets. There is a question on OpEx decline quarter-on-quarter. How much is driven by a weakened NOK versus the U.S. dollar? Perhaps that's one for you, Stefano.

[Stefano Pujatti, executive]

Yes. Thank you. Let me say that the impact on the ForEx is not really material if you compare it with Q4. So it's roughly 0.1 really. So the main driver of the decrease is really the cost. And -- that is, as Torger mentioned earlier, its mainly due to the less maintenance in the quarter and the fact that since Q1, we had no turnaround.

[Ida Fjellheim, executive]

And then the final question on -- also from Teodor on the Barents Sea and Infrastructure. Are there any other exit routes that we're considering and we''ll void unless we invest in infrastructure.

[Torger Rod, executive]

Yes. I think the answer has is a bit mentioned. I think what Gassco has been doing in the report is really to assess the most likely allocation concepts as such. And also as I mentioned on the question from John Olaisen as that we are keen to mature. We see a big potential in the brands. We would like to continue exploring and this going and naturally more prospect. And then, of course, really what we would like to do is to create the sufficient resource base to just justify such our pipe solution to the continental to the market. That is really our task going forward yes.

[Ida Fjellheim, executive]

Thank you very much Torger and Stefano. That concludes Q&A and Q1 presentation webcast. We do apologize for the technical issues. The full Q&A will be available as a recording on our website after this. Thank you very much, and have a good rest of your day.