RBC Capital Markets has reduced its view on Var Energi ASA, citing increased leverage and strategy dilution tied to the company's recent purchase of BlueNord.
On Thursday, the brokerage cut Var Energi's rating from "outperform" to "sector perform" and lowered its price target to NOK55 from NOK60 per share. The change follows Var Energi's $1.3 billion takeover of BlueNord, which RBC said raises balance-sheet pressure and dilutes the firm's Norwegian Continental Shelf focus.
RBC highlighted that Var Energi will face stronger balance-sheet stress through 2027 and 2028 as it seeks to maintain a quarterly dividend of $350 million while funding higher capital expenditure, particularly if market pricing follows the forward curve. The bank flagged that financing and cash-flow dynamics under those conditions are likely to constrain flexibility over the period in question.
Deal structure and valuation
The transaction consideration consists of $203 million in cash plus 248.4 million new Var Energi shares. RBC estimated the deal carries an enterprise value of about $2.3 billion, which it equated to roughly $12 per barrel of oil equivalent based on the combined 2P and credible 2C resource figure. That per-barrel figure is a small discount to the roughly $12.50 per barrel valuation at which Var Energi traded prior to the announcement.
RBC noted the acquisition creates what it called the largest European exploration and production company by combining the assets and resources of the two groups.
BlueNord asset and cash-flow profile
BlueNord's portfolio on the Danish Continental Shelf covers the Tyra, Halfdan, Dan and Gorm hub areas. The assets produce between 40,000 and 45,000 barrels of oil equivalent per day and hold about 195 million barrels of net 2P reserves, according to RBC's recounting of the transaction details.
Using first-half 2026 annualised figures, RBC estimated the BlueNord portfolio generates roughly $500 million of annual cash flow from operations.
Cost, tax and decommissioning considerations
Despite that cash flow, RBC drew attention to BlueNord's year-to-date operating costs of $25.7 per barrel. The brokerage warned those costs are likely to push group-level operating expenses higher into 2027, well above Var Energi's indicated full-year target of $10 per barrel.
RBC also raised two additional liabilities that increase the acquisition's complexity. First, the potential for new Danish windfall taxes under the country's recently formed left-leaning coalition government could create incremental fiscal risk. Second, BlueNord carries decommissioning liabilities of about $1.35 billion as of 2025, which represents a material future cash obligation for the combined group.
Financing and synergy assumptions
RBC estimated that roughly 80% of Var Energi's stated synergy target of $250 million to $300 million for 2027 through 2032 would stem from refinancing BlueNord's approximately $1.2 billion of debt. That debt currently has an interest rate around 3.2 percentage points higher than Var Energi's borrowing costs, the brokerage said, underscoring the reliance on refinancing to deliver the planned savings.
Combined capital expenditure is expected to reach about $2.8 billion in peak years. RBC compared that with a $1.4 billion annual dividend run-rate and concluded that the payout and elevated capex together are likely to weigh on the balance sheet under strip pricing in 2027 and 2028.
Market performance and portfolio mix
Var Energi's share price has risen 48% year-to-date, a performance that outpaced peers Aker BP and Harbour Energy by roughly 17 and 20 percentage points, respectively. RBC attributed that outperformance to Var Energi's stronger exposure to gas and to cash-flow leverage. With BlueNord's portfolio weighted at about 35% gas, the combined company's overall gas exposure increases as a result of the transaction.
Finally, RBC's NOK55 price target is derived from a four times average 2027 through 2030 debt-adjusted cash flow multiple, reflecting the brokerage's view of the enlarged group's cash generation after accounting for debt.