Equinor ASA

Gentlemen, thank you for standing by. Welcome and thank you for joining the Equinor Analyst Call Q1. Throughout today's presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you'd like to ask a question, you may press star followed by one on your touch-tone telephone. For questions, please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Mr. Peter Hutton, Senior Vice President. Please go ahead.

Hi, thanks, and thanks, everybody. Welcome to the Econocle, as you heard, for the first quarter of 2021. I'm pleased to welcome Sven Scheier, Acting CFO, who will present the results for around 15 minutes. And then we will move to the Q&A. This call will last for a maximum of one hour. I know there are a number of companies reporting today. Also joining the call, we have Foyan Kralvana, Head of Accounting, Luna Carlson, Acting Head of Performance, and Matt Holm, Head of Finance. And with that, let me pass immediately over to Simon to start the presentation. Many thanks.

Thank you, Peter. And good morning, everyone. I very much appreciate you joining us. especially on what we know is a busy day, as Peter said. Today, we present our best quarterly results since 2014. This is, of course, driven by better commodity prices, but we also capture value from strong operation performance, continued cost improvements, and strict capital discipline. In 2014, the oil price was close to $100 per barrel. We now deliver results at this high level, with an average oil price of over 60. We booked gain on divestments within renewables, and we are of course also helped by Johan Sverdrup's major contribution to these results. A year ago, we saw rising uncertainty in the markets, and we implemented our operational and financial contingency plans. Now, we see a clear improvement in the world economy, and some countries are starting to reopen. However, in other areas like Brazil, where we have large operations, the situation is still very demanding and unpredictable. The status on infections and restrictions also affect manning at construction yards in several countries and may have further impact on the progress of our projects in execution. But I continue to be impressed and grateful for all our employees and suppliers who have kept our operations running safely, supplying energy to people around the world during these difficult times. The Trolla platform has provided enormous amounts of gas to Europe, delivering a total of more than 1.6 trillion Norwegian kroner in revenue to date. And still, we expect the remaining potential to be significantly above this. Last week, we delivered the plans for the full and partial electrification of the Troll B and the Troll C platforms, cutting almost 500,000 tons of CO2 per year from 2024 and onwards. Troll 3 will start production this autumn, adding a total of more than 2 billion barrels of oil equivalent and at a break even below $10. And for three of our commercial discoveries in first quarter, Tie back to Troll B or Troll C is an option. The same technology used to build the enormous Troll A structure is now being developed to build the 100 meters tall sparse substructures for the 11 floating bin turbines of Heiden-Tampen. This is a great illustration on how we exploit value creating synergies between offshore oil and gas and offshore wind. Heidentampen will be the world's largest floating wind farm, providing electricity for the Frives Norge and Guldfax platforms, and is an important step in commercializing this technology. We also continue to mature our offshore wind project in the U.S. During the quarter, Equinor and our strategic partner BP were selected to provide renewable energy to the state of New York from our assets Empire and Beacon Wind. We completed the divestment of 50% of these win assets in the quarter, as well as the farm down of the 10% of Dogger Bank A and B, and booked an aggregated gain from renewable transactions of nearly $1.4 billion. The Board of Directors has increased the dividend for first quarter 21 to 15 cents per share, up from 12 cents last quarter. This is consistent with our statements that the board will assess the dividend on a quarterly basis, reflecting assessments on the company's financial position and funding requirements, investments in our competitive portfolio, the market conditions, and the commodity price expectations. Before discussing our safety performance this quarter, I want to remember our 13 colleagues and friends who five years ago, on April 29, lost their lives in the Tyre accident on their way home from the Guldfax B platform. Our thoughts go to the families. The safety and security of the thousands of people working at our plants, projects and offices, and the integrity of our operations is Equinor's top priority. The fires at Hammarfest LNG and Kjellbergården last year but fortunately without personal injury. But we see these as serious incidents. And after the fires, we have started several initiatives to improve on safety across the company. We will learn from previous incidents to avoid new ones. For the last 12 months, we reported a serious incident frequency of 0.5 and a total recordable incident frequency of 2.3 per million working hours. This is an improvement from the first quarter of last year. And now onto our financial results. The financial results this quarter reflect the increase in oil and gas prices. Our realized liquid price was up 28% and inverse European and US gas prices up 64 and 46% respectively. Underlying upstream operating costs were down 4% in the quarter. The continued cost control and solid operational performance positioned us to capture value from the price increase. IFRS net operating income was $5.2 billion and net income $1.9 billion. Adjusted earnings before tax were strong at $5.5 billion, up from $2 billion in the same period last year. The group tax rate this quarter was 51.3%, and for the upstream business in Norway, the tax rate was 72.6%, due to the strong results giving less impact from the tax package. Note the comments to each of the reporting segments. E&P Norway delivered its best quarterly results since 2014. In 2014, E&P achieved this quarterly result, with a brand price of around $100 per barrel, while Snow making it at just above $60. A true testament to the major improvements done over the last years. The production efficiency was strong, and this together with other improvements secured a reduction of 3% in underlying operating costs. Sverdrup and Troll are the largest contributors, but we see strong deliveries across the board. In the quarter, we had four high-value discovery wells on the NCS, close to existing infrastructure, adding a total of around 90 million barrel of oil equivalent net to Equinor. E&P International delivered a strong result, with $382 million in adjusted earnings before tax. Adjusted earnings after tax are negatively affected by a non-recurring effect in Angola, impacting the tax rate. The continuing efforts to reduce costs by ourselves and our partners are rewarded, as underlying operating expenses are down 6% in the quarter. Our business in Brazil is impacted by the Peregrino field not producing, due to the pandemic impacting the repair of the risers. and delivers a negative bottom line in the quarter. We will drill two exploration wells towards the summer, with a potential financial exposure, as we know, of around $150 million, including signature bonuses. Our US upstream segment delivered adjusted earnings of $192 million, and a strong cash flow from operations of around $600 million. The sale of Bakken closed on Monday, and therefore both production and revenues from Bakken are included. E&P USA is continuing to reduce costs, and the investment level has been significantly reduced, compared to the same quarter last year. So the M&P. An M&P delivered adjusted earnings of $61 million in the quarter. Last year, we decided to move sales of some gas volumes from 2020 to summer 2021 and some beyond, taking advantage to capture higher prices. With the impacts of colder weather in Asia and Europe and the draw of greater LNG volumes into Asia, European gas prices were even better than anticipated. The increase in gas prices was positive for the group overall, as reflected in upstream results this quarter. But it also means that M&P report losses on derivatives for gas forward sales against the stronger prices seen at the end of the quarter. Refinery margins were weak in the quarter and affected the results negatively. And the shutdown of Hammerfest LNG also impacts the results. However, we deliver solid results within liquids trading, especially within LPG and the light ENF. So to renewables, the new segment, and a report of renewable business as a separate segment this quarter. The structure of this segment differ from the other ones in important ways, affecting how we report. It has been a common practice to establish separate companies to develop and to operate the renewable assets. This, combined with those often having an ownership share of 50% or less, leads to equity accounting being common in this segment. Both project financing and portfolio optimization are key parts of our value creation strategy in renewables. And like other renewable companies, we will therefore not adjust for profits and losses from transactions in this segment. We will, however, continue to provide full visibility of how we consolidate and report gains and proceeds from transactions. In addition, I would like to remind you that on Equinor.com, there's further information about our renewable assets. Our share of the results from renewable assets in production was $24 million in the quarter. Including the costs associated with maturing our renewable project pipeline and gains from transaction, adjusted earnings for the segment was $1.34 billion. So to the production, and I will start with the oil and gas. This quarter, we delivered stable and safe operations with high regularity despite COVID restrictions and strict infection control measures. Our equity production was 2,168,000 barrels per day in the quarter, slightly down from the record production in the same quarter last year. Production is negatively affected by the outage at our Hammerfest LNG plant and at Peregrino, partially offset by higher production at Johan Sverdrup and production ramp-up at Snorre Expansion. To capture additional value from higher gas prices, we also had high production from our flexible gas fields in Norway and from our US gas operation. To the renewables production, our offshore wind farms had high availability and stable operation throughout the quarter. In March, Highland Scotland was named the UK offshore wind farm with the highest capacity factor for the third time. However, there was less wind this quarter than expected for the season, and the production ended at 450 gigawatt hours, down from 558 in the same quarter last year. In the quarter, we deliver a strong cash flow from operations of $6.6 billion, and a very strong net cash flow of $5.2 billion after net investments and dividends. Driving the cash flow were continuous improvements and strong capital discipline, combined with proceeds from the investment. We paid cash tax of $78 million in the quarter at NCS and will pay around $160 million in the second quarter, based on the 2020 results. But based on the first quarter results, we expect increased tax payments in the second half of 2021. The strong cash flow helps to significantly improve our net debt ratio. By 7.1 percentage points, down to 24.6%. So, going towards the end, and let me end with our outlook. We expect annual organic capex in 2021 and 2022 at $9 to $10 billion, and 2021 exploration is capped at around $0.9 billion. The expected annual average production growth from 2020 to 2026 is around 3%, while the rebased production growth for the current year is expected to be around 2%. Thank you very much for your attention, and I look forward to your questions and pass it back to you, Peter.

Many thanks, Brian. So with that, I pass it through to the operator to open up for polling, and then we'll be taking the first question.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question. It's from the line of Biraj Borkaharia from RBC. Please go ahead. Hi. Thanks for taking my question.

Two things. The first one's on shareholder returns. Where do you want your gearing or net set to be before you can return your dividend back to pre-COVID levels, you know, as you previously planned it? And then the second question is actually on maintenance. Just thinking about the portfolio as a whole, depending on the country you're in, the rules around personnel distancing, et cetera, will be different. So I was just wondering if you look at your maintenance activities for 2021, are you on track as it stands today? Or is it maybe taking longer to complete some of these things? And also, can you confirm if you're still completing the same level of preventative maintenance activities now as you maybe would have planned six, 12 months ago. Thank you.

Thank you, Barash, and thanks for good questions. Regarding the dividend, as we have said over the last quarter, is that when the board is then doing the assessment on the dividend level based on a quarterly basis, it's an assessment of the company's financial position that we are in, the funding requirements ahead of us, investments that we have at hand from our good and advantage portfolio, the market condition, but also the commodity price expectations. So those are the things that we are taking into account. So what the board has done and done the evaluation, we see that there are some better market conditions out there. We have been able to reduce the debt by 7.1 percentage point to below 25%. So the assessment that has been done in this quarter is that we increase the dividend by 3 cents to 15 cents per share. There's no clear rules on when we are then getting to exactly this level of net debt threshold, then we will then do a further assessment. But it's the totality that really, really matters, and the board is doing that assessment on the quarterly basis as we have communicated. Regarding then the maintenance for 2021, as you might remember, in 2020, we then deferred quite a bit of the maintenance due to the COVID situation. We had some more maintenance, for example, on NCF towards the end of the year, normally in second and third quarter. This year, we have also focused a lot then on the maintenance being on track, so what we now see and expect in the second and third quarter is that we will have more maintenance, and for the totality for the year, we expect turnaround effects of around 50,000 barrels of oil equivalent per day. The major part of it will then come in second, and a little bit less we expect then in third. We are following the COVID restrictions there and doing good planning with the people on board on there so that we are able to prioritize and do the maintenance as we go along.

Okay, operator, can we have the next question?

The next question is from the line of Oswald Clint from Bernstein. Please go ahead.

Thanks, Peter. Sven, thank you. Hammerfest, another six-month delay. I just want to firstly understand the insurance. So is it $100 million a quarter, but it looks like 60 of that is from the captive. So is that how we should think about that? It's kind of net 40 each quarter, and then Principally, my question is, are there any critical milestones here to ensuring this starts up by the end of March next year? I know there's 180 kilometers of cable to arrive this summer and then replace. Does that need to be in before the winter period this year? Just any cover around that would be interesting, please. And then secondly, you mentioned integrity of operations. And just with that in mind, Orsted, I think, this morning took a pretty sizeable warranty provision on cable protection around the wind turbines and it's all around scouring just in terms of the rock. So I imagine with your offshore experience, you probably plan for these issues, but is there any reason to expect that you might be susceptible to similar issues now or in the future? Thank you.

Thank you, Oswald. On the Hummer test, as you referred to, is that we had an income from the insurance coming into the DPN segment this quarter of around 100 million US dollar. Part of this is coming from our captive, and around 60 million is then estimated to come from the captive, while the remaining will come from external sources. This is then based on totality and not on the quarterly impact of it. Going forward with Snövitt and Melkøya in this perspective, it's been quite a lot of table and work that needs to be done. It's been working on getting the full overview here, so it's man hours then being required. There has been some limitation also here due to the COVID and to get people into the facility there, but we are also working on that one. So our best estimate now is that we will have a startup within end of the first quarter next year. On the totality with the seasons into Nortar, the harbor, since we have the Gulf Stream, it's not ice place, so it's possible to operate with both in and out at all times. On the wind part of it, as you alluded to, I will not comment on Ørsted's statements there, but what we are following on totality is that we are utilising in general the competence that we have from our offshore oil and gas in an extensive way for the development of the areas and those things. And we are also working closely with our suppliers for the wind turbines to also make sure that we have that in good place. So no new update from us on this one.

That's great. Thank you. Next question is from the line of Theodore Milson from SB1 Markets. Please go ahead.

Good morning, and thanks for taking my questions. Two questions. First one is on Sveidruppe. This morning, Lundin is out and commenting on that plot hole for Phase 2 could exceed current guidance of 720,000 barrels per day. I guess that's not any shocking news, but would you please comment on that? What should we expect after first story left at Phase 2? And second question is regarding U.S. It's fine, you said that, or at least that's what I understood. The earnings from the U.S. activity includes Bakken in first quarter. I just wonder how much of the earnings of $190 million is related to Bakken.

Thank you. Thank you. Thank you, Theodor. On Johan Sverdrup, Now we are then working then to lift the production on phase one, then to 535,000, and we expect that that will happen then before the summer. On the totality for the full field for Johan Slade, our best estimates today is still the 720,000 barrels in the full capacity. It has been worked with studies and those things, but Our best assessment where we are today is that the capacity is then 720,000 on Johan Sverdrup. Regarding Bakken, the impact on the Bakken there in the reserves into the net operating income is a little bit less than 50 million in the quarter.

Okay, thank you. Next question is from the line of Mehdi Enabati from Bank of America. Please go ahead.

Hi. Good morning, and congratulations for those very strong results. So two questions. First one from the working capital valuation, please. So this is the fourth quarter in a row where you have a working capital outflow. So I imagine that the reasons are different every quarter. But my question is, how do you explain the working capital outflow in the first quarter? And should we expect part of that working capital outflow to reverse soon? Second question is about your natural gas production in Norway. So it has been down roughly 3%. That is Q1 last year. I understand that you have been impacted by a slow heat production shutdown, but I thought that you might have been able to boost production from fields where you have compressor units, given that the natural gas price has been very strong. So, have you been able to boost that gas production from the fields where you have a compressor or no? and why, and if I may, Angaz, would you say that the demand in Europe is currently high or not?

Thank you. Thank you for your questions. Regarding the working capital, what we are then seeing from close quarters is mainly related to the price impact. There is not that much volume impact that we are working on then. to take that further down and looking into the totality there, of course, dependent on the market outlook, contango, decadation, so it's been taken into consideration. But, Erjan, would you like to give some more details?

Yeah, so we see from fourth quarter to first quarter that we have increase in prices, but there are decrease in volumes, that is the impact on the inventory. And also on the trade and other receivables, we see an increase then related to both prices, and that is related to activity in December and March, and then limited effect on the trade and other payable.

Thank you, Adrian. On the oil and gas in Norway, this nervous impact is around 40,000 barrel oil equivalent per day. And that also explains some of the reason why why the production is slightly down on the Norwegian continental shelf. In the first quarter, on our flex gas fields, both Oseberg and Troll, we have been running those at high capacity, taking advantage of the gas prices that we have seen in Europe. And in totality, you saw that the invoice gas price is around $6.7 per million BTUs. in Europe. So by having the good capacity and utilizing those two fields in the best possible way, we have been able to capture strong values from there. Regarding the European gas market, prices then going up and being at a high level, it has been strong demand in Asia. cold weather in Asia, also then driving the demand for LNG. That has meant that less LNG has come to Europe. It has also been a cold weather in Europe, and then also a little bit less supply from other sources into Europe. That has meant that the gas prices have been strong. This is something that we are then taking advantage of, utilizing the capacity that we have at our field to gain this value then for our business. So we are then well supported by the higher prices there. But of course, we also see currently that the prices are at a high level. And currently, there is then the filling of storages and those things which is ongoing. And then always the competition for the LNG with Asia also currently having high prices.

Perfect. Thank you very much. Mekki, if I could just make one clarification just popping on there. In fact, if you look, the gas production in this quarter in Norway was 7.23. A year ago, it was 7.45. So actually, the snow that production uh more than makes up the the difference excluding that one uh underlying gas production is actually higher yeah yeah thank you thank you very much next question is from the line of thomas adolf from credit swiss please go ahead all right good morning guys uh two questions for me uh

Just one, going back to the dividend, and you've obviously mentioned in the past that the dividend needs to be competitive with peers. And over the past 12 months, we've seen many of your peers introduce a variable component with a lower base dividend. Obviously, you've got a good starting point there. And I guess you don't have to really comment on what you're thinking, but is it fair to assume that we'll get a new distribution policy announced with your anniversary in the middle of June. And I guess secondly, on flex volumes for gas, I believe there's an annual quota. I'm not quite sure how exactly it works from one quarter to another, but perhaps you can talk about the seasonal flexibility you have in the second quarter and the third quarter, please. Thank you.

Thank you, Thomas. On starting with the dividend there, and just also repeat what I said earlier, the board is then doing the assessment on a quarterly basis here, based on the outlook, the projects that we have enhanced, the volatility that we are seeing in the market. So that's what we will also then continue to do. We will have the capital market day that we will have in June. There we will update our strategic outlook for the portfolio. And that also includes overall financial framework to it. So that's where we are there. But the board is deciding on a quarterly basis on the dividends. With the volumes for the gas, it's then mainly related to the troll field. and to the Oseberg where you have the flexibility. So on Tolle and Oseberg, we are then utilizing the quotas and the production permits in the best possible way. So we are then running and optimizing based on the prices that we are seeing. So then being able then to capture the value then from the flexibility. If you look at, compared to last year, you have seen that it's been up for the flex gas in totality, due to the fact that we saw that there were higher prices now, that we then took advantage for. But the production permit is for totality, on toll especially, there is a production permit, which also means that we can run that at a high level. So comparing them with the gas last year, you saw that the Troll was mainly at a similar level, while the Oosterberg, where we produced it over a shorter period, it took the advantage of having high production in the first quarter and onwards.

Okay, thank you. Next question is from the line of Joanne Sharrington from Societe Generale. Please go ahead.

Hello, everyone. Two questions, if I may. Regarding the tax losses pool in the USA, which is not reflected on the balance sheet, are you able to touch upon the possible implications of these farm downs and the backend asset sale for the size of this tax losses pool, please? And the second question would be on turnarounds. So you are guiding for 120 KBOED in the second quarter for the impact of maintenance. Are you able to say how much of this stems from Norwegian gas versus the Norwegian oil, please?

Thank you. On US and the tax positions there. by doing the farm downs, for example, as we did know on Empire Win and the Beacon Win, we are able then to utilize our tax position in US, which means that we are able then to do this without having to pay tax on the transaction. So we are utilizing that one in a good way. And it's also similar on the backend that we can utilize the positions there when we are then doing the divestments. When we are looking then at the turnarounds, then in totality, as we said, around 120 for the quarter on NCS, I would say around two-thirds-ish will then be related then to the divestments. and then around one-third related to liquid of the turbine run in Norway as part of the totality of the 120.

And Marian? Just to comment on the bucket, so we keep the text carry forward position with the neck vinyl.

Thanks, Marian. He's very clear, thank you.

Next question is from the line of Anders Holte from Kepler Chevrolet. Please go ahead. Mr. Holset, can you please unmute your telephone?

It is now unmuted. Sorry for that. Actually, my questions are largely concentrated around the new segment, renewable segment. Now, you've been very helpful in providing your production per field for burning gas assets. I wonder if you will do the same. for your renewable assets on a quarterly basis. And also, while you mentioned the high wind pumping in your introduction there, I know it's for the day still, but is there any chance you can give some flavor on what you think levelized cost of energy will end up at when it comes to high wind pumping? Thank you.

Could you repeat your first question? Because the line was not that good. If it was then production per...

So the first question is related to the production of renewable power in the quarter. For oil and gas, you report on a field-by-field basis for a quarter, which is extremely helpful and it's a very good set of numbers that you provide on a quarterly basis. I'm just wondering, will you do the same for the renewable assets?

On that one, we are now in the build-up of of the renewable portfolio. It is still early days, but those are things that we actually will then look into going forward, how then to provide good information also then for each of the wind parks that we are then building up. So that is something that we are looking into and will then continue to look into. On your second one, on the Hyven Tampen part of it, I do not have the exact levelized cost of energy on that one. But what we have seen is that when we started off with the first hive in Windmill just outside Stavanger, then moving over to a hive in Scotland with the six windmills there, we saw a significant decrease in the cost and the levelized cost of energy there. And we saw that further into the hive in Tampen. We have the estimate for the high wind pump and all of the total carpet figures, and we are within this. But I do not have the exact level of cost of energy for it.

All right. Thank you. And congrats. Next question is from the line of Martin Raps from Morgan Stanley. Please go ahead.

Yeah, hi, good morning. I also have two, if I may. I wanted to ask you about the EU taxonomy, because I find the topic that is sort of a little hard to gauge. So I recognize the question is sort of quite broad, but what do you think the EU taxonomy sort of means for Equinor, and particularly this decision that we're all anticipating later in the year, whether natural gas may come under EU taxonomy or not? Can you talk a bit about what that may mean for Equinor. It may mean very little, but I'm just trying to figure it out. And the other one I wanted to ask you is that I noticed that Equinor New Energies has a separate credit rating of its own, or at least from Moody's it does, not from the rest, but from Moody's it does. And I was wondering if you could talk a little bit about exactly what is in this entity. I would imagine it's, of course, your sort of renewables projects, but if you can sort of describe that, that would be helpful. And also, why is the credit rating of this particular company lower than the main credit rating from Equinor? And does that mean that financing renewables projects by an entity like this is somehow at a sort of cost of capital disadvantage?

Thank you. I will start with the taxonomy and also the Let's ask Arjan if he would like to add something. And also on the rating, Mats, can you also then prepare for that one, for the new energy company? What we see in the EU taxonomy, and it's then part of the overall reporting requirement, which is then coming, we have been reporting with the sustainability report for quite a lot of years, and trying to give an overview of important impacts from our operations and how we are doing. So what we will now do is awaiting the final legislation to follow that one from EU and then also then towards the Norwegian legislation which will come. But what we see as an overall is that taxonomy aligns well with our strategic direction and also the vision of shaping the future of energy. And in that context, ESG has and will be an important part, Joss. Jan, will you add something?

Yeah, so we got some important clarification last week. So we are in the middle of assessing this. But I don't think we are in a position right now to comment any further, but we need to come back to that on a later quarter.

So, supporting into it and driving the strategic direction there. And Mats, some of the rating on the new energy company?

Yes, thank you very much, Svein. So, on the rating side, I can say that Equinor New Energy is containing most on the renewable business. But most importantly, it does not include the US on shore wind at this point in time. The rating is slightly lower than the national answer, and that's not because it's not solid, but that's a little bit about how we rate these entities and set it off. Thank you. Thanks, Mark. All right. Wonderful.

That's great. Next question is from the line of John Rigby from UBS. Please go ahead.

Thank you. Two questions, actually, rather more granular, I guess. The first is, you made some comments about how problematic the pandemic effects are in Brazil. So I just wanted to check in on both the Peregrino work and the Bacalao FID. Are the conditions in Brazil going to allow you to proceed with both of those on schedule, or should we just be a little bit cautious on that? I guess it depends on how much work you have to do in-country. And the second is, and forgive me for asking about this, but the tax rate on the NTS has been a bit all over the place since the tax concessions last year, and it's popped back up to something that looks more akin to where we were before. those concessions. And I guess, as I understand it, it's got much to do with the oil price. So if oil prices continue in the kind of range we've seen here today, is the tax rate on the NCF that we saw in the first quarter a good number to be thinking about going forward?

Thanks, John, for the question. And let me then start with Brazil and As you all know, Brazil has been hit hard by the pandemic there. So what is our main priority is the safety and security for our people. And that means that we are following this very closely, making sure that we are not having more people on board than is absolutely critical than to do the development. there has been very, very hard, also limitations in Vassil on how then to be able to, on number of people that we are having on board. So that is the main priority. And that means that it's a bit hard to say how this is develop going forward. And that means that we, that we just need to follow it, make sure that the safety is well taken care of. And when there are possibility then to do something and have more people on board, then we will then have more people on board. That's for the Peregrino main, but it's also impacted on the Peregrino phase two. Peregrino phase two was some planning and then to deliver with the startup team. by end of last year, but following this pandemic situation, it is also so that this has also been delayed following the pandemic there and also on the repairs on Perigino Main. So that means that we have no latest startup. But it's still a challenging situation in Brazil, so it means that we need to follow it follow it closely and make sure that the safety is well taken care of. And then we also need to come back then later on when we see that it's going back to more normal again to come with the exact dates for this one. So now to an update on it. On the tax rate on Norwegian continental shelf and the taxes paid in Norway on the Norwegian continental shelf is then this quarter coming from from the results that we made in 2020, and it was $78 million that we paid. However, when we look at the taxes payable, which will then impact the second quarter, that is then increasing. And as you said, John, on the tax rate on the NCF, it's more than close to 72 percentage point. That's impacted by the strong results that we have been able then to generate on the Norwegian continental shelf. So then high earnings, and this is the highest quarterly results since 2014 with the current prices. So with the high prices, we also see then less impact from the tax package. So that's the totality on it. Of course, depending on investment level, that has an impact with an increased uplift, but with high results in the E&P and always segments, the impact from the tax package will then be less than what we saw in last year when we had low results, and then you had much more impact from the tax package.

Okay. Super.

Thanks for that. Next question is from the line of John Elizam from ABG. Please go ahead.

Good morning, gentlemen. My question is actually more like a request for some comments on it. The renewable business, it's great that you started talking in a separate segment. However, of course, when you're doing the equity accounting as main principle, the revenues, EBITDA or EBIT numbers will be missing. or at least being useless. And these numbers are really important to look at when you try to evaluate the underlying performance or try to evaluate that part of the business. At this point, it would be possible to, at some point, to go over to more proportionate accounting, similar to what you do in the oil and gas business. It would be more useful for us to judge. The next three quarters, your revenues for that segment would be zero unless you have any and the sales, of course, and asset sales. And also, finally, on the same renewal basis, it would be great to get some more insight into the financing of the individual wind farms. I guess that's more a question. I wonder if you could comment a little bit on those issues. I'm sure you've thought about them.

Thanks, John, for the questions there. And this quarter, we are done reporting... first time as a separate segment, following then the accounting rules there. And as you said, several of the companies is then equity accounted and that we are in a way following. We try then also then to give some more visibility on part of the totality as we also have been doing earlier on an annual basis. Also some of the commercial terms and as well as descriptions of the totalities is then also then given at equinor.com. So there are some more information there. And then also we have tried to give some, for example, on Doggo Bank. When the financing was in place, we also released some information around that one. So I think it's a segment in development.

It's a comment from my side.

Thank you.

Okay.

Next one. Next question is from the line of Lydia Rainforth from Barclays. Please go ahead.

Thank you, and good afternoon. Two questions back. The first one on cost. If I look at Norway being down 3% year-on-year and then internationally, US 6% year-on-year, are they broadly in line with what you would expect at this stage? And I'm just wondering if Norway could go a little bit further. And then secondly, on the hydrogen side and the Kirby project that you announced during the quarter, is the idea that the Equinor natural gas going into that project and that ends up being a long-term contract and that essentially is then zero carbon gas in the way that you're thinking about it. Thanks.

Thank you, Lydia. Let me then start on the cost side and the totality there. As we then also commented a bit on in the run-through of the segments, The underlying operating costs are down then both in the ENP Norway, in ENP International, as well as in the U.S. We see that there are 3% underlying costs down in the ENP Norway. And we are able then to capture on the improvements that we have been doing over the last year. So that is then good. And there is high focus on it in the organization. Looking at the totality, when you look at the absolute numbers on Norway, since we are reporting in US dollar and quite a lot of the costs are then in Norwegian kronor, there will be a currency impact on it. But what we are then trying then to focus on on the underlying, then we're trying to take out that impact. And there we see the improvements that we're getting with around 3% related to not the currency and impact coming from that. On the international part of it, in the international totality, we have a strong focus there, both ourselves, as well as then all partners there. So we see that both we and, but not also where we are partners that the operators are also having a strong impact on the cost and a good focus to take that further down. On the hydrogen part of it, as you asked Lydia, we have done set up a separate unit within the MMP segment. It's called Low Carbon Solutions. And in this quarter, we have then enabled them to have progress on several things. We have the releases that we have related them to around the Humber in UK. So we are maturing and working on that one, as well as the MOU that we have with the for Netherlands, Belgium, and France. So that is handled by the low carbon solution group in MMP.

Thank you.

As a reminder, if anyone would like to ask any further questions, please press star followed by one on your touchtone telephone.

I'm actually going to interrupt that actually because we do have to get away. So I think as far as I'm aware, there are no further questions. So I'd like to take this opportunity to thank Simon and our colleagues for covering those and for all of you to join the call this morning. As always, if you have any follow-up, please don't hesitate to call us in Investor Relations. I'd also take the opportunity to remind you that it's on Capital Market Day, as Shane said, on June the 15th. So we look forward to talking to you then as well. So with that, I'd like to just pass on my thanks. Stay safe and best regards. Many thanks indeed.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.