Equinor ASA

Ladies and gentlemen, good afternoon. It is a pleasure to welcome you all to the presentation of Equinor's fourth quarter and full year result for 2022 and our capital markets update. My name is Bård Glad Pedersen. I am, since December last year, heading up the investor relations team in Equinor. We have looked forward to engage with you all, and I will soon take you through the program for today. But safety first. If an emergency situation occurs while we are here, the evacuation signal is a voice announcement. We will only evacuate if the announcement says that we should do so. then please follow the marked fire exits and the instructions from the guards. Exiting is at the ground floor, and venue staff will show you to the assembly point. Today, we will have three presentations here in the plenary session. First of all, it's Anders Opedal, our CEO, Then our EVP for MMP, Irene Rummelhoff, will present before the session is concluded with Torgrym Reitan, our CFO. After the presentations, there will be a Q&A session where the three presenters will be on stage, and also the CEC is here and available to respond. Following that, you are all invited to join us for a lunch, and for those of you who have signed up, there are breakout sessions with the EVPs for EPN, EPI, REN, MMP, PDP, and TDI afterwards. They will all give short introductions and be ready to answer your questions. Finally, let me remind you that all the presentations here today are subject to the forward-looking statements that are included. Then, Anders, we are ready to start, and the floor is yours.

Thank you, Bård. And it's really good to see you all. And to me, it's a pleasure to welcome you finally here in London for a capital markets update. And I and my team, we're really looking forward to share our financial results and the progress on strategy and ambitions. 2022 was a special year. The war in Europe still causes human suffering and has disrupted the energy markets, contributing to inflation and a cost-of-living crisis. In Europe, this year marks a shift as we move forward not relying on Russian oil and gas. Equinor responded quickly, and we are well positioned to be a part of the solution. Short term, deliver the energy needed. Longer term, to build up sustainable energy sources, contributing to energy security and decarbonisation. Our milestone this year is the start of the Doggebank, the world's largest offshore wind farm here in the UK. This leads me to the topic of the day, how we will deliver strong returns through the transition. Our strategy remains firm, creating value on the way to net zero. We are progressing on optimizing oil and gas, high value growth in renewables, and developing market opportunities in low carbon solutions. Positioned for high value creation, we expect a strong and resilient cash flow. In a $70 Brent scenario, we expect to deliver a very strong cash flow from operations. On average, around $20 billion US dollars after tax annually all the way to 2030. We estimate an annual return of capital employed above 15% towards 2030. This strong outlook, annually 20 billion after tax and solid financial position, funds increased capital distribution and continued investments in profitable projects. For fourth quarter 2022, we step up our capital distribution and propose a 50% increase in the ordinary cash dividend to 30 cents per share. In combination with extraordinary dividend and share buyback, we expect a total distribution to shareholders of around $17 billion for 2023. I will revert to this, but let me first present our results. On safety, we have achieved improvements on key indicators over several years. our serious incident frequency of 0.4 was stable from 2021, the best level ever so far. We had no serious well-controlled incidents, and hydrocarbon leakages are down. Total injury frequency was 2.5. We continue with our clear goal, all our people returning safely home from work every day. Last year, we enhanced security within cyber and for our assets. Stricter security protocol, more training, and closer collaboration with authorities. All of this to safeguard our people, operations, and security of supply for our customers. Sustainability is all about making progress for society. We are committed to creating local value and equal opportunities and protecting the environment. In 2022, we responded to the energy security situation by boosting our gas production and shipping more crude to Europe. I'm really proud of the hard work from colleagues to ensure safe and efficient supply of energy. This is a true team effort. And during the year, 2,600 new colleagues joined Equinor, replacing and renewing competence, demonstrating our attractiveness in a tight labor market. Last year, we delivered strong operational performance. Five new fields downstream at a capacity of more than 200,000 barrels per day. Around half of this from Johan Sverdrup phase two. In addition, we have put our floating wind farm, Highwind Tampen, in production on NCS. We delivered net operating income of 79 billion dollars and adjusted earnings of 75 billion. This clearly demonstrates our ability to capture value from high prices and volatile markets. Our free cash flow before capital distribution came in at 32 billion dollars. These earnings brought return on capital employed to 55%. Across the portfolio, we have progressed on projects to reduce our own emissions. Our CO2 intensity ended at 6.9, well below half the industry average. We are progressing our projects for decarbonization with CO2 transport and storage. Including the SMEA higher license on NCS awarded last year, we have an acreage to store around 30 million tons of CO2 annually. Our strong cash flow outlook, continued capital discipline, and robust balance sheet is the basis for the increase in capital distribution. To me, it is important that the stepper provides highly competitive distribution for 2023 and increased predictability and commitment in the long run. The board proposes a 50% increase of the ordinary cash dividend from 20 to 30 cents per share from the fourth quarter. Our dividend policy remains firm. We expect to increase the annual ordinary cash dividend in line with long-term underlying earnings, now from a higher base. In addition to the ordinary cash dividend, no above pre-COVID levels, share buyback are an integrated part of our ordinary capital distribution. We continue the program we introduced back in June 2021 of $1.2 billion per year. The record earnings last year and our strong financial position also enables extraordinary distribution to shareholders in 2023. We propose an extraordinary cash dividend of 60 cents per share for fourth quarter. This will bring total quarterly cash dividend to 90 cents per share, subject to AGM approval. The board is clear in its intention to maintain this level for the first three quarters of 2023. In addition, we propose an extraordinary buyback of shares of $4.8 billion, making it $6 billion for the year. In total, this leads to a capital distribution to shareholders of around $17 billion in 2023. We are in a unique position to create value, providing energy security and decarbonization. On liquids, gas, and power production, our liquids, gas, and power production is high, but far exceeded by the volumes we sell and trade. Last year, we sold more than 800 million barrels of liquids, 100 BCMs of gas, and traded more than 175 terawatt hours of power. We optimize and create value from production, our infrastructure, and the volumes we sell and trade. On top of this, we will provide decarbonization through CCS and hydrogen. We leverage our full portfolio as we seek to develop new value chains with industrial partners and customers. Going forward, we are set to continue capturing high value from volatile and tight markets. On the back of this, we increased our guiding for marketing, midstream and processing by 60%. Creating and capturing value across our business, we estimate a free cash flow over the four years to 2026 of around $25 billion. We will continue to develop our profitable oil and gas portfolio. Last year, we sanctioned 13 projects, adding around 600 million barrels in reserves. We keep on exploring with around 35 exploration wells planned this year. In 2023, we estimate a 3% production increase. By the end of the decade, we expect the production to be on par with today, while delivering a 50% reduction in our emissions. The estimated production will secure long-term supply of gas from NCS to Europe. We expect the average annual production to be above 40 BCMs throughout the decade. and our pipe gas to Europe have less than one fifth of the CO2 intensity compared to LNG imports. Our Norwegian portfolio is the backbone of the company, and we continue developing assets, increasing value creation. Internationally, we have further focused our portfolio with a clear mindset of value over volume. Kjetil and Filip will show you how our Norwegian and international portfolio are set to deliver strong cash flow to 2030 and beyond. Our oil and gas business is robust and cash flow neutral at around $30 per barrel. And we continue to improve. Our projects in execution have reduced costs since investment decision, despite inflation. Hegen Geier will talk about execution excellence and how we manage cost and create value through technology implementation. Across the full company, including renewables and low-carbon solutions, we plan to invest 10 to 11 billion dollars in 2023 and around 13 billion annually from 2024 to 2026. No company, including Equinor, is shielded from the inflation and cost pressure in our industry. Capital discipline and cost management is high on our agenda, and we take firm actions. We use flexibility and optionality in our portfolio, we collaborate closely with suppliers, and we use new technology to reduce cost and increase production. From this year and until 2026, we expect unit production costs for oil and gas below $6. We continue to work to manage cost and mitigate inflation, and Togen will provide more details on this. Profitability is at the core as we grow in renewables. This is demanding and will require discipline. As history shows, we have won bids at price levels supportive of value creation, also making us more robust towards impairments. Our California lease serves as a new demonstration. Our farm downs have been at high price levels, capturing the benefit of early access. We maintain our expectation of projects return of 4% to 8% real. As projects start production, power generation will grow rapidly, and we have the optionality to prioritize the projects, bringing the best returns. We expect to grow our annual production from the 1.6 terawatt hours today to between 35 and 60 in 2030. Paul and Helge will show you how we will further increase value creation from this. We remain firm on strategy, but flexible on execution, and continue putting value over volume. Equinor has safely stored CO2 for almost 30 years at the Sleipner Field. we introduced low-carbon solutions as a part of our corporate strategy in 2021. Since then, we have made strong progress. We are taking the lead in developing the North Sea as a hub for commercial carbon storage. And we are on track to store 15 to 30 million tons of CO2 per year by 2035. For our projects and plans in Europe and US, the recent policy developments will strengthen the commercial potential. We see growing interest in CO2 storage and hydrogen from industrial customers. Irene will give more details, but let me share a few highlights. Last summer, Northern Lights on Norwegian continental shelf signed the first commercial agreement. In UK, our East Coast cluster was shortlisted in the government clustering process. And in January, we announced a cooperation with RWV in Germany for energy security and decarbonization. Together, we aim to help Germany transition from coal to gas to low-carbon hydrogen, and finally, hydrogen from renewables. We are collaborating on new value chains in several industrial clusters. By 2035, we aim to have three to five clean hydrogen projects. The energy transition will be demanding with difficult dilemmas. We believe in a balanced transition, and Equinor must solve for three things. Reduce emission for ourselves and our customers, build up new energy sources, and secure reliable energy. We will work hard to deliver on this, but at the same time, create value for shareholders and society. We continue to cut emissions from operations. Since 2015, we have cut almost 30% of our emissions on the way to net 50% reduction in 2030. The share of gross investments in renewable and low carbon is on track to a 30% share by 2025 and progressing towards with more than 50% in 2030. We are also progressing on our energy transition plan and remain committed to the ambition of net zero. So let me sum up. We are uniquely positioned to create value and strong cash flow on average around 20 billion dollars after tax per year towards 2030. We reaffirm our commitment and step up capital distribution while investing in our profitable portfolio. We can deliver the energy needed while driving the transition to a low-carbon future. So, thank you, everyone, for the attention, and I look forward to the questions later. But first, Irene, happy birthday, and the floor is yours.

I was hoping to keep that a secret, but there you go. Well, thank you, Anders, and it's really good to see you all. I'll cover three topics today. I'll share some reflections on the gas market, then I'll explain why we upped our guidance, and then thirdly, I'll talk about and convince you that we're uniquely positioned to develop low carbon value chains. So first, the gas market. You all know what happened to the Russian volumes last year and how Europe managed to replace them through increased exports from Norway, severe demand reduction, but also very costly LNG imports. Lately, we've seen some relief, a relief that is directly correlated to the fact that we're in the midst of one of the warmest winters on record in Europe. And we actually saw demand reduction at 32% in January. So, no, the gas market is all about preparing for next winter. And we do believe that it's likely that the storages will be filled come November at the EU target or above 90%. But that requires continued demand reduction and high LNG imports levels. However, real relief will only come into this market beyond 2026, when we expect significant volumes coming in from Russia and Qatar. So in the meantime, the market will remain fundamentally tight and nervous, as my boss said earlier today. And I think there may be the three most or the biggest uncertainties to watch out for are weather, weather in Europe, weather in Asia. We saw how impactful that was this winter. Then it is also quite interesting to see whether, for instance, industrial demand will come up again, know that we've kind of landed at a dampened level. And the supply interruptions is always something to look out for, particularly in such a tight market. Going forward, we expect massive investments in renewable. If you couple that with the rapidly changing weather patterns, you will need energy storage. And the call upon flexible gas is expected to be significant. And I think a very illustrative example is what happened in Germany this winter. between a cold day in December 13th and a warm and windy day on January the 4th. The difference between storage injection versus withdrawals were 260 million cubic meter. And that's actually equivalent to all the gas that we export from Norway on a normal day. Volatility is something that me and my team, we've talked about for quite some time. We expected it, and we have prepared for it. Back in 2019, we changed our gas sales strategy, and we're basically now selling all our gas on spot indexation, meaning that we can capture volatility and price spikes like the one we saw in August this summer. And I also do hope that you have seen how we are working hard to mature these low carbon values chains. And we do attack four elements in parallel. And I think maybe that's a little bit of a differential. differentiator with respect to us. We work on the upstream production and storage. We work on the transportation and infrastructure. We work on the customer side and also the political support in parallel. If you don't do that, you will not succeed. So thank you for your attention and Tor Grimm, it's your turn.

So thank you very much, Irene, and thank you all for joining us today. It is very good to see you again, and it is very good to be back as CFO in Equinor. Since my last time around, a lot has changed, but one thing remains constant. Value creation is our top priority. After safety, this is the first priority. And it is always more important than the volume targets. So coming into this role, I have two main priorities. First, that Equinor steers safely through volatility and through these uncertain times and come out as a stronger company. And second, that we continue to be a leading company in the energy transition and deliver cash flow and creating value for shareholders. Our robust balance sheet and strong cash flow outlook position us well to transition in an investor-friendly way. In 2022, we had solid operations and we contributed to energy security. And at the same time, we delivered record returns and cash flow from operations. We stepped up our capital distribution, and we invested more than ever in the energy transition. So this result does not come for free. My colleagues in Equinor have made significant improvements over the past years, and we are now benefiting from that. So we're in a good position and we have a strong balance sheet. But in times like this, we need to prepare for lower prices and drive cost and capital discipline. So I will walk you through our financial framework after I've taken talking to our results. So in the fourth quarter and full year, we saw solid operations from oil and gas. Against this dark backdrop of the Russian war on Ukraine, we completed our exit from Russia. The flexibility of our gas fields on the NCS enabled us to deliver more gas to Europe. However, In the fourth quarter, we reduced our gas position, gas production, since gas demand fell. So we will produce this gas in later periods with higher demand, but this reduced production in the quarter by 48,000 barrels per day. Snøvidt produced for the full quarter. Johansverders phase two and Njord in Norway started up, and Peregrino in Brazil ramped up. Power generation from renewables came in 6% higher for the full year in addition to our renewable assets in operations. We are now generating power from gas from the Triton power station. For the full year, we had a record net operating income of $79 billion, $79 billion. And we delivered unprecedented adjusted earnings before and after tax. In the fourth quarter, we continue to deliver strong results and net income of $7.9 billion and adjusted earnings after tax of $5.8 billion. So Equinor, we are not shielded from tight markets and inflation. we do see a growth in our OPEX and SG&A costs. And the underlying increase is masked by the strengthening of the dollar. So I will come back to how we are addressing costs. With the strong results from the US business and the expectation that income will be taxable in a few years, we can now recognize a deferred tax asset in the US of $2.7 billion. We have net impairment reversals of around $1 billion in the quarter, mainly related to Mariner, driven by an optimized production profile and higher prices. Let me turn to the segments. In the quarter, our Norwegian upstream business continued to deliver strong adjusted earnings before tax of $14.6 billion. or international business, excluding the U.S., had solid earnings, driven by Peregrino ramp-up. The U.S. business also delivered solid earnings, however, production there was slightly lower due to a major planned turnaround on Caesar Tonga. Within M&P, we continue to see very strong results, as you heard from Irene, from gas and power sales and trading. We had negative derivative timing effects for the quarter, and without those adjusted earnings for MPP, MMP would have been positive $1.8 billion, which is well above both the old and the updated guidance. The negative derivative effect is mostly within the 78% tax regime, which leads to a positive earnings of 1.9 billion of the tax for MMP. And finally, we continue to build our renewable business, and in this phase, we see a negative adjusted earnings. Our assets in operations have a positive contribution of $37 million, up from $28 million last quarter. And then cash flow. For the full year, we delivered record cash flow from operations of almost $84 billion. And after subtracting taxes, including the additional tax payment last quarter of $10 billion, and subtracting investments and capital distribution, we delivered a net cash flow for the year of around $23 billion. For the year, we had organic capex of around $8.1 billion, which was somewhat below our guidance, mainly due to phasing of project activity and currency effects. Based on the strong cash flow, our net debt ratio is further reduced to negative 23.9%. As you know, this is impacted by the lag in tax payments on the NCS. During the first half of 2023, we will pay three tax installments related to the NCS of 54 billion kroner each, which is lower than indicated last quarter, and this is due to the recent reduction in gas prices. So, let's move on to our financial framework. We have four important boundaries for how we will develop our company and how we want to drive capital discipline. First, we have value over volume. Very, very important. Return on capital is key, and we expect to deliver on average more than 15% for the period towards 2030. Secondly, a solid balance sheet is the basis for all good risk management. And we maintain our guidance of a long-term net debt ratio of 15 to 30%. And then thirdly, our industry is cyclical, and we must be prepared, and we will remain robust in a $50 environment. And lastly, of course, we will transition with force in line with our energy transition plan. So within this framework, we expect a very strong cash flow over the next decade. cash flow from operations after tax of around $20 billion per year on average. So we will use this cash flow to create shareholder value. And we will allocate capital towards a competitive capital distribution. We will reinvest in our oil and gas activities in an attractive project portfolio with an average breakeven of $35 per barrel. And then we will continue to invest and grow in our high-quality project portfolio within REN and low-carbon solutions. So this financial framework is, as you understand, very important for us when we prioritize our spending going forward. Our capital distribution is a central part of our investor proposal, and this is important to us. The step-up is based on our outlook for strong returns and cash flow. The board of directors, they have proposed a 50% increase in the ordinary cash dividend to 30 cents per share per quarter, up from 20 cents last quarter. So we expect to increase the annual cash dividend in line with the long-term underlying earnings and know from a higher base of 30 cents per share. In addition, we remain committed to the share buyback program we introduced in 2021 with share buybacks of $1.2 billion annually as part of the long-term capital distribution. This project is subject to the same conditions we set when it was introduced. We will also continue with an extraordinary cash dividend with an additional share buyback in 2023. The extraordinary cash dividend will be 60 cents per share for the fourth quarter, making total cash dividend 90 cents per quarter. Our clear intention is to continue with this level for the following three quarters. The additional 4.8 billion in share buybacks brings the total program to $6 billion for 2023. So in total, our capital distribution for 2023 is $17 billion, up from 13.7 last year. The first tranche of this program of $1 billion will start tomorrow. And that will be based on the existing approval that we have from our annual general meeting. So as you understand, capital distribution is important to us. We are set to deliver a strong free cash flow of around $25 billion towards 2026 in a $70 reference case. That is the free cash flow. This cash flow has both longevity and is resilient towards lower prices. As you can see, our company will be cash flow neutral at around $50 per barrel, meaning that cash flow from operations will cover planned investments at those prices. From 2024, more than half of Okapex will be linked to our non-sanctioned projects, giving us significant flexibility going forward. We expect to increase our investments in both oil and gas and in renewables and low carbon solutions. I started out with one of my key priorities to ensure that Equinor steers safely through uncertain times and volatility. So this will require strong cost and capital discipline and we are prepared. The picture of Johan Casberg is no coincidence. In 2014, in times of high cost pressure, we postponed Casberg, reworked the concept, and reduced CAPEX by 50%, by more than 50%. We do the same today. And that is why we decided to postpone the large bar and seed development, So we will continue to improve and mature this thing to make it even better and more robust. To build resilience, we need portfolio flexibility and we need to execute project efficiently. And as a large operator with a strong investment program, we have exactly that. We set out on a $4 billion dollar improvement ambition from 2020 to 2025. I am glad to announce that we have already delivered three years ahead of schedule. So this was driven mainly by production optimization and utilizing our integrated operations center. In 2022, we saw an increase in unit production cost to around $6 per barrel. driven by higher energy costs and CO2 prices, in addition to Peregrino and Snøvit coming back online. So, we expect to be able to maintain at that level or lower towards 2026. We are working strategically with suppliers to drive efficiency across projects and using standardization to ensure pace and scale. So this has delivered more than 5% lower project facility costs and more than 45% lower drilling costs compared to PEARS. So we will continue to drive improvements, and Hege and Geir will speak more to this in the breakout sessions. And now to our oil and gas project portfolio. Our projects coming on stream over the next 10 years will create large value. Low break-evens of around $35 per barrel. High returns of around 30% internal rate of return. short payback time of around two and a half years, and a low carbon upstream intensity of less than six kilo of CO2 per barrel, which is less than half of the global industry average. So through this portfolio, we will deliver strong production and cash flow to 2030 and beyond. we will reduce scope one and two emissions by 50% while we are doing exactly that. So we sanctioned many projects in 2022, and this portfolio is to a large extent protected against inflation with contracts already awarded. Our non-sanctioned portfolio is more exposed to cost pressures and changes in supply markets. So we will continue to work hard to mitigate these pressures and rest assured we will not sanction projects that are not good enough just to drive growth. We are investing to create as much value as possible. We have an extensive portfolio of renewables and low carbon projects. We see significant synergies for them to be part of Equinor. First, with access to a strong balance sheet, we can reduce funding costs. We can warehouse risk, and we can take on merchant risk. Also, working closely with our marketing and trading business will lift returns. And finally, we have of course deep competence and execution skills that these projects will capitalize on. So we will maintain a disciplined approach, and we will focus on value over volume, and Paul and Helge will go into this later. And by the way, I hope you saw Monday's news on Dogger Bank D. You know, where we together with SSE are looking into a fourth phase of the world's largest offshore wind farm. So, let me conclude. We expect to invest 10 to 11 billion dollars in 2023, making CAPEX for 22 and 23 slightly lower than what we said last year. For 24 to 26, we expect annual CAPEX of around $13 billion. Important to note that the CAPEX will be back and loaded in that period. The CAPEX program is driven by stable investments within oil and gas. growing CAPEX in renewables and low-carbon solutions, and that we intend to use or balance sheet more within renewables, as there is an increasing value in that. That is the driver behind the CAPEX program. In 2023, we expect to deliver 3% production growth in oil and gas. Towards 26, we will continue to grow production. And in 2030, we expect production to be on par with where we are today. So finally, I hope we have shown you how well positioned we are to transition and create value in an investor-friendly way. First, we will deliver strong cash flow and returns over the next decade. Secondly, we are committed to a competitive capital distribution. And thirdly, we will lead the way in the energy transition. And all of this will be done within a firm financial framework that we discussed just a few minutes back. So thank you very much for your attention. And then, board, I would like to hand it back to you to help us through the Q&A. So thank you.

Thank you Anders, Irene and Torgrim. We are then ready to start the Q&A session. The Q&A is reserved for analyst investors here in the room, but also those participating on the phone. And to make sure that we have time to cover as many as possible, I ask that you limit yourself to one question each, and that you try to keep that crisp. I also ask that you introduce yourself at the start of the questions. So, then, we can start here at the front, and then we'll make a list based on that.

Hello, it's Martin Radstad. I'm with Morgan Stanley. I wanted to ask you about the European gas market, if I can only limit it to one topic. So last year, a part of the incremental gas supply from Norway to Europe was at the expense of some oil production because it was gas that was otherwise re-injected. And I was wondering, given the balance of prices at the moment, whether you could reverse that, i.e. less gas, but then at the benefit of oil production. And secondly, on the same topic, I wanted to ask you, when you mentioned we lowered gas supply to Europe in the fourth quarter because of the lower demand. That sort of sounds a bit like OPEC. It sounds a bit like some sort of market management going on. Now, of course, the obvious question would be to ask at what price level would you expect to start doing that going forward? I'm sure you won't answer that question. But I was hoping you could say a few things about the circumstances under which you might sort of be quite dynamic and active. Is it demand? Is it inventories? Is it price? I think that would be very helpful.

Yeah, thank you. And you prepare for the last question. And we, as you said, we are injecting, selling the gas to the market instead of injecting into some reservoir. This is something that we monitor very, very closely in terms of long-term value creation and making sure that we are developing the reserves and not leaving reserves behind. So this is a kind of trade-off between what is the equivalent liquid price for gas compared to the oil. And if you see that gas prices are lower than the oil prices, and we are seeing that we might lose out on long-term value, we might change this. Because, again, this is about creating long-term value.

But I think it's important to note that gas is still $120 at the oil equivalent, so it's still a high level of prices. I think with respect to your question on moving gas further out in time, I alluded in my presentation to the fact that we have an increasingly flexible portfolio. And what do I mean by that? We have flexibility upstream. Some of our gas fields are now coming very close to the decline phase, which means that depending on the price signals, whether demand is needed, we can choose to produce the gas now, or we can move it to one year ahead of in time or two years ahead of time so it's basically an optimization on prices but it's reflective of the demand situation in Europe so using the upstream production more or less as a gas storage good then we move to you and here in the front next

Thank you. It's Lydia Rainforth from Barclays. And I want to come back to, obviously, $75 billion is an amazing profit number, and you're matching that with $17 billion of cash returns to shareholders. Why is that the right number for 23? Because, obviously, you could have phased it more and kept payouts higher for longer, but just at a lower level. So I'm just wondering why $17 billion is the right number for this year? And this isn't quite linked to that, but Torgrim, just on the tax side, obviously, the tax pay guidance for the first half is much lower than it was for the second half, I think, in terms of what you actually paid. So I'm just wondering, is that purely a price thing for it?

When we look at the capital distribution, no, the shareholder distribution, as we said today, we're increasing the ordinary cash dividend to give the long-term commitment based on the long-term underlying earnings. And together with the 1.2 billion in share buyback, this demonstrates how we feel about the business going forward. Then, as you know, we have a very, very strong balance sheet, and we are a negative net debt ratio. And we have said, and Storium said also today, that we are moving towards our long-term guiding of 15 to 30. The balancing between the ordinary dividend and the extraordinary dividend is what we feel is the right for optimal capital structure in the long run.

And Torge, you've got a question? Yeah, thanks, Lydia. You're right. So since we sort of initially gave expectations for taxes, gas prices have fallen significantly. So that's the reason why we are reducing sort of the cash tax payment expectations for the first half.

Let's move to the front here, and then Theodor, and then we'll take one from the phone after that.

Thank you very much. It's Oswald Clint at Bernstein. It was good to see the enthusiasm from IRENA on the customer side. I always look for more of that from Equinor versus your customer-rich competitors. So RWE, ONGIE, the deals you've laid out, you didn't quite talk about expected returns from these chains. Torgrem showed us 30% in the upstream. You said it took a lot of time to strike these deals, but you're selling gas, then blue hydrogen, then green hydrogen, and there's different pricing going on there, which is quite opaque to us. So maybe just talk about what are these integrated returns that you can tell us that we should expect? And just a linked side question, you know, in those discussions, do you think Russian gas could ever make a way back into Germany? Thank you. Yeah.

I start a little bit and you can comment on the Russian gas as well. You know, we have progress very well on both working together with Engin and RWG and gradually building up this new value chain that is so important to decarbonize the industry in Germany and Europe. We see that this will be based on contracts for differences, particularly for hydrogen, and also the ETS price will drive the prices more for the carbon services. So we are seeing returns, and it's too early to guide on this, because we are uniquely positioned, and we're going to really be one of the first ones developing this, but we will see returns in the same range as we say for renewables, but it's too early to say exactly. But we worked really hard to develop these projects and make them as good as possible using the same toolbox as we have used for renewables and oil and gas projects to make these projects profitable.

I think there are two phases with respect to these kind of projects. It's one where we will need subsidies both for the CO2 value chains and the hydrogen value chains. But I think when you get closer to 2030, the EU ETS price is going to be higher than the cost of capturing and storing CO2. So then you get into a commercially driven environment and you could expect to see different returns at that point in time. The other thing I would want to highlight compared to the renewables is that the entry barrier into this space is much higher. So if you start out on a level, you're more likely to be able to hold on to that level than what we have seen in some of the renewable businesses. Then you asked whether I think Russian gas will come back to Germany, and I would say no today. But then we also know that politics change as times move on, but within... We have no assumptions in our models of seeing Russian gas coming back to Europe in the next three to four years. I think what will happen, though, is some of the Russian gas will be rerouted to China via pipeline. They might expand their energy export capacity or so. So I don't think it necessarily will disappear from the market, but it seems, as of now at least, very unlikely that it will hit the German market anytime soon.

Let's do Theodor to Rosbjørn Osvall, and then we do one from the phone afterwards.

Theodor Nilsen, Sparebank One Markets. Congrats on very strong results this year. Positive also to see how specific you are on dividends and buybacks. So more specifically on those $17 billion you promised as shareholder returns this year. How sensitive is that to oil and gas prices? We all know that this is a very, very cyclical and volatile industry. In a scenario where you see much lower oil and gas prices this year, will it still stick to the 17 billion, or is it some kind of sensitive to oil and gas prices?

As I said in my speech, this is the number we're setting out for this year. This board's clear intention to keep the same dividend level for the next three quarters. And as you see, we have a very, very strong balance sheet with cash and cash equivalents around $45 billion. So this is also about... putting us closer to the long-term guiding of the 15 to 30 net depth range.

Can I just build on you Anders? I think the ordinary cash dividend and the ordinary share buyback program, that is linked to outlook for the future, the $20 billion cash flow from operations, and return on capital employed. The extraordinary part is related to money already earned, and that is actually sitting on our balance sheet currently. So that is $45 billion in cash and cash equivalents. So that is linked to the extraordinary part, and it is not linked to earnings this year or future earnings.

Let's take one from the phone, and then give the microphone to Buraj in the middle of the room for the next one after that.

John Olesen, ABG. Good afternoon, gentlemen. You have changed your guidance for renewable volumes from gigawatt hours, gigawatt installed capacity to terawatt hours of production. And I'm wondering a little bit about this. Firstly, is the terawatt hour guidance a net number to you, or is it a gross number? Secondly, why did you change the guidance? And then thirdly, is the chart of power generation a terawatt between now and 2030, is that based on the assets you have today, or is it assuming that the wind acreage results in the future lies around, or do acquisitions?

I start on this one, and I know Paul is also eager to jump in on this one. But first of all, the 12 to 16 vision for renewables, 12 to 16 gigawatts, remains firm. We have already accessed 14 of this, so we are on the path to deliver on this. But, you know, gigawatts is just a potential. Power, you know, in terawatt hours is really the power we will produce, which is a basis for a future cash flow. And when we discuss how to develop the renewable business further, we say that now we want to really measure ourselves on how we develop us in power generation, remembering that different sources of renewables have different capacity to produce a different amount of power. So, Paul, maybe allude a little bit how you have developed portfolio as well over the last year.

Yeah, thank you. So I don't think we have made a deliberate choice of changing our guidance. I think we've actually been providing more information than what we've been doing in the past. And our starting point is that we have built a very strong position in offshore wind, but during very heated markets over the last few years, what we have been doing is actually being a net seller of shares in offshore wind and monetizing in that market. We've also seen that we have a portfolio that was in need of a bit of diversification. So that is why you have seen us make bolt-on acquisitions into onshore platforms in Poland with Vento with a 1.6 gigawatt pipeline and with B-Green in Denmark that closed only last week. So we have been diversifying our portfolio. So what you see in the installed capacity numbers is a higher element of onshore volumes and solar PV in particular than what you have seen in the past that comes on top of that strong offshore wind portfolio. So the 14 gigawatts of installed capacity roughly corresponds to the lower end of the production range that we have given today But given that we now have a portfolio, we also see quite a bit of upside in bringing merchant onshore volumes where we can trade and market these volumes in the market compared to locked-in long-term PPAs that we have on the offshore wind side. So to me, it is a way of demonstrating that we are putting value over volume in the way that we are prioritizing our portfolio.

Yes, please. You haven't got the mic. Can I get the microphone in the... Hi, thanks.

It's Piraj Bhogatari at RBC. I want to ask about free cash flow deployments. At Toragram, you were very clear that the CapEx increase was back-end loaded, and you're in somewhat of a unique position as a company, given... the strong macro environment last year. You're sitting on $20 billion of net cash and so on. But could you just talk about why you're choosing to make that CapEx profile back-end loaded? Is it that you're concerned about supply chain inflation and so on? Is it that you're maturing the projects? And maybe you could also touch on policy because... There is a narrative that the U.S. is obviously pushing ahead with the IRA and so on, and your carbon capture profile and options are largely European-focused. So I just wanted to get your thoughts on the regulatory environment there as well. Sorry, there's two questions. Thank you.

Yeah, I'll start a little bit on Carpex Torgrim and you can follow up. So we have a Carpex guiding which is very much in line with previous guidings and with some smaller adjustment which is from year to year and project facing, we are fairly stable on the oil and gas. So the increase you're seeing, and the increase with 13 on average, which is backend loaded, is really the increase in renewables, and is also a potential increase where we will finance renewables over the balance sheet. We will never sanction projects before they are good enough, and that's why also we will see that there are some flexibility to when we will sanction these projects, and there can be small adjustments, and that's why we're guiding in our range here going forward. Yes, IRA. And we do have projects both in Europe, where we kind of have a very, very good, and I think Irene said it very clearly, where we have a strong position, which is with higher barriers to enter. And then we have also projects in the U.S., but, you know, quite fierce competition. So maybe you want to say a little bit of what we're doing in the U.S. And if you have anything to add on CapEx, please let me know.

I can do that. I think we always chase where we have opportunities, where we have a competitive advantage, and clearly in Europe we have the infrastructure, we have the customer relationships, et cetera. The other place where we see some synergies with the existing business is in the US, and for some time we've been chasing a couple of opportunities, bigger ones in tri-state area in the US and also in ammonia export project. These projects overnight with the IRA became much more attractive and we continue to mature those. You know, Europe was way ahead of the U.S. when it came to incentives for a while. Then the U.S. moved ahead. You saw Ursula von der Leyen out there saying, you know, we're going to up our game. So I think this is not going to be a static picture. You're going to see, you know, the support regimes change over time. So stick to where we really have a competitive advantage, but clearly quite excited about what goes on in the U.S. right now.

A very important question. It all starts with that we are driven by maximizing the value creation out of that investment program. So we have deliberately taken some decisions to say, okay, these projects need to be worked more and they will come later. And I think this thing, as I mentioned, is sort of one example of that. The other one is that in a big portfolio where we are an operator, Clearly we need to manage execution capability and inflation. We have seen inflation last year, quite significant, but we really, really need to manage that. Meaning that we need to see to that we have a good portfolio over years to manage that. And you saw from our presentation, $35 breakeven. of the upstream project portfolio. That has remained rather constant over the years, despite that we have had inflation in the period. So that's sort of a KPI or matrix to follow. That is really where we see that we can create value by actually profiling the investments in the way that we do. So we're not driven by volume targets, we're driven by value. I think I've said it 10 times now, so that's for sure.

That's good. One in the back there, and then we'll take one more on the phone and continue here in the room.

Thank you. It's Chris Coupland from Bank of America. I really welcome the clarity you've given on the capital distribution front, but maybe, Torgrim, I'll challenge you here a little bit because you're presenting a $50 breakeven after CapEx, and I think on your 2023 cash flow outlook, the $17 billion of cash returns are going to be covered roughly where we are right now, $80 plus minus gas prices where we are right now. So it looks like you're giving yourself quite some time redistributing your balance sheet strength to pick up your comment earlier. So just wonder whether you can give us a bit more color in terms of how much time you have to reallocate that balance sheet strength that you've accumulated. And, of course, my second question is the least popular one because I know you're not going to want to answer it. But I'll ask it anyway. What role does your M&A team play here in having a claim on that balance sheet strength? And maybe Anders, if you, or Irina, if you want to give us a little bit of your view on what the market currently looks like. You know, this is no longer a zero interest world. What does the M&A market look like to you? Thanks.

Yeah, I can start with that a little bit. As we have said many times, M&A is always in our toolbox. And you have seen what we have done in the past. You have seen how we have been optimizing our oil and gas portfolio, both by acquiring some and divesting some. Always constantly driving to make sure that the robustness of the company will increase by doing so. And then also for the renewables, with Vento and the Big Green, as Paul said, it was a time we felt it was very, very expensive, but then with increased inflations and interest rates, we have made some acquisition, and also with Triton, a Bolton acquisition there. Going forward, I don't want to comment on it, but we follow this market very closely, you know, to follow my CFO, you know, we will value over volume driven also when we use the M&A market. And then Torge, he challenged you and you want to comment as well.

You know, a very important question and a great question and I thought you actually had two because you talked about the $50 breakeven on the slide. I just want to explain that a little bit to you because We are building a company that will function from A to Z in a $50 environment. Meaning that the capital distribution that we have committed to, the ordinary part of it, is going to work in a lower price environment. That is very important. Again, we have significant flexibility in managing lower prices, as we are a large operator, and we are the captain of our own investment program, if you like. So I think that is very important to understand. The second one, today, or this year, we are planning on a negative net cash flow. And I'm glad for that. And it's probably strange to hear a CFO saying that, but with a $17 billion cash distribution, we clearly plan for a negative net cash. And then moving towards a more optimal capital distribution. So we will, you know, we aim 15 to 30, and that's sort of what will happen this year is on its way to that. And then, you know... clearly the balance sheet will remain very robust and solid, and clearly we will be careful as always, and I think you might want to look at the past and see the capital discipline under the CEO over the last few years, and clearly we want to keep that intact.

And just to add, two years ago I presented the worst result from Equinor, and two years later, the best result ever. This shows the volatility in this market, and that's why we're focusing on the robustness. And that, Irena, you're eager to answer.

No, no, no, I just wanted to draw your attention to the M&A we have done within M&P, because we acquired Danske, as I said, then we acquired Triton, Both of them have been tremendously good investments in the Danske Commodity. The results since the acquisition have paid back the acquisition fee multiple times, and Triton was actually paid back twice in the course of four months. So, yeah.

Let's take the one on the phone, and can I ask you to limit it to one question so that we can cover as many as possible?

Michele Delevingne, Goldman Sachs. Please go ahead.

Perfect. Thank you very much. And again, congratulations on the record cash return to shareholders for 2023. I had one question. When I look at the delivery of mega projects in oil and gas, the industry from 2014 until COVID hit was in a consistent trend of improvement, quicker time to market, shorter delivery, and everything was coming on stream more or less on time and on budget. Then through COVID, the main problem was with the yards in Asia. How do you see the outlook for delivery? Where do you see the tightness in the coming years? And looking specifically at two of your most complex megaprojects, Castberg and Bacalhau, do you still feel confident those can come on stream on time? Thank you.

Thank you very much. That was actually a very good summary of what happened in the project markets from 2014 and onwards. Yes, I think all projects were hampered by the COVID and not only the yachts in Asia, but also I think the yachts were worldwide and also in Norway. We are recovering from that now, and Geir and his team are making really good progress. We are on plan with the Kasberg project, but the Bacalao project in Brazil will be delivered during 2025. I saw several hands over here, yeah.

Thank you again for the presentation. If you don't mind, I would like to go back on CAPEX, and if you could provide some color on the breakdown. It's true that you are being consistent. We have not seen a massive change in terms of guidance for getting CAPEX. But at the same time, in the past year, we have seen Equinor exiting Russia. You referred to the Inflation Regulation Act as an impulse, basically, for investment. So can you explain, and of course I should add that wasting as well has been delayed for a few years. So can you explain basically what replaced the exit from Russia in terms of contribution to CAPEX and the removal of wasting to basically lead us to this level which is sort of consistent with what you guided for before?

Okay, thank you very much. The guiding this year is actually consistent and quite consistent with what we had said earlier. For 22 and 23, if you summarize those two years, it's actually slightly below what we said last year. Then sort of in the going forward, we are actually extending the period with one year, and we say that CAPEX is back and loaded. So in reality, it is sort of the same CAPEX level that we know we're putting forward, despite that we have seen sort of inflation over the years. We have built in future inflation assumptions, so we are quite comfortable that these are sort of numbers that are strong. Again, I mean the CAPEX program is driven by oil and gas, which is flat, you know, over years, so we continue to invest on the same rate. We are growing our investments within renewables and low carbon solutions. And then we aim to use or balance it more in financing our renewables business. Due to that increasing interest rate makes that more sensible. So that will be to Paul's portfolio and that will be reported as CAPEX or equity terms. So that will actually change the reporting on investments. So those are the key elements. So it is actually fairly consistent with what we have said earlier.

Thanks, Alastair Syme at Citi. Can I ask about the long-term oil and gas production profile? The one you show to 2030 is sort of flat to down 15%. So what defines that range? And just to link it back to value, what's the $20 billion cash flow linked to from a volume standpoint?

The $20 billion cash flow from operation after tax is really based on both the production profile we've shown you on the oil and gas, and also with the contribution from Irene and her team as we have increased the guiding And gradually, also towards 2030, we will also see more and more coming in from renewables. That is the basis for those 20 billion US dollars there. And then your first question was?

what defines the range, because it's got a big range.

Yeah, so of course, you know, this is, we are now constantly developing new resources on the Norwegian continental shelf, for instance, and sanctioning new projects. We have an exploration program. and we are using quite a lot of sanctioning smaller projects that tie into existing facilities. So there's always a little bit of uncertainty, but Kjetil, head of the Norwegian Continental Shelf, he can explain a little bit more how he is working now to ensure that he keeps the production of the Norwegian Continental Shelf at the high level to 2030 and beyond.

Yeah, that I could do for hours. But very quickly, the variation between the upper and lower bound is basically the project that we need to sanction the next three, four years. That is the difference in the production. So it's a project that we're sitting on. It's not a lot of exploration. I don't think there is any in that time frame. So it's basically the project that we need to sanction the next three, four years, which is the difference.

Good. We have Paul there on the middle, yes.

Yeah, thank you very much, guys. It's Paul Redman from BNP Paribas. I just had a quick question on gas prices. So normally we think about gas prices on maybe an annual basis, but if Europe comes out this winter with... significantly higher storage volumes? Do you have a view kind of on a quarterly basis how that gas price could pay out? Could we go significantly lower than where we are today? And then secondly, how would that impact your extraordinary distributions if gas prices do go significantly lower through the middle of the year?

I will start and then Irene can talk more about that. But as Torgrim said very, very clearly earlier, the extraordinary distribution for 2023 is based on past earnings and is the board's clear intention to have the same level of dividends, ordinary and extraordinary, for the next three quarters.

Maybe on the gas market. It seems like the market has found some kind of equilibrium right now and taking it through the next summer. But it's important to remember that come November, storages are full. They were full in November last year as well. So it's basically a reset. And you're looking at the next year again. you know, needing to attract more LNG and reduce demand even further. So I think the best thing we can say is that we do expect volatility and also that the uncertainty or the upside is higher than the downside, given what we have seen.

We are a bit on overtime, but I feel bad because I overlooked this side for a while, so if you take one final here.

Thank you. Anders from SCB. Will you leave profitable barrels behind in your energy transition journey?

No, we don't plan to do that. We plan to develop the oil. The energy transition needs to be a balanced transition. So that means that oil and gas will play a role in the energy transition. And as we have demonstrated today, that we will continue developing the oil and gas business I think we have 20 years of resources in our books, meaning that Philip and Kjetil will continue to develop those resources together with Geir, bring them into real projects, implementing technologies, and have a target of these break-evens that Ogim talked about, 35 in break-even. So we will continue to mature reserves and not leave valuable barrels behind in the energy transition.

Very good. I think we need to close this session. I will leave the word to you to do that, Anders. I just want to remind you all that you are invited to lunch in the area outside of here afterwards, and that we will start the breakout sessions quarter past two. So Anders, if you want to say any concluding remarks.

No, I just wanted to say that thank you very much for coming. I think we have represented a very strong outlook for Equinor, both for 2023, but also into the future. So thank you for coming and have a good lunch.