The announced plan to merge Neptune Energy with Var Energi will have a positive effect on Var's business risk profile due to the resulting accelerated production growth toward 400 thousand barrels of oil equivalent per day (kboepd; about +30% pro forma), increased operatorship, and lower production costs per barrel than the current company average. In our view, it will also balance the portfolio with more gas and added production from the Barents Sea. While the acquisition will be immediately cash-flow accretive, we understand that funding for the deal will come from existing liquidity. This will increase net debt and have a negative effect on Var's credit metrics, though we anticipate the metrics will remain commensurate with the 'BBB' rating, with
