Equinor ASA

And I would now like to turn the conference over to Mr. Peter Hutton, Senior Vice President Please go ahead.

Thanks, Anna. And you're very welcome to the conference call for Equinor's fourth quarter and full year 2020 results. Welcome those analysts and investors joining us either on the call or those watching on the webcast and media also joining us on Zoom. I'm delighted this morning to introduce Anders Upperdahl, Chief Executive Officer and Steinshire CFO. They will present the results and outlook for around 20 minutes each, and then we will move into a Q&A session for analysts and investors, which we hope to finish around 11.30 Norwegian time. And at that point, the media will have an opportunity to move into their own Q&A session on Zoom. So with that brief introduction, let me pass the word over to Anders. Thank you very much.

Thank you very much, Peter, and good morning to all of you. I hope you and your families are safe and well. We are all used to digital events by now, but I really hope progress on vaccination will allow us to meet sometime soon. Today, we are presenting our fourth quarter and full year results for 2020. We are also announcing the sale of our backend asset today, and I will revert to that too in my presentation. In addition, we will take the opportunity to provide some direction on the strategy process leading towards the capital markets day in June. This is the first time Svein and I present to you as CFO and CEO, and we look forward to a good and open dialogue with you all. 2020 was a year like no other, and the pandemic continues to impact people and society across the world. For the global energy markets, the unprecedented volatility was illustrated by taxation in the Brent. From almost $70 at the start of the year, to even below $20 at the bottom in April. No, it's showing signs of recovery, but we should still be prepared for volatility. It is in times of challenge that we see the true strength of the company and the quality of our people. Equinor kept operations running and responded forcefully. This was important not only to protect our financial resilience in 2020, but also to be in a strong position for value creation going forward. In addition to meeting and beating action plans to reduce cost and improve resilience near term, we took significant steps to transform our company. We have set a clear ambition to be a net zero energy company and to create value as a leader in the energy transition. Our first priority is to make sure all our people can return safely home from work every day. In 2020, we have implemented measures to keep our people safe and well during the pandemic. For many, this has been a tough year. And I'm impressed to see how colleagues have looked after and supported each other. During the year, we experienced serious incidents in our operations. And with the fires at the onshore plants at Melkøya and Kjellbergården, it is clear that we are not where we want to be. we will take learnings from investigations and avoid future incidents. For 2020 as a whole, we had an increase from 10 to 11 hydrocarbon leaks. But we see from the reduction of serious incidents and personal injuries that we are moving in the right direction. In fact, with a serious incident frequency of 0.5 and a total recordable injury frequency of 2.3, we achieved our best safety results ever. This gives inspiration to improve further in close cooperation with authorities, partners, suppliers, safety delegates, and union representatives. Shortly after our capital markets update last year, the pandemic hit and our established contingency plans proved their true value. We launched a $3 billion action plan to strengthen our financial resilience. Hard efforts throughout the entire organization succeeded, and we have delivered above and beyond our ambitions. In fact, we have achieved savings of more than $3.7 billion. We reduced the organic CapEx to $7.8 billion, almost all of it in our international portfolio. The temporary tax adjustment at the Norwegian continental shelf made it possible and profitable to maintain activity and progress projects. In addition, we realized improvements and reduced our operating costs with around 1 billion from original estimates, well above the 700 million target. Still, our financial results were of course impacted by the low prices during the year. Our net income for 2020 ended up negative $5.5 billion, and the adjusted earnings came in just below $1 billion of the tax. We will continue to take steps to strengthen our robustness towards periods with lower prices, particularly in our international business. And due to savings and capital discipline in 2020, we delivered a strong cash flow from operation at around $11 billion after tax and a positive net cash flow at an average oil price below $42 per barrel for the year. Last year, we reduced our dividend from 27 cents per share in fourth quarter 2019 to 9 cents per share for the first quarter 2020. as a part of our forceful response to protect our financial resilience. Through the year, we have balanced capital discipline, investing in profitable portfolio, and return of value to our shareholders. We continue with this balanced and cautious approach, and the board proposed a modest increase in the quarterly cash dividend to the annual general meeting. from 11 cents per share in third quarter to 12 cents per share for the fourth quarter. We also continued to cut emissions and deliver on our low carbon emissions. We reduced our CO2 intensity from 9.5 kilo per barrel in 2019 to 8 kilos in 2020, below half of the global industry average. We will experience variances from year to year, but the long-term direction towards lower emission intensity is clear. At end of 2020, we had an equity installed capacity of 0.5 gigawatt renewable energy in production, and we are on track for profitable growth with 3.3 gigawatt in development projects. Our agility in the market turmoil safeguarded our financial resilience last year. But even more important, we strengthened our competitiveness for strong value creation and cash flow in 2021 and the years to come. We have improved our unit production cost, achieving the 2021 ambition already in 2020 with a 5% Strict capital discipline and strong improvements have significantly reduced expected COPEX from the indications we have previously given. For 2021 and 2022, we expect a COPEX levels of $9 to $10 billion annually. Cost reductions and capital discipline will significantly improve our capacity to deliver strong free cash flow. In 2021, we expect to deliver a free cash flow of $6 billion after tax and before capital distribution at an oil price of $50. In addition, we will get the proceeds from the Bakken divestment. This demonstrates the true value of our improvements over the last year. We have initiated a strategy process towards the Capital Markets Day in June. Our clear ambition is to continue creating long-term value as a leader in the energy transition and become a net zero energy company by 2050. To us, this is a sound business strategy creating long-term value for shareholders. We have a strong portfolio within oil and gas, and by optimizing it further, we will strengthen our competitiveness and value creation while reducing emissions. Building on our competitive advantage from oil and gas, we will accelerate profitable growth within renewables, leveraging our leading position in offshore wind. Our capabilities from oil and gas also position us for developing low carbon technologies and value chains. Let me be a bit more specific on each of these areas. In 2020, we delivered an underlying production growth of more than 2%. Johan Sverdrup officially opened at the start of the year. and continues to deliver beyond high expectations. The field reached plateau production sooner than expected and at a higher level, capturing value from the use of new technology and digital solutions. In the middle of this year, we expect a third production increase, taking the capacity to around 535,000 barrels a day. around 100,000 barrels above the estimate at startup. Johan Sverdrup phase one investment was 83 billion kroner. Today, we can announce that for Equinor, this investment will be paid back after tax this month, or to be precise, actually this week. That's 16 months after startup. In my view, quite impressive. Snorre expansion came on stream towards the end of last year, ahead of schedule and below cost estimates, adding 200 million barrels of recoverable oil reserves. Last year, we also established a new unit focusing on improved value creation from late life fields. In fourth quarter, this unit delivered solid production efficiency at 98% and updated the plans for start to rest, increasing the recovery rate from 56 to 62%. In the other end of the life cycle, we keep developing high value projects and delivered development plan for Breida Blikk with a break even well below $25 per barrel. Our international business is significant, but it's not sufficiently robust in low prices periods. It is clear that we have to improve our operations and our portfolio to increase resilience. This also means taking actions where we don't see the profitability and robustness we seek. This is the basis for the decision that led to the impairment of our asset in Tanzania. It is also the basis for the steps we are taking to shape our portfolio to be more robust and competitive. We are today announcing the divestment of our Bakken asset. By doing this, We are focusing our effort and capital towards more competitive projects in our portfolio, enabling us to deliver higher value creation for our shareholders. In the results we are presenting today, the Bakken asset is reclassified as held for sale, leading to an impairment of around $300 million for the quarter. The Bakken investments was done at the time with high and increasing oil prices. And based on price assumption, that proved to be way too optimistic. We have taken impairments and we are realizing a significant loss. But I would also like to thank the organization for impressive improvements efforts in recent years. make it possible for the Bakken asset to actually deliver positive cash flow in the period from 2016 to 2020. And to realize this transaction at the competitive terms in today's market. Last summer, a temporary tax regime was put in place in Norway to maintain the activity level in the industry through a period with lower prices. Equinor has delivered on these ambitions and we are on track with the projects to be sanctioned for the Norwegian continental shelf in 2021 and 2022. The temporary tax regime combined with our improvement efforts lowered the break-even price for these projects with around $10. We have reduced costs and improved our projects to be sanctioned in 2021 and 2022. For the total portfolio in this period, the breakeven price is around $30, and the net present value is $3.9 billion, at an oil price of $50 per barrel. This portfolio includes several electrification projects, reducing CO2 emissions from production and it's also making this project portfolio carbon neutral in operations. We kept progressing our renewable portfolio last year with the final investment decision for Dogger Bank in the UK. This is in fact now the largest project in our portfolio and the largest project development ongoing in the North Sea. For DogeBank A and B, we leveraged the toolbox to increase equity returns with project financing and a farm down of 10% equity interest. In the US, we have entered a strategic partnership with BP to create a platform for growth. In January, we were selected to provide New York State with offshore wind power from the Empire Wind 2 and Deakin Wind 1 projects. In total, our capital gain from sales of renewable assets was around $1.2 billion. This gain will be booked in 2021 and is clearly demonstrating our ability to create value. The construction of Hyve in Tampen is ongoing, the world's largest floating wind farm to date. Floating wind farms will provide new market opportunities in deep waters. For 2020, the equity accounted net operating income from our renewable business was $163 million, and gross production of electricity was 1,662 gigawatt hours. Going forward, we see increased investments in profitable renewable assets. In 2020, we made investment decision for $3.2 billion with low carbon projects, with the gross capital of Dogger Bank as the biggest investment. Equinor will become the operator of Dogger Bank at production startup. And by the end of the year, we will start construction of the operations and maintenance base in UK. Our capabilities from oil and gas position, position us for developing low carbon technologies and new value chains within handling of CO2. Nordelight is a groundbreaking project to build new and commercial value chains to capture, transport and store CO2 from industrial sources in Europe. In May, we took the final investment decision together with our partners Shell and Total. And with government support, construction has started. Let me end with our guiding. We expect an annual average production growth of around 3% from 2020 to 2026 from our highly competitive project portfolio within oil and gas. From 2021, we expect to deliver around 2% production growth. We are reducing expected exploration spend to around $0.9 billion. For 2021 and 2022, we expect organic CapEx levels at between 9% and $10 billion, significantly below our previous indications. 2020 was a year like no other, and the world is not yet back to normal. But we spent the year improving, and with our strict capital discipline, we can deliver strong value creation and cash flow in 2021 and the years ahead. With that, I leave the floor to Useline to take us through the results, and we look forward to your questions afterwards.

Thank you, Anders, and good morning, everyone. I must admit, it's a bit unusual for me to be on this side of the stage for the quarterly presentation. Normally, I'm in the back with my spreadsheets and the numbers, but this also feels good. We really appreciate you joining us today. And I look forward to the dialogue with all of you. In this industry, we are used to the highs and the lows of the economic cycles and demand. But the disruption caused by COVID-19 is unprecedented. COVID-19 hit demand hard and Equinor responded early and forcefully. also strengthening our position long-term. The impact on value creation and cash flow this year and the next will be significant. As Anders said, we have delivered above and beyond on the plan we launched in March. We said we would deliver savings of $3 billion, and we have realized more than $3.7 billion. And in fact, more than $4 billion if we use the same currency as we assumed in March. we have shown very tight capital discipline in 2020. Organic cap expanding was strictly controlled. And for the year, we ended at $7.8 billion. And this is well below our initial guiding of $10 to $11 billion, and also below our updated guiding of $8.5 billion. This reflects reduced activity, especially onshore USA, and our decision to postpone sanctioning of projects to remain resilient. We have continued to improve our projects, for example, Bacalao in Brazil and Askeladd West and Kristinsholt on the Norwegian continental shelf. And we also reduced exploration activity and we reduced investments on partner operated fields internationally. In addition, we deferred some scope to 2021 and 2022 due to the COVID situation. Last year, we said we would realize a 5% improvement of the unit production costs from 2019 to 2021. This we have already delivered one year ahead of schedule and supported by high production on Johan Sverdrup due to the strong regularity and the rapid ramp up. And the high production also contributed to the early payback of Johan Sverdrup phase one, despite the low prices in 2020. We have also reduced operational costs in the different segments, capturing efficiency gains, and we are benefiting from the full implementation of our integrated operations center for our NCS assets. We continue to deliver on our improvement program, realizing around half a billion dollars in 2020 from new digital and technical solutions. The improvement program continues and we must make sure to keep focused on implementation and realization. Our rebase production growth was 2.4% in 2020, also supported by higher production from Johan Stadrup, good regularity in the fourth quarter, and high flex gas production as prices recovered in the fall. We expect annual CARPEX at $9 to $10 billion for 2021 and 2022, well below indications given at the OCMU last year when we said $10 to $11 billion for 2021 and around $12 billion for 2022. Solid improvements and tax adjustments in Norway has enabled us to strengthen our highly competitive project portfolio even further. For projects on the NCS planned to be sanctioned in 2021 and 2022, we have reduced the average breakeven with around $10 per barrel. In total, for all the projects we plan to sanction in 2021 and 2022, we have an expected breakeven of around $30 per barrel. The net present value of these projects net to Equinor is around $3.9 billion at a $50 oil price. We have improved the portfolio since our last capital markets update. Some of the operated projects we expect to sanction in the next two years are Bacalar in Brazil and several fields on the NCS. The projects on the NCS benefit from the temporary changes in the tax regime, such as Visting, Craflaja, and Oseberg gas compression units. And on the NCS, we also plan to sanction electrification projects such as the troll field electrification. But we will continue to mature and improve our projects. The improved portfolio is more robust and enable us to deliver a strong cash flow going forward. At an oil price of $50 per barrel, we have the capacity to deliver a free cash flow of around $6 billion before capital distribution in 2021. And this is not including the proceeds from the Bakken divestment. Before Bakken, we are cash break-even after tax and before capital distribution at $30 per barrel, clearly demonstrating our robustness. Now on to the financial results. The fourth quarter results reflect the lower commodity prices. Our average liquid price was down 28% from the same quarter last year. Average invoice gas prices in Europe and US were down 5 and 11% respectively. Despite the European gas price recovery, which we saw during the second half of 2020. The IFRS net operating income is negative by $989 million, while adjusted earnings in the quarter is $756 million, down from 3.5 in the same period last year. IFRS net income is negative $2.4 billion, highly impacted by impairments. The organization delivered solid operational performance taking group OPEX and SG&A costs down by 13% in the quarter. This reflects cost discipline throughout the organization. For the full year of 2020, we have realized cost savings of around $1 billion, significantly above the 700 million we set out to achieve in March. And we see improvements across the company in all segments. On the production side, our financial results were impacted by production outages at Hammerfest LNG and Peregrino in Brazil. In addition, we are taking action to optimize our oil and gas portfolio, leading to impairment of Tanzania LNG and Bakken in the US in the quarter. In addition, the transfer of exploration obligation in Russia had some impact. On our refinery in Norway, we take an impairment of around $600 million, mainly driven by lower expected future margins and a somewhat higher cost base. The group adjusted tax rate in the quarter was 173%, mainly due to write-ons in entities with no or low reported tax. And then let me give some comments to each of the reporting segments. ENP Norway delivered adjusted earnings before tax of $1.8 billion. High production despite the Hammerfest LNG outage and improved production efficiency in several fields made a difference. In addition, we reduced underlying OPEX and SG&A by 11%, which includes positive development in the field cost. The adjusted tax rate in the quarter was 61.6%, benefiting from the temporary tax change in Norway. The losses from our two international segments for the quarter and for the year demonstrate that they are not sufficiently robust towards lower prices. And we take steps to focus our portfolio towards countries and projects that can deliver long-term value for shareholders. But for this quarter, the impact is negative. EMP International delivered adjusted earnings before tax of negative $1.2 billion. The result is impacted by lower prices and the shutdown at the Peregrino field in Brazil, leading to a negative result this quarter for our Brazilian business area. An impairment of our Tanzania asset by around $1 billion had significant impact. However, we see solid cost reduction in the segment, with OPEX and SG&A down 18%, supporting positive cash flow from operation of around $400 million for the quarter. The low tax rate of 3.1% is due to the earnings composition. The sales from E&P USA are also impacted by the low prices. Carpex and costs have been forcefully reduced as operated onshore drilling and completions were stopped early on in 2020. In the quarter, underlying OPEX and SG&A is down 16%. Adjusted earnings before tax came in at negative $172 million, while net cash flow was positive, with cash flow from operation of around $300 million. Our MMP segment delivers strong results from European gas sales and trading, but offset by the shut-in at Hammerfest LNG and low refinery margin. The OPEX and SG&A are down 14% year-on-year, mainly as a result of lower transportation costs. In total, MMP delivered adjusted earnings before tax of 352 million dollars. Fourth quarter is the last time we report activity on renewable energy projects and production in our other segments. And from the first quarter of 2021, our renewable business will be a separate reporting segment due to the strategic importance. In the fourth quarter, we had high availability on our offshore wind farms. And our equity-accounted investment delivered net income of $21 million. Overall, adjusted earnings were negative, but this result will be improved as we have been reimbursed for half of the project development costs related to Empire and Deacon in the US. So let me then reflect some of the production and reserves. All production in the quarter are stable, and we have not seen negative COVID-19 effects on production. the total equity production in the quarter came in at 2,043,000 barrels per day. For the full year, we delivered 2.4% rebate production growth. We adhered to the production curtailment imposed during 2020, but we used the opportunity to perform modification and upgrades on certain fields and installations without further production impact. Ramp ups and new wells put on stream contribute to the rebase production growth. And we drilled more than 90 production wells last year with high value creation and a break even well below $10 per barrel. New technology such as automated drilling control contributes to the lower break evens for the wells. In the quarter, Johan Sverdrup produced 95,000 barrels per day more than the same period last year. We also increased our NCS flex gas production to capture additional value as the European gas prices continue to recover through the fourth quarter. Our priority in 2020 was to strengthen financial resilience. The deferral of project sanctioning impacted our reserve replacement ratio for the year, which came in at minus 5%. The three-year average for this was 95%, and the reserves-to-production ratio based on SEC reserves is 7.4 years. Based on all resources, it is 24 years. All renewable electricity production in the quarter has been high, and in line with expectations for the seasons. From 2019 to 2020, we increased our full-year V-based production. And in the fourth quarter, we continue to demonstrate that we can capture value in our renewable business by taking in a strong partner at the right time. We divested 10% of our Dogger Bank A and B to ENI with a net gain of around $270 million, expected to be fixed now in the first quarter. And in the US, we secured the largest ever US offshore wind award for our Empire and Deakin Wind project. And in Poland, where Equinor has several offshore wind positions, the government recently approved offshore wind legislation that will increase the probability of new developments going forward. So, summing up, 2020 has been a year of solid production as well as value creation and strategic progress within the renewables. So to the cash flow. We deliver a strong net positive cash flow of $1.4 billion in the quarter, based on strict cost and capital discipline. We also deliver a positive net cash flow for the year, which is a true testament to our resilience and flexibility in a year when rent averaged below $42 per barrel. The net NCS tax payment in the fourth quarter was 3.5 billion Norwegian kroner, or slightly below 400 million dollars. For the first half of 2021, we expect NCS taxes payable of around 2 billion Norwegian kroner. We paid 550 million dollars for the KGN acquisition in Russia. And we also received $500 million prepayment on the US wind deal. Our net debt ratio ended at 31.7%, fairly stable from 31.6% in the third quarter of 2020. So let me then end with the outlook. Anders presented our guiding, but let me repeat the key messages. We expect around 2% production growth in 2021. 3% compound annual growth rate from 2020 to 2026. Exploration activity at $0.9 billion in 2021 and $9 to $10 billion annual CapEx level in 2021 and 2022. And with this, we have the capacity to deliver a free cash flow of around $6 billion before capital distribution in 2021 at an average oil price of $50. This represents a cash break even of just $30. And with that, I hand it back to you, Peter, and I look forward to your question. Thank you very much for your attention.

Thanks very much, Simon. And with that, I pass that over to the operator to open up for questions. Thanks very much.

Ladies and gentlemen, at this time, we will begin the question and answer session. If you'd like to ask a question, please press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. And the first question comes from the line of Birad Chukotaria of RBC. Please go ahead.

Hi, thanks for taking my questions. I've heard a few on the free cash flow guidance. So I believe that's at $4 MVP for 2021. Are you able to provide a sensitivity on cash flow for European gas? I know you provided the earnings, but cash flow would be helpful. Secondly, embedded in that guidance is an assumption on cash taxes for the full year. So can you say anything at this point on what you're assuming for the second half of the year? And then just a quick final one. In that $6 billion free cash flow guidance, can you just confirm the KKRA unitization payment, which is due this year, is already reflected in that number? Thank you.

Thank you, thank you very much. Let me start with the Bacalao question. And yes, this consideration is included into those numbers. And maybe you want to elaborate a little bit on the tax side?

Yeah, I can do that. On NCS, it's so that we pay half of the tax the year it occurs and half of the taxes the year after. So for the first half, we will pay 2 billion Norwegian kroner in taxes for NCS. And that is based on the results that we generated in 2020. On the question regarding the prices that we've used for the 6 billion, that is $50 oil and $4 MMBTU for the gas prices. Then looking into what will the payment in the second half be, of course that will depend very much on the prices and what we see during the year. And how we do it is that when we come to June, then we will do a calculation based on what we have realized so far in the first month, and then an outlook of how it looks like for the remainder part of the year. Then we will decide the taxes. So that depends on the market. But also the questions on the gas prices. In the presentation, there is a slide which is then showing the sensitivity on the gas prices, just both pre and post tax for a $1 change in the gas price.

Just second back on the gas price sensitivity. Are you able to say about the cash flow sensitivity? Because I know in the slide it shows earnings.

What typically happens is the totality. You see it's 2.1 pre-tax, 0.8 after. And remember, then you have the half-year deferral. So half of it will happen this year, and then you will get half of the tax next year. Okay, understood. On the Norwegian part of it. On the U.S., then there's no tax.

Your next question comes from the line of Oswald Flint with Bernstein. Please go ahead.

Thank you both. Good morning. Anders, I'd like to explore a little bit more what you mean by optimising the upstream oil and gas portfolio and really looking out a little bit. Is this about long-term growth but increasingly from a low-cost, low-carbon barrel? Or do you think there is an optimum size for the upstream going forward and and you'd have to bend the portfolio the other way. And I'm really thinking post-2026 and into the next decade, especially with your aim here to be a leader in the transition. And then perhaps for Svein, 3.7 cost reduction last year, there was a billion dollars of fixed costs within that number. Could you, or it'd be great if you could talk about what are those big cost buckets in that billion dollars, which regions, and really just confirm that it It won't rise back up, won't spring back up here now in 2021 with higher commodity prices. Thank you.

Thank you very much for your question, Oswald. And we say we are optimizing oil and gas. When you look at the future demand as we see it, it will gradually increase towards around 2030. And then we expect to see a slight reduction in demand over time. So we are building a portfolio now that we also are able to capture the growth in demand and building increased resilience in our portfolio. We will focus on value creation and we will focus on robustness. And that's why you saw we took the actions with Tanzania and back in today that enable us to to take the consideration from the back end and reinvest it in our more profitable portfolio with break-evens around 30. And of course, we are also investing in low-carbon solutions and renewables to find a very good balance between optimized oil and gas accelerate growth and renewables, and also build some more projects into the low-carbon solution, in addition to the northern lights that we already sanctioned this year. So both with oil and gas and with renewables, low-carbon, we will focus on growing value going forward.

And then to the improvements, Osvaldo here. What is good to see is that when we set the ambition of 0.7, we focus on all segments in the portfolio. So we have been able to see that there are positive cost developments from all business units. It's coming down from taking down, for example, activity that we did in the U.S. with that one being taken down. that have contributed, but we are also focused on then making sure that we are continuously looking into, can we do things smarter as we are moving along? And also seeing it, utilizing, for example, technical solutions in a new way, which are also then benefiting us in the totality. So where we know focus is then we need to make sure that we are keeping these improvements and continue to improve going forward as well. If you look at the fixed cost in totality, of course, when new fields are coming on stream, which is not in production today, they will add some costs related to it. But the main focus is then to maintaining and continue to focusing on improving as we move along.

That's great. Thank you. Thank you.

The next question comes from the line of Thomas Adolf with Credit Suisse. Please go ahead.

Good morning. A couple of questions, please. In offshore wind, you've done an excellent job unlocking value last year through farm downs in the US and also in Dogger Bank. As it relates to the 4 to 6 gigawatt medium-term target following these farm downs, how do you feel about that target? Do you feel like we might need some shorter cycle solar to hit your target? target that four to six gigawatts range. And then secondly, you've talked about the optimization and upstream and you've done Tanzania, you wrote it off and it's all back in. I wonder if there's anything else you're planning on doing near term in terms of asset sales and maybe you can also comment on the fairly sharp cutting capex in 2022 and I'm assuming This cannot be all related to capital efficiency. Thank you.

Okay. Thank you, Thomas. We thank you very much for the acknowledgement of the value creation in offshore wind. We see opportunities also going forward in this new areas coming with potential bid options like Svein mentioned in the presentation, like Poland and also in Asia. So our targets for 4 to 6 gigawatts in 2026 remains affirmed. We will of course always seek to move into those projects where we see where we can use our capabilities, our experience and seeking the return of six to 10% that we also said last year at the capital market upstate. So we will continue working on growing our portfolio and remain firm on the target. When it comes to optimizing oil and gas, I mentioned Tanzania and Bakken today, but of course, the most important actions we are doing to optimize the oil and gas is to continue improving every project that we do have. We postponed the FID of Bacalao some months to make sure that we could have fully improved that projects. We are doing the same on all the projects in Norwegian continental shelf, ensuring that we can deliver this project with as low as possible breakeven and maximum value creation. And I'm not, of course, BD is a part of our toolbox for value creation. but I cannot comment on any future potential BD deals.

Maybe I can take some on the 2022 projects, as you asked about, Thomas. What we have been doing there is focusing and prioritizing within the portfolio on the overall context. For example, we have taken down activity in the US and said that For example, on the operated, we stopped the production and drilling. And those are, for example, some of the measures that goes in. We also said, earlier on that we postponed, for example on Veidenoor, working further on that one, taking also in the results from the exploration wells there, which has an impact on the totality. And as Anders said, on Bacalao, then moving it a bit over time, getting a slightly different profile, but getting and improved portfolio compared to where we were last year, that has an impact. So it's a combination of then the focus that we are doing and the improvements that we are doing to our projects, which then brings us into a situation where we have a portfolio that deliver $3.9 billion based on investment that we are doing in 2021 and 2022 and a break-even of $30.

And what does CapEx look like in 2023 then?

That is too early to say, but we will continue optimizing the portfolio and we'll guide that at a later stage.

Okay, thank you very much.

As a reminder, please press star five by one to ask a question. Next question. comes from the line of Mehdi Ennebati with Bank of America.

Hi, so good morning all, and thanks for the presentation. Thanks for taking my question. Two questions, please. First one, the follow-up one, you know, regarding the sensitivity that you provided. Well, yes, you provide, you know, sensitivity on EBIT. You provide sensitivity on the net income related to the oil and gas prices variation. We did not provide any sensitivity on the cash flow from operation as usual. But my question is very simple. So if we want to have an idea on the cash flow from operation sensitivity, would you say that we should look at the EBIT sensitivity, given that you will pay very low tax amounts this year in Norway, or rather the net income sensitivity? That's the first question. And the second question is about your guidance on the free cash flow. So you say this takes into account the back allow payment of around $600 million, if I am not mistaken. Can you just tell us what... What M&A transactions did you take into account to get to that $6 billion cash flow guidance? And if all those M&A have a negative impact or a positive impact on your $6 billion cash flow. Thank you.

Well, let me first take the second question and you continue on the sensitivity.

It's fine.

So basically the consideration that is in the guidance is, as I mentioned, baccalaureate. Then it's the US VIN with BP and also the E&E on the Dogger Bank. And we have not included the backend transaction in DOS. So all known M&A are included in this guiding.

Yeah, and just to build further on it, also remember that we have a prepayment. of 500 million that we received, which is included in the 2020. So those have to be adjustable for the gross amount that we got. So that means that on net outstanding approximately 700-ish on that one. Then going then into the sensitivity and if you should look at the EBIT or the net income, I would say you have to look at both. So due to the fact that the EBIT is giving the sensitivity pre-tax, then remember that in Norway, you will pay half of the tax this year and half of the tax the year after. So you will get a bit in between. Then on our international portfolio, then there will be some other countries we pay taxes, but while all those countries where we are not in a tax position, then it's the pre-tax. So sorry for not being... into the exact number there, but it's a combination due to the fact that the Norwegian taxes are set in June, and then we are paying them pre-installment in August, October, and December.

All right, understood. Thank you very much for this.

The next question comes from the line of Theodore Nielsen with SP1 Markets. Please go ahead.

Good morning, and thank you for taking my questions. Two questions from me, if I may. First one, I follow up on the cash flow guidance of $6 billion this year. I just wonder, how would that number look like without the NCS tax incentives in place? I guess that's a substantial positive impact on that number. And my second question is on reserves. You report a reserve replacement ratio of minus 5%, and I understand, of course, that's due to lower oil and gas price assumptions, partially. I just wonder which fields in particular did contribute to that low reserve replacement ratio for 2020? Thank you.

So let me start with the reserve replacement ratio and you can prepare on the cash flow. It's fine. So we use 2020 to deliberately postpone some project, improve some project to maintain our financial resilience. And that caused the kind of the annual triple R to be negative. but the three years average is 95%. The next project that I'll do for FID is the Bacalao that will considerably change this. We deliberately moved Bacalao from FID in 2020 to 2021. So this is the biggest impact you will see.

And on the cashflow, Theodore, What we are now doing is that we are focusing and prioritizing investments on the Norwegian continental shelf due to the tax incentives that are available there. So that means that we have a lot of projects that are coming up for sanctioning. I mentioned the listing, also by gas compression unit, for example, but also the electrification. And that means when keeping up the activity and focusing there to benefit from where it is, then we also get the positive cash flow impact on it. And for 2021, we estimated to be around 2-ish billion in impact.

So we will also, as we mentioned earlier today, we focused a lot of our activity in Norwegian continental shelf due to the tax package and increased profitability. We drilled more than 80 production wells in 2020, and we will continue with high number of production wells on the Norwegian continental shelf and also high exploration activity also for 2021.

Those $6 billion will be $4 billion assuming a normalized tax regime on NCF.

No, we are focusing on then capturing the value then from the tax incentives that are there. So the effect on the tax package in itself is around $2 billion. in improved taxes for 2021, which is then benefiting and then taking down the breaking events in the portfolio with around $10. So it's then focusing on the NCS activity, which gives the benefits to us and has an impact on around 2 billion.

Okay. Thank you.

Next question comes from the line of Lydia Randolph with Barclays. Please go ahead.

Thanks, and good morning. Two questions back. I'm just going back to the cash flow numbers and just to be explicit, what do you expect to be the use of that free cash flow? And just in terms of the priorities, and obviously there probably is upside at the moment if I look at where gas prices and oil prices are. So any excess free cash flow, what happens to that? And perhaps just related to that, is that more constrained to the renewable side at this point? Is it level of investment or is it opportunities? And then just a final question on the safety element. Clearly there were probably more incidents you might have liked over the course of 2020. Can you just talk through what specific actions have been taken to try and address some of that going into next year? Thank you.

Yeah, let's start on the safety. So we clearly see that we need to improve on safety. We're still with our best results in terms of serious incident frequency and total recorded frequency incident. We see that we have too many incidents and too many people are getting hurt. Particular, will our focus be now to avoid major accidents? So we're putting in an additional focus on process safety. We will use external company also to see how we can improve even further. So that is the kind of the biggest steps we are doing. We also taking working together with the unions and safety delegates to improve how safety delegates are involved in the way we work on a daily basis. Then we are working now to, and we have built during 2020, a solid financial framework. We will continue to make sure that we are solid in terms of both the net debt ratio, the financial flexibility. And we will look for opportunities in the market, both organically and inorganically. but we will have a value of a volume focus on both on the oil and gas and on the renewables. And we will only pursue those opportunities that will create value for our shareholders. So maybe you will have to elaborate a little bit more as well.

A little bit where we are in the current situation is that we are at the net debt ratio at 31.7%. It's slightly above our long-term ambition, and we are comfortable with that one. But we also have a strong credit rating, which is in place there. And then, also building on what Andersen is saying, we also have a very good portfolio ahead of us. As we said, the break-even for the project expected them to be sanctioned over the next year, a $30 clearly robust portfolio, adding a lot of value. So it's a kind of a combination of the totality within the financial framework that we are looking at and working on on a regular basis.

Great, thank you. Next question comes from the line of John Woodby with UBS. Please go ahead.

Yeah, thank you. Thank you. Hi, Anders. Two questions. The first is you referenced a a sort of cautious increase in the dividend at 4Q, sort of mindful that you wanted to indicate progress but not get ahead of yourself, which I think is sensible. But as we head into June, you know, the corporation, the company has sort of expressed its desire to get the dividend or the payout back to pre-COVID levels. But obviously with the cut, it gives you a degree of flexibility about how you think about that. So without sort of committing yourself ahead of June, I kind of wondered whether you could think about or discuss a little bit about your thoughts on that and the sort of ability to introduce some sort of shock absorbers into your distribution policy around, you know, volatility, et cetera. The second question is on LNG. I mean, you've written off Tanzania, compared Tanzania. One of the things that's always sort of occurred to me or interested me about your portfolio is your strength in natural gas in Norway and your sort of integral position in the European space but your sort of shortfall in your exposure to LNG, which is, you know, widely regarded as a transitional low-carbon source of energy for quite a long time to come. So without Tanzania, does this leave a sort of strategic gap in your portfolio? Is it one that you, you know, all things equal, would like to fill, or are you comfortable just leaving it as an absent piece?

Thank you, John. Let me elaborate a little bit on the dividend first. So you're right, we took extraordinary measures in this unprecedented situation in first quarter of 2020 from 27 to 9 cents, a reduction of 67%. As you might recall, it was a three-point reference for long-term dividend level then. First, our dividend policy remains firm, so we will grow dividend in line with our long-term underlying earnings. And our dividend level also needs to be competitive. And of course, the fourth quarter 2019 dividend level. The speed of any return towards the pre-corona level will depend on several factors. The board of directors will consider both the cash flow, capex plans, financial requirement, and also the financial flexibility we need against the macro outlook. So the dividend level will be decided quarter by quarter. So we increased it last quarter from nine to 11 and this one from 11 to 12. So this is how we're thinking around the dividend level. Regarding gas. The decision around Tanzania must be seen as a more project asset decision, not necessarily a wider thinking around our view of gas. This, we haven't had any progress. in developing this project despite a lot of hard work. And we haven't seen any progress also in the regulatory framework lately. And with no current plans to develop these assets, we took an impairment this quarter. Having said that, we are increasingly more and more exposed to LNG prices in our portfolio. We see that when Asia has been spiking due to cold weather and LNG outage all over the place in the world, we've seen also price increasing in Europe due to LNG being more moved to Asia. We don't have to be in a physical energy plant. We can also use contractual arrangement and we are using that. So a combination of contractual arrangement, the gas prices in Europe expose more and more to the LNG market, give us some exposure. So this is not changing any view on gas. And I would also like to refer to the gas market seminar. No one can do the marketing here. On the 19th of February, where MMP and Rene will give a more broader view on the gas outlook.

Very good. Thank you.

The next question comes from the line of Alistair Stein with Citi. Please go ahead.

Thank you. Hi, Anders. Nice to meet you. I wish you the best in your role. As you look at the mandate the Board has given you to accelerate Equinor's development as a broad energy company, do you think the company has all the skills it needs or other areas of competency that you think you need to build. And so secondly, follow-up. You know, it struck me that the 60-month payback from Johan Stetrup is totally outstanding. You know, what sort of perspective does that give you around the shift to renewables? So, you know, I presume there is nothing in renewables that even comes close to that level of payback if you put aside the sort of the farm-down economics that you've been doing. Thank you.

Yeah, thank you. Yeah, I wish there were more Sverdrups. You know, but Sverdrup is an outstanding asset, outstanding in terms of how we developed it and also outstanding how we're operating it and how we're actually including new digital technology to take out more value. And I was not precise in my speech when I said we will have a break even this week. It's actually on Saturday. So this is outstanding work. Of course, not all assets are at the same return as Johan Sveadrup. And in the long term, we see that beyond 2030, there will be a decline in demand for oil. And then we are building up a portfolio also to have cashflow capabilities beyond when we see the oil and gas going down. So that's why we will like to both optimize and invest in oil and gas. but at the same time also invest in renewables, building future cash flow capabilities as well as we see oil and gas will come down. Competence. We have been able to build up, I see more and more, analysts was putting value to our renewable business. We have been able to build up this renewable business using the competence and the ability to learn new technology and industrialize based on the technology. This is really the core skills of this company, being able to, you know, working in offshore, working in harsh environment, doing the engineering, be able to operate it. And that's what we have done with renewables. This is also what we have done in, a low carbon solution with a Northern light where we need the geologist, we need the drilling engineers, we need the pipeline engineers, everything that we do have in order to work also in that space. So as we have done in 49 years, We will continue to develop our competence, our skills, develop our technology, in particular in the digital space. And at the same time, we will also attract talents outside the oil and gas that we have done now for several years, coming into our renewable business, into our oil and gas business, and also into the low-carbon solution business. So that is how we're going to develop these technologies and these value streams going forward. Anything to add, Svein?

I think you cover it well, as you said, with the payback. But also remember some of the good features with the renewables is also that we're also getting some fixed income stream into the portfolio, giving a different risk profile to the portfolio. And also there we have by then taking position early. And then the farm loan, we have also seen pretty good payback on those as well. So it's not black and white, of course, as you said, yes, we would like more in the portfolio, but it's about also then getting into projects which have a different profile related to it as well.

As a follow-up to the first piece, can I ask, do you think that the oil price forecast you're using, which I think is now 65, a real 2020 winning in the middle of this decade, is strengthened enough to cause that rotation of capital that you really think you need?

I didn't hear quite the question. Did you ask about our economic planning assumptions?

Well, yeah, it's really, you know, if the core is to find projects with very good payback, do you think that the oil price criteria you're using, because I think your fair value analysis is still based on 65 real 2020 money, is that putting enough of a pressure on the organization to find really good projects?

Well, when we are deciding projects, we of course using our planning assumption, but at the same time, we're adding robustness criteria to this, where we really also look into the sensitivity and make sure that we are, in addition to maximizing the value of the project, are driving down the break even. So this is independent of the expected oil price going forward. We are seeking this robustness for every project, for every well we also are drilling. So here it is a combination.

Okay, thank you for your time.

Can I just take this opportunity to ask people to be relatively tight in terms of the questions? We've got a few more to go and around 15 minutes left. So if we can keep it more towards the one question, please. Thanks very much.

The next question comes from the line of Christian Manek with J.P. Morgan. Please go ahead.

Good morning, gentlemen. First of all, congratulations, Anders and Ryan, on these appointments and the best of luck. Anders, in your first 100 days, I guess the first question, and I'm sorry I had to make it too because I wasn't clear about the business earlier that John asked, but the first is around track record and M&A. I mean, when you've looked at the business, I mean, and seeing the sale of buttons today with the write-down and just reviewed the strategy, you know, the decisions made, what do you think needs to change in terms of the way the company operates, whether it's assumptions around the macro environment, where you should be thinking about the portfolio internationally. I just wonder to what extent do you think there is either an immediate or more urgent pressing need to sort of review sort of the decisions and track record of the businesses internationally to obviously match the very high bar that you've set within Sverdrup, which I now understand is exceptional. The second question, the dividend, I'm still not clear. You know, you've got a yield, one of the lowest yields in the sector with one of the best investments portfolios and growth outlooks. And I was slightly surprised by the dividend increase today. I thought it would be more, if I can be really honest. And I just wondered to what extent is there a more kind of sort of desire to raise a dividend commensurate with your growth outlook and the cash flows that you're generating through this year, particularly if the macro environment is conducive. So apologies for that second follow-up, but thank you very much. Yeah.

Thank you very much. First of all, if I kind of reflect a little bit on you say the strategy and the urgency I think we demonstrated today that we have a solid financial framework. We spent the 2020 well. And also the energy transition and the way we have built up also a portfolio of renewables that have taken place over many, many years. Credit to the previous CEO. So I think we are very well placed. both on the financial taking advantage of increasing oil price and gas price. We have built up the capabilities to do and move into projects like Dogger Bank and the Empire Wind competing for the kind of the big contracts in renewables and taking significant steps into the low carbon solutions. So this is a solid fundament that we will build on. We see, as I said earlier today, that we are not robust enough in the international oil and gas. We will continue working on that and enable further growth, both in oil and gas, and also taking the new opportunities that we see particular in other areas for offshore wind, both in Poland, Asia, et cetera. So this is not... kind of any need for any turnaround is to build on the strength and continue to take steps such that we are a leader in the energy transition. We have a history of being first out with some technology, first out with a lot of technology, compressor at the subsea for oil and gas. floating wind parks for renewable, and then also the Northern Lights and CCH storage for the low carbon solution. So that is the fundament we will build on in the strategy update. So you will see us continuously developing in the direction I've indicated. Regarding the Divalent, same as I said to John, the Divalent level will be based on those three points of reference that I mentioned. We will look at the cashflow, the CapEx plan, the financial requirements, and also the financial flexibility we need in terms of the MAC route look we see. And we are solid, but they're also remind you that there are volatility and what we learned in 2020 is that there are also prices and And that's why we're saying that we will evaluate this quarter by quarter.

The next question comes from . Please go ahead.

Good morning, Anderson. My question will relate to the 2021 production guidance. If we adjust for the backend asset sale, It looks like the guidance calls for broadly flattish or very slightly rising production growth this year. And would you be able to provide some color on the factors across your portfolio that upset Norway's production space in 2021? I will be keen to really understand, for example, what is the implied decline rate in Angola and what sort of production profile is assumed in the Appalachian. Thank you.

Thank you for your question. And as we said, they are around 2% growth from then 2020 to 2021. If you look at Bakken in itself in 2020, it had an average of around 70,000 barrels per day. But it was ending then towards 60,000 barrels per day. And there are declines since we have stopped drilling on new wells and then also the fracking there. So the expectations then for 2020, if it has been in our portfolio, it will then be lower than the export rates that we had. So that is some of the consideration around that one. If you look at, at the decline as a totality, I think it's for where we operate, and we need to comment on where we operate, we see a 5% decline rate in the fees, and that we have said earlier, that we say no. On the Angola one, there we also need to ask also questions towards the operator in those assets. But we also see that there has been some optimization in the COVID situation, taking measures there in that context. And on Appalachian, there are still rigs that have been drilling well. Because we see that there are opportunities to continue to deliver low-cost gas barrels into the market in the U.S. So where we are a partner, then there are really new events as we speak and have also been done in the fourth quarter.

Thanks.

Next question comes from John Olajson with ABG. Please go ahead.

Sorry, I thought I'd removed myself from the crew. All my questions have been answered. Thank you.

Thank you. The next question comes from Peter Lowe with Redburn. Please go ahead.

Hi, thanks. Just a quick one on your growth aspirations in offshore wind. Are you able to confirm whether you bid in the latest UK lease round, the results of which were announced this week? And then perhaps more generally, are you seeing competition for new acreage increase? How confident are you that you can remain competitive?

Thank you. We are not able to confirm if we participated or not. But generally speaking, we see an increasing competition in the offshore wind segment with new competitors coming in. We have 15 years of experience from offshore wind to build up the capabilities both from operation, project development. We've been able to bring down the cost quite substantially from the first project that we did on Scheringham Shoal to now Dogebank. So we have been in this improvement mode for many, many years and are confident that we will also be competitive in the areas where we select to compete. We will select the areas where we see that we can utilize our experience, our competence, and particular where we can utilize the offshore floating wind, where we have a leading position with the biggest floating offshore wind park being developed at Highwind Tampen that will supply five oil and gas platforms with power. So that is how we're thinking about our competitive situation. Thanks.

Next question comes from line of Anders Holter with Pepe Shibu. Please go ahead.

Thank you. And thank you for taking my question. It's a question to the CFO. It goes more to the point of the spending levels that you have guided on for 21 and 22. Obviously, what you spend in 21 is going to be covered by the tax amendments currently in place in Norway. My question is more precisely what percentage of the 50% spending level in Norway is going to be covered by the amended tax regime in 2022?

In 2022, the exact numbers that we will need to come back to at a later stage, but we see that the full benefits then in 2021 on the tax packages in Norway. What will then happen for the CAPEX in 2022 and onwards is that the things that we sanction now in 21 and 22 will then start them to have also the benefits as we move along. But normally what you typically see is that you have a ramp up of projects. So when you sanction it, you are not spending most of the money early on before you all opt them to the running speed. So that means that you have less impact in the early days, but more impact from the tax benefits in those projects when we are coming from 22 and 23 and onwards.

Okay, thank you.

Next question is from the line of Martin Ratz with Morgan Stanley.

Please go ahead. I had to remove myself from the queue. All my questions have been answered. You covered an awful lot. So in the interest of time, to do Peter a favor, I'll hand it back.

Thanks, Martin. I will always take a favour when it's offered, so I appreciate that one. Thank you to everybody for calling here. I'm pleased to be finishing absolutely at 11.30 CET, so I'm very pleased about that one. Can I take this opportunity to thank Anders and Sine. We will now close the equity part of this. Thank you, Anders, for the reminder of the gas seminar later this month. You'll be getting invites to that one. And of course, if there are any questions in the follow-up, please don't hesitate to contact us in investor relations. So with that, as I say, we'll close the equity part. The media one will continue on Zoom. Thank you very much for joining.

Thank you, Peter, and good morning, everybody. My name is Bård Glav Pedersen. I'm head of media relations in Equinor, and we'll run this Q&A session, and we are ready to start that immediately. This will be run on Zoom, and you have two different opportunities to ask questions. Either you can use the function to raise your hand, and you will be called upon when it's your turn to ask a question, and then please unmute when you ask your question. Alternatively, you can ask your questions using the chat function, and I will read the questions, and some of you have already taken that opportunity. We will continue to run it in English for the benefit of those international journalists attending and for those watching the webcast still ongoing. And both Anders and Sven will continue to be on stage and available to respond to questions. So with that, I think we start, and I'll kick us off with a question that has been posted in the chat field, actually a double question from Ole Helgesen in Amsterdam. And the question is, to tell us today that under investment, OPEC Plus production restraints and cracks in the U.S. shale model We reached a 10 million barrels per day global oil supply shortfall between now and 2025. Do you agree with this assessment of supply and demand? And the second part of the question is, can you elaborate on how the future speaks between renewables and low carbon on the one hand versus oil and gas will be in the future? And could pricing all prices affect this split?

Thank you. I'm not going to comment exactly what Total is saying, but how we see the market is that the OPEC Plus and the compliance with the decision OPEC Plus is working. and there is a high degree of compliance and the market is seeing that in terms of an increased, gradually increased prices. We know that there are more supply behind the valves that can be opened up at the moment, but we also see that there are quite a lot of demand for oil and gas over the next period of time. We see also the storage going down and the investments are going down. So we also seeing in a two to three years that there are, you know, the supply and demand will meet. And this is reflected in our long-term EPA prices. where we see a $65 in 2025. And the second question, you have to remind me, Bård.

The question was on how you see the future stick between renewables and low carbon on the one hand, and oil and gas on the other hand, and if a spike in oil prices can impact that.

As you saw earlier today, we said that the amount of gross capex we committed or made investment decision for in 2020 was 3.2 billion US dollar. That's included the Dogger Bank A and B and the solar electrification projects on Ginna Korg and Sleipner and also the Northern Lights project. We will see. that the balance between oil and gas projects and renewables, low carbon projects will gradually increase over time. And we see a substantial higher amount from renewables and low carbon. But for independent of oil prices, oil prices are volatile. And so we will always seek to make sure that we have robust projects, even if we have, you know, short time spikes in the oil price. We are preparing, you know, according to our APR prices and adding robustness criteria to that. We will do that independent of the oil price.

Thank you. We will take the next question from Marius Lorentzen in E24. Marius, please unmute and ask your question.

Hello. Thank you so much for taking the time. I have a couple of questions regarding your results. First of all, can you say what refinery you impaired in Norway? And secondly, in the measures you took starting at the beginning of last year to car costs and investments, you mentioned that your operating costs fell more than expected, but can you say what other elements gave that increase from $3 to $3.7 billion? Yeah.

Yeah. So you prepare on that, it's fine. So yeah, refinery in Norway. So we have done some impairment on Mongstad. This is due to we see pressed refinery margins over the time and also some somewhat higher costs going forward. That has led to the impairment of this asset.

And then on the 3.7 or more than 3.7, as we said, it comes then from OPEX and exploration. And let me reflect a bit on it. A year ago, we said that we had a guiding of 10 to 11 billion US dollar for investments for the year. And then we delivered 7.8. So then in a way, you take from 10.5 to 7.8. That is the first element that comes into the equation. Then the second one is then regarding then the OPEX, where we then set a target when we launched it back in March of more than 700 million in the US dollar. And in fact, on the operating cost side, we delivered a billion. And if we then had taken into account the same currency rates as we used when we launched it in March, it would have been even bigger, both for Carpex as well as for OPEX part of it. Then we also reduced exploration activity from 1.4 and we delivered 1.1. But just want to remind you to avoid double counting on those one in the cost as well as we are also then capitalizing some of the exploration. We said more than 3.7 billion. And if you look at the split of it, we have seen On the Carpex side, we have taken down a lot in the international segment. For example, what we did in US, we don't show there coming down. But we also have worked consistently across the organization with improvement so that we have been able to take down OPEX in all segments as we have been able to deliver them. So those are the building blocks going into the more than $3.7 billion in savings that we have realized. Okay, thank you so much.

Thank you. It seems the preferred solution for many is to post the questions in chat. So I'll take one from there. It's from Nereus Adomartis in Reuters. And the question is, did you participate in the latest UK offshore lease round? And what is your view on the outcome, especially the prices paid? And do you also have more details regarding your plans for participating in the upcoming Norwegian tender? Will you participate for both Ypsilanti Nord and Southern Nord Stream 2?

Yeah, thank you. We are not able to confirm if participated or not. We have noticed the strong competition. But we are also seeing that there are growing opportunities in other areas as well, in addition to those in UK. And we will compete in upcoming auctions based on our competitiveness and experience. And we have been in this market for many, many years and demonstrated a strong value creation. We come from Norway. We have developed the oil and gas industry in Norway. And now we see also an opportunity to continue developing the offshore wind. We are already developing floating offshore wind in Norway with the Highwind Tampen project. And we see the opportunities coming both on Utsira and the southern area as very interesting. And what we can offer into this is that, of course, demonstrated experience and capabilities for offshore wind, both on floating and on the fixed bottom wind turbines.

Thank you. The next question is from Morten Holmestad in Dagens Magazine. How, Anders, would you explain the difference between your strategy internationally and the former CEO? And how will you characterize the international expansion from 2007 after the hydro merger and up until today?

Well, I'm actually very, very lucky taking over after Elda Sedra that has built up a very strong Equinor together with all the employees over many years. We have struggled in the international portfolio for a while and been working for several years to improve it. There has been taken significant steps to improve our efficiency and competitiveness in U.S. onshore and elsewhere over the last years, but we see that other competitors have also improved, and in particular in U.S. conventional, there are others that are able to operate in a much more cost-efficient way. Among that, we enjoy that working together with Chesapeake on the Appalachian gas asset and the salt western. So we have invested quite a lot in the international business when the oil price was much higher. This has proven not to be robust enough when the oil prices have been falling and we have taken significantly impairment and losses. So my job now is to look forward We have the portfolio at the moment and we will continuously improve that one. We have taken steps today and we will continue working in improving both the Norwegian portfolio and the international portfolio, actually both in oil and gas, but also in renewables. Continuous improvement will always be our preferred tool to improve our business.

Thank you. Let me remind reporters that you can use the raise hand function to ask your questions yourself, but I will continue to take those that have been posted in the chat function. There is a question from Lars Taralsen in Bloomberg. Total has taken the step of only selling debt that has some sort of sustainability criteria. Is that something that Equinor might do? If so, how soon? If not, why not? Do you see a divide opening in the oil industry between clean and dirty producers with some branding themselves as ESG investment options?

So let's find the CFO, take the bond question.

Thank you, Anders, and thank you for the question there. What we see as a group and totality is that we are in a situation with a solid balance sheet, being able to manage through 2020 with the COVID crisis. And we are now in a situation where we have a net death ratio of 31.7%. We also have a strong rating. We are rated AA minus as a group. And that means that we are able to borrow money at good conditions and good terms in the market. Of course, we are also following what is happening within the green bonds and others there. But we're also seeing it from a corporate perspective, seeing how can we raise funds, what is the best available solutions offered to us. And that's why we also, when we raised bonds during 2020, we selected them to do it on a corporate level. We also then in the project, in the renewable project, we also project financing and we see that there's also attractive offers available then for project financing into the renewable. So we do a kind of a mix on how we are financing it. But we are following the market closely as it develops.

And let me just add, we have a very strong credit rating with AA on both rating agencies. And there has been some revision of the oil and gas sector. And there are many that's been on the watch list, but we are not on the watch list. So we are very good credit rating and we have access to competitive spreads in the market.

Thank you. The next question is from Deb Kelly in Energy Intelligence. How do you strike the right balance between slimming down the company to position for a possible future and maintaining the manpower that will allow you to develop both your upstream portfolio and big new offshore wind projects? And to that end, could we see ECNO in any bigger transactions involving utilities in the future?

Well, BD is, of course, one of the toolbox we do have for creating values, but we never comment on that one. So we will, of course, continue to build the competencies In the organization, we see that there are a lot of people that will retire over the next 10 years. So we will need to recruit. We will need to recruit both in the oil and gas and in the renewables and low carbon solution. We will need new talents with new skills also into all parts of our businesses. So we might be fewer in the future, but that's not saying that we're going to scale down. We are reorganizing at the moment, but that is not a downsizing exercise. Any reducing of people will be based on activity level in certain areas.

Thank you. We'll take the... The next question from you again, Marius Lundsson in 24.

All right, thank you. Over the past years and also recently, you've booked some significant profits in renewable deals. But when you look at what happened in the UK just the other day and the prices that BP and others were willing to pay, as you view it, the window of opportunity closing to make... good profits from these types of projects or do you still see viable paths for Equinor to acquire Acreage and make profitable projects?

We see that offshore wind will be needed for many countries to provide more clean energy. And the world needs more clean energy, and more and more regions need that. Offshore wind is kind of the closest you come from a renewable to a baseload. So we will see a growing number of countries that will also include offshore wind into their energy mix. So in that respect, we will seek those opportunities. We see there will be a growing number of opportunities and we will capture those opportunities that gives us the required return from this business. We are in a very good position to capture that based on our experience and been reducing cost over time. Hive in Scotland to Hive in Tampin was a reduction of 40% per megawatt. And we will continue to do this kind of work. So I think we are well positioned even that we see increased competition and particularly in some areas.

Thank you. Thank you, Norris. I have a question from Herman Mostu in Monten. Let's see. It's written in Norwegian, so I'll translate as we go. Can you say something about the development of European gas prices this winter? Cold weather has given higher prices. How do you see the price development going forward? Connected to that, the last couple of years there's been talk about an LNG glut. Is this situation now more normalized and could that contribute to upwards pressure on prices?

Well, on the gas prices, this has been a combination of manufacturers lately. We have seen an outage of some LNG plants combined with lack of transportation vessels and also a strong cold winter in Asia. This in combination directed a lot of LNGs to Asia that should have been come to Europe. And then we have seen an upward pressure from European pipe gas. We see now that due to cold winter also in Europe, more and more gas is being used and with less energy coming in, the delay in the Nord Stream 2, the storage and the withdrawal from the storage is increasing. And that gives us support for a positive outlook of the prices also coming into the summer season. So I think we will see a volatile market based on this a little bit here, but we see that the market is more balancing, you know, when we move a year and two ahead.

Thank you, Anders. The next question is from Morten Olmestad in Dagestaniske. Regarding Mongstad, have you made any assessment of the costs related to getting Mongstad in compliance with Norwegian environmental regulations?

Well, this is related to the water treatment facility and also the oil pipes there. And this is included in our cost estimates for the Mongstad refinery. And we will of course run the refinery within all regulations from the environmental agency. So all elements are included.

Thank you. A question from Nick Coleman in class. Is the Clarify FID plan for the next year or two internationally? Is Bacalao the only one? Or do you expect others? Do you expect Rolls-Royce FID by May 2022? He asks. And also, are you confident of lifting investment decisions by end 2022, given the complexity of this?

So Bacalao is the project that we will do an FID in 2021, the first half of 2021. We are waiting for the regulatory approval of the unitization. And for the other international projects, we are working now on improving them, ensuring that we are able to deliver them with the lowest break-even and the highest net present value that we are able to achieve. So we have some plans, but we have no firm plans and exact dates for the FID. We will make the FID when we think they are good enough and also in accordance with the expectation from the local authorities as well. We're working very hard on the visiting project now. This was one of those projects that we highlighted as a project that we would sanction as a part of the tax package discussion to demonstrate the value creation for the supplier industry and local societies. So we are progressing this project now according to the plan and we'll do the FIE towards late 2022.

Thank you. The next question from Lars Karlsson in Bloomberg again. Do you have any plans on further divestment from American shale?

Well, we announced today that we are divesting from Bakken. But let me just elaborate on that. We have a very kind of strong, solid position in the US left with our US offshore fields in Gulf of Mexico contributing significantly to the cash flow outlook we gave earlier to today. and also the Appalachian gas assets that is very close to the market where we also see that we have trading opportunities on top of an integrated midstream position. So we have significantly value left in US. We have one small operated position and we will look also at the strategic option for that. potential JV with some other operators in the neighborhood. But that is just one of the strategic options we are pursuing and we have to come back to that at the latest stage.

Thank you. I have one question noted left, and that is from Doug Kelly in Energy Intelligence. I will take that now. There have been a few questions that have been on the same subject, and then I've taken only one of them. But I think I have covered all. But if there are any outstanding questions, please take the opportunity while we cover the final question from Doug. And the question from Doug Kelly is, can you provide some color around your exploration strategy going forward? And what are your thoughts on the best way to realize value from your venture capital investments in the clean energy space? So two questions in one there.

For the exploration, we have focused our exploration strategy. We see good possibilities in already prolific areas where we do have a position, particularly in in the Norwegian continental shelf, in Brazil and Gulf of Mexico, among others. And the exploration departments worked really hard to improve over the last year in terms of administration costs and reduced significantly on the cost. That's why we are able to guide a little bit down for 2021. but we are going to drill between 20 and 30 exploration wells also in 2021. So exploration is a significant part of our business, but every well will be hydrated and they will also be able to meet the necessary value creation potential and the potential life cycle break even as well. Regarding the venture portfolio, it's a very exciting portfolio with a lot of new technology. For us, of course, there is a potential to have an increase in the value of the investment itself. But we are always looking for potential to integrate this technology into our business and really scale up the value substantially. So let me give you just one example. We are investing in a company called Gumbo, a blockchain. And as you know, we have digitalized Johan Sverdrup, So we have a lot of sensors collecting data. Using blockchain, we are able to set up new types of contracts that actually we are measuring data. This is automatically by new types of contract being converted into the price we're going to pay to the supplier. And it can be paid immediately. And nobody needs to be involved. in between. So this is somewhere where we can use the exciting technology from the venture portfolio into our business and we'll get a value creation on both sides.

Thank you. During that we got two more questions, one on Mongstad, one on Peregrino. So If it's okay with you, we will cover those in one go, and that will be the final questions of this Q&A. The question on Monsta first is from Mikael Horter in Dagens Nyheter now. On the impairment, can you provide a more precise figure on that and some more details on the causes behind it? You said part of it was due to lower margins and part higher costs. Can you provide a breakdown of the two? And can you confirm that the costs are related to upgrading the facility to get in line with regulations? That's the monster question. And the one on Perugino, when will the production start again? And what is the status for phase two? That's from Alan Skarsgård in Stavanger Aftenblad.

Yeah, so let me start with the Peregrino question. And since there is a detailed number, I'll leave it to the CFO for the Mongstar. That's the CFO job. So on the Peregrino, we're working on the riser, on the main field. They erupted last year. We are a little bit delayed on fixing those racers due to COVID-19. We have had outbreaks on the facility and had to take down the manning several times. But during first quarter, we should be able to have the first racer installed. Let me also elaborate a little bit on the Perugino 2 project. This was a project that one year ago was on time and below budget, but due to the COVID-19, we have had to demand the flotel many, many times and in periods had no progress on the project. So the production startup that was supposed to be end of last year will be in end of But for all of these projects that are highly affected by manning and due to infection risk, they have some uncertainty in them.

we have an impairment of around $600 million related to it. It's then regarding several factors that is impacting it. It's both the refinery margins on the totality and the outlook that are going forward, which is then a very important part of generating the cash flow. It's then the cost side, and then also related to the carpet side, as well as the totality on the new ETS, the taxes and so on. So I can't be specific on how much each of the elements are, but it's a combination of all those three that is important. But the margin and cost and capex in totality meant that we did an impairment of the size that we did know in the first quarter.

Thank you. With that, we round off the Q&A session also for media. So thank you very much to Anders Opeland and Sven Scheer for taking the questions. Thank you to all journalists attending on Zoom and asking questions. And thank you to all of you who have followed the webcast.