Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Var Energi ASA (VARRY, Financial) reported strong financial results with an operating cash flow of $1.3 billion post-tax in Q1 2025.
- The company successfully issued EUR 1 billion in senior notes, which were significantly oversubscribed, enhancing liquidity.
- Production efficiency was high at 97%, with first quarter production at 272,000 barrels of oil equivalent per day, in line with expectations.
- Var Energi ASA (VARRY) is on track to achieve its 2025 growth target, expecting to reach over 400,000 barrels per day by Q4 2025.
- The company maintains a strong focus on cost discipline, reducing operating costs to $11.6 per barrel, with expectations to lower it further to $10 per barrel by Q4 2025.
Negative Points
- The market environment remains uncertain, which could impact future financial performance and operational plans.
- There is a high level of uncommitted capital expenditure, which may pose risks if market conditions deteriorate.
- The company faces challenges in accelerating project timelines due to complexities in geology and engineering.
- Dividend sustainability is questioned by analysts, especially in a volatile oil price environment.
- The company has a relatively low free float due to a large shareholder, ENI, holding 63%, which may limit liquidity and investor interest.
Q & A Highlights
Q: What factors could lead Var Energi to reach the top of its production guidance range for 2025, and how sustainable is the dividend given the current market conditions?
A: Nick Walker, CEO, explained that the production guidance of 330,000 to 360,000 barrels per day is expected to exceed 400,000 barrels per day in Q4 2025. This is contingent on the successful startup and ramp-up of several projects, including Halton East, Jon Kasper, and Boulder. Regarding dividends, Walker emphasized the company's ability to sustain dividends long-term, supported by production growth and a robust project pipeline. The dividend is expected to remain stable, even in a volatile market, due to strong cash flow generation and strategic investments.
Q: Are the Boulder Phase 5 and 6 projects sufficient to maintain production levels, and how does Var Energi plan to manage costs in the short term?
A: Nick Walker, CEO, stated that Boulder Phase 5 and 6, along with other projects like Ringhorn North and King Development, are expected to maintain production levels towards 2030. The company is focused on accelerating project timelines to achieve this. On cost management, Walker highlighted the company's strong cost discipline and the ability to sustain low operating costs, which supports dividend sustainability even in a lower oil price environment.
Q: What is the potential of the Goliath Ridge discovery, and how does it fit into Var Energi's overall strategy?
A: Nick Walker, CEO, described the Goliath Ridge discovery as a significant opportunity, with potential resources upwards of 350 million barrels of oil equivalent. The discovery is close to existing infrastructure, allowing for fast-track development. The company plans to de-risk the project quickly and integrate it into its broader strategy of leveraging existing assets for high-value, low-emission production.
Q: How does Var Energi plan to utilize its CapEx flexibility in response to fluctuating oil prices, and what is the company's approach to maintaining its investment-grade credit rating?
A: Nick Walker, CEO, emphasized the company's commitment to maintaining resilience and flexibility. Var Energi has a range of projects with low break-even costs, allowing it to adjust capital spending based on market conditions. The company aims to sustain its investment-grade credit rating by optimizing its project portfolio and maintaining a strong balance sheet, ensuring long-term dividend sustainability.
Q: What are the key milestones for the Boulder project, and how is Var Energi managing working capital and underlift positions?
A: Nick Walker, CEO, confirmed that the Boulder project is on track, with the FPSO successfully moored and final commissioning underway. The company expects first oil by the end of June. Carlo Santopader, CFO, addressed working capital management, noting that the company is recovering its underlift position and expects operational movements to normalize in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
