Var Energi (VAR) is Norway’s third-largest oil and gas producer and one of Europe’s largest gas exporters from the Norwegian Continental Shelf (NCS). Founded in 2018 through the merger of Eni Norge and Point Resources, VAR is listed on the Oslo Stock Exchange, with Italian energy giant Eni as its largest shareholder. The company has equity stakes in approximately 50% of all producing assets on the NCS, controlling 203 licenses, including 47 producing fields. VAR is expected to produce in excess of 300,000 barrels of oil equivalent (Boe) per day in 2025 and reach a run rate of 350,000 to 400,000 barrels per day in 4Q2025. While increasing production, management has also driven down the cost of production, from about $13 per Boe in 2024 to $10 per Boe in 2025.

The material cash flow generation resulting from this efficient growth, combined with an investment-grade balance sheet, enables attractive and predictable dividend distributions. The Company paid $1.1 billion in dividends in 2024, yielding 14% on the end-of-year market capitalization for fiscal year 2024. In the first quarter of 2025, VAR distributed a dividend of $331 million, representing an annualized dividend yield of 18.2%. From 2025 onwards, the Company has raised the dividend guidance to 25–30% of CFFO after tax, from 20-30% previously. We estimate that at the current market capitalization, a double-digit dividend yield is feasible down to $50 Brent and $8 mmbtu TTF.

The company holds 1.3 billion barrels of proved and probable reserves across its portfolio, which spans all four major producing hubs on the NCS.

Recent strategic moves include the $1.2 billion acquisition of Neptune Energy’s Norwegian assets in January 2024, which added approximately 65,000 to 70,000 barrels of oil equivalent per day (boe/d) of production capacity. This works out to management paying roughly $48 per barrel of first-year production and getting all future barrels for free. Major development projects include the Balder X field, with a peak output of 78 kboe/d, and Johan Castberg, with a net peak capacity of 57 kboe/d. Both fields are expected to be in production this year. The company operates critical infrastructure, including the Goliat field, the first oil field to begin production in the Barents Sea.

We believe that Var Energie has a probability-weighted value of 64.3 NOK, representing a 108% return compared to its current price. Over a three-year time horizon, in which the most significant downside scenario fades out after two years, this price yields an internal rate of return (IRR) of 58.7%. In our peak valuation scenario, we use $85 oil and $18 TTF, yielding a value of 132 NOK. In our downside scenario, we use $55 oil and $8 TTF, yielding a value of 11 NOK.