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Investing.com -- Vår Energi on Tuesday reported a 52% decline in net profit in the second quarter of 2025 to $217 million from $453 million in the first quarter, as income tax expenses increased and outweighed gains in production and operating profit.
The Norwegian oil and gas producer posted operating profit of $1.2 billion, up from $972 million in the previous quarter, supported by higher sales volumes and contributions from new field developments. Profit before taxes totaled $1.23 billion, down from $1.28 billion in the first quarter.
The effective tax rate rose to 82% in the second quarter, above the marginal rate of 78%, due in part to an impairment of technical goodwill and foreign exchange gains taxed at lower rates.
Total (EPA:TTEF) income for the quarter was $1.85 billion, down slightly from $1.87 billion in the prior period.
Realized crude oil prices declined to $68 per barrel of oil equivalent (boe) from $76, while realized gas prices fell to $79 per boe from $87.
Production averaged 288,000 barrels of oil equivalent per day (kboepd), up 6% from the previous quarter.
Current production exceeds 350,000 kboepd, with fourth-quarter output projected at approximately 430,000 kboepd, the company said.
The company maintained its full-year production guidance of 330,000 to 360,000 kboepd and expects to sustain production between 350,000 and 400,000 kboepd through 2030.
Vår Energi brought four of nine planned new projects online during the first half, including Johan Castberg and the Jotun floating production, storage and offloading unit at the Balder field.
Cash flow from operating activities fell to $766 million in the second quarter from $1.32 billion in the first quarter, following tax payments and negative working capital movements.
Free cash flow dropped to $4 million from $727 million in the previous period. Capital expenditures rose to $761 million from $595 million, with most of the investments directed to the Balder Area and Johan Castberg.
The company paid a dividend of $300 million for the quarter and reaffirmed full-year 2025 and 2026 dividend guidance of $1.2 billion.
Vår Energi has hedged all post-tax crude oil production for the rest of 2025 through put options with a strike price of $50 per boe.
Exploration expenses totaled $70 million, in line with the previous quarter. Vår Energi reported three commercial discoveries in the year to date and raised its exploration spending estimate for 2025 to $380 million.
Production costs increased to $12.7 per boe from $11.6, due to new field start-ups and seasonal maintenance.
The company expects costs to decline to approximately $10 per boe in the fourth quarter.
An impairment reversal of $510 million pre-tax on the Balder asset contributed to an overall impairment reversal of $441 million in the quarter. The net post-tax impact was $42 million.
At the end of the second quarter, net interest-bearing debt was $5.21 billion, up from $4.64 billion in the prior quarter.
Liquidity rose to $3.47 billion, supported by the issuance of $1.5 billion in senior notes and refinancing of credit facilities. The leverage ratio stood at 0.9x, within the company’s stated target of below 1.3x.
Vår Energi sold 26 million boe in the quarter, up from 23.8 million boe in the first quarter. Crude oil sales totaled 17.1 million boe, gas 7.7 million boe and natural gas liquids 1.2 million boe.
The board approved a second-quarter dividend of $0.12 per share, or $300 million, to be distributed Aug. 26, subject to shareholder approval.