Equinor ASA

Welcome to the Equinor analyst call first quarter 2023 results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by number one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants, this call is being recorded. Thank you. I'd now like to welcome Bård Glad-Pedersen to begin the conference. Bård, over to you.

Thank you, Gavin, and good morning to you, ladies and gentlemen. It's a pleasure to welcome you all to Econo's analyst call for our first quarter results for 2023. As it was said, my name is Bård Glad-Pedersen, and I am head of investor relations. As usual, our CFO, Torgim Reitan, will present the results before we open for questions. And we know it's a busy day, so we will aim to keep this session within an hour. Also on the call today, we have Frida Seljevold-Metti, our SVP for Performance Management, and we have Maj Kirsti Enger, our SVP for Accounting. So with that, I hand it over to you, Torgrim, to present our results.

Okay, thank you very much, Bård, and good morning, everyone, and thank you for joining us today. So this quarter, we are delivering strong results across the business, but with lower prices than the historic heights we saw last year. A mild winter in Europe has helped bring energy prices down, And this is good for Europe, and we continue to be a reliable supplier. But the gas market is still vulnerable. And looking ahead to next winter, storage levels will again depend on weather, demand across Europe and China, and LNG capacity. So these factors can easily put pressure on prices in a tight market, and small changes can lead to significant fluctuations. We continue to be a stable supplier of energy to Europe and the world. Therefore, I'm happy to see solid operational performance, and we are on track to deliver 3% production growth in 2023. We are still in uncertain times, and we need to ensure that we steer safely through volatility. And our strategy remains firm, and we aim to be a leading company in the energy transition while offering energy security and delivering strong cash flow, creating value for our shareholders as we change. Our balance sheet is very strong, and our cash flow expectations continues to be high, positioning us well to transition in an investor-friendly way. So, let me take you through the results. For the first quarter, we have strong earnings and cash flow across the business with very high value creation from our marketing and midstream segments. We have seen solid operational performance with production growth driven by ramp up of new fields and resumed operations. We continue to have high gas production from the Norwegian continental shelf to Europe with no deferral of gas volumes this quarter. We experience cost pressure as any industry or consumer, and therefore we are carefully prioritizing our activities and driving cost control. At our capital markets update in February, we announced a step-up in capital distribution based on strong outlook and results, and we are committed to deliver a competitive capital distribution. And it is our clear intention to deliver in total $17 billion in 2023, which results in an industry leading yield of around 20%. For the first quarter, the board has approved a regular cash dividend of 30 cents per share, which was a 50% step up last quarter. And in addition, an extraordinary cash dividend of 60 cents per share, making the total cash dividend 90 cents. We continue to execute a $6 billion share buyback program for this year. Subject to approval of our annual general meeting next week, we will start a second tranche of $1.67 billion, which will start on the 11th of May. So this reflects our clear intention to continue with this level for 2023. And also going forward, beyond 2023, we will continue to use capital distribution as one of our tools to achieve a more efficient capital structure. Safety. The trend for our safety performance is positive in several areas. The 12-month serious incident frequency is 0.4, but we see an increase in the 12-month average when it comes to total recordable injury frequency, which is 2.7 per million hours worked. We investigate every single injury to learn and prevent it from happening again. So production, we are on track to deliver 3% production growth for 2023. In this quarter, we deliver high production of oil and gas with 2,130,000 barrels per day, which is 1% up from a strong first quarter last year. In that quarter, it was the last quarter we had production in Russia. And since then, we have also divested our share in ecofisk and reduced our interest in Martinlinge. So these all contributed to a high production in the same quarter last year. This quarter, production growth is driven by Johan Sverdrup phase 2 and Peregrino coming on stream, and Snøvitt and Sisartonga coming back in operations. In the U.S. Gulf of Mexico, the shell-operated vitofield was put on stream and will contribute to future production growth. We saw high deliveries of natural gas to Europe, with gas up almost 2% from last quarter, and kosher and colesness, you know, or processing plants, delivering 99% production efficiency. We had some short-term operational issues on Johan Sveldrup in the beginning of the year. These were quickly resolved, but they impacted production growth in the quarter. Expected turnarounds for next quarter will impact production by 80,000 barrels per day. With this, we maintain our guidance for maintenance impact on production of 45,000 barrels per day for the year. We made three commercial discoveries in the quarter, with two of them in the Trollfam area. We have also increased our ownership share in five discoveries in this area, strengthening our positions in one of our core areas on the Norwegian continental shelf. Power production for the quarter was 1.2 terabatt-hours. 0.5 of this production is from our renewable assets, slightly higher than last year due to good wind and regularity and high wind thumping in production. We also had strong gas to power contribution from the Triton power plant in the UK. So, turning to our financial results. We have a net income of $5 billion and net operating income of $12.5 billion. Adjusted earnings came in at $12 billion and $3.5 billion after tax. These results are driven by solid operations across the business while impacted by reduced prices. Costs increased compared to first quarter last year due to inflation. increased transportation costs and higher CO2 costs, in addition to high activity levels. For our operations in Norway, reported costs are impacted by the further weakening of Norwegian kroner. This quarter, our unit production cost was $6 per barrel, which is in line with our expectations and what we discussed at our capital market update. We continue to work strategically with our suppliers and across our business units to manage costs. The tax rate on adjusted earnings was 70.6%. Then moving to the segments. Within our upswing segments, we see strong earnings and good cash flow, driven by increased production and solid operational performance. Within our international business, we acquired Suncor Energy UK, with ownership shares in Rosebank and the Buzzard Field, in line with our strategy to optimize our oil and gas portfolio and building on our long-standing position as a broad energy partner to the UK. For the US upstream business, the tax rate on adjusted earnings was 23.4% in the quarter, within the new guided range. But remember, this will be credited against the tax asset we recognized in fourth quarter last year. So the cash flow effect is lower at around $27 million, including the federal alternative minimum tax and state taxes. The midstream and marketing segment delivered very strong results, with $1.3 billion in adjusted earnings. So this is well above the new and increased guiding range for the segment. This is driven by strong results from trading of crude oil and refined products, while results from pipeline gas and power trading are down this quarter from an extraordinary level last year. From this quarter, we have made some changes to our MMP reporting methodologies. We have removed the mark-to-market timing effects of price hedging mechanisms to defer these to the time of physical delivery. The fact is that adjusted earnings are more than $800 million lower in the quarter than it would have been with the methodology we used before. In the report, we have included restatements of previous quarters to enable you to compare results over time. When it comes to mark-to-market effects on derivatives related to geographical optimization, we have concluded to continue to report this within the adjusted earnings. We believe that after a totality of changes made, adjusted earnings will better reflect MMP's underlying performance. Our renewable business delivered $29 million from assets in operation. And as we continue to build this business and the high level of project activity and business development will result in negative adjusted earnings. And we expect results at this level also for the next quarters before it will improve following the startup of the Dogger Bank project. So over to cash flow. At our capital market update, we presented an ambition to deliver average annual cash flow from operations of $20 billion after tax through this decade. This quarter, we deliver cash flow from operations of $9.7 billion after tax. So this is strong, and it is a good start. But remember that this cash flow is impacted by only one tax installment in Norway of $5.4 billion. Next quarter, we will pay two similar tax installments. In the quarter, we paid $3.3 billion in cash dividends and share buybacks. A smaller cash flow impact than we will see in the next quarter. In June, we will pay the state's share of buybacks covering the last four tranches, from the second tranche last year up to and including the first tranche this year. A total of around $3.7 billion. So, with two tax installments in Norway, total cash dividends of $0.90 per share payment, payment of state share of buybacks, and start above the second tranche of the share buyback in the market, we expect a total cash flow impact related to tax and capital distribution to be around $17 billion in the next quarter. So, our solid balance sheet is the basis for good risk management, and our strong cash flow makes us resilient. Or net debt is further reduced to negative 52%, driven by the strong cash flow shown on this slide. And in addition, lower working capital, which has been reduced by around $5 billion. And also lower collaterals due to lower gas prices. So when the net debt is in the negative territory at this level, this ratio is very sensitive to even small changes. And therefore, we see larger than normal fluctuations in the net debt ratio. With current forward prices and tax and capital distribution payouts coming, we expect negative net cash flow in the second quarter and a net debt ratio to increase. After Capital Markets Day in February, we presented our balanced approach to the energy transition, highlighting our ambitions and portfolio. Our direction remains firm, and we maintain our guidance for production growth and organic COPX. So, thank you very much for your attention, and I look forward to your questions and comments. So, thanks.

At this time, I would like to remind everyone, in order to ask the question, please press star then the number one on your telephone keypad, or pause for just a moment to compile the Q&A roster. And your first question comes from the line of Oswald Clint of Bernstein. Your line is open.

Good morning, Board and Torgram. Thank you. Two questions. In the first one, in the context of being a reliable supplier, the very strong gas output, once again, around about 810,000 barrels of oil equivalent in Norway. I think that's the second time it's reaching that very high level. So I just wanted to ask around sustainability of that volume, you know, really through the next year and obviously the years ahead and just how the reservoirs and facilities are kind of responding to that level of output? I know you mentioned one facility doing 99%, which is pretty high and unlikely to be sustainable over the long term. That's the first question. Secondly, and kind of linked to gas, but within MMP, you called out the trading of liquids this time, but there were some comments around LNG diversions, which is not something I've seen Equinor doing an awful lot of over time. So if you could speak about the Snowbit cargos and what exactly you're up to there with LNG cargo diversions, that would be interesting. Thank you.

Okay, thank you very much, Oswald. So first, on gas production going forward. So, you know, high gas production in the quarter. So we had no commercial holdback. So we produced, you know, as much as we could during the quarter. And that gas has been needed in Europe. Going forward, we have increased production permits from the Norwegian states. So we will produce more as long as we have those in place and we do expect that to continue for quite a while. Also, we see that the facilities and the transportation system is working very well and we're able to maintain a good and stable production. For the next few quarters, I mean, When it comes to profiling of the gas, that will typically be steered by the forward curves. If there are big changes in the outlook for gas, it gives an incentive for us to optimize the production profile. As you have seen, the forward curve is rather flat, so there is... is fairly limited signals now to make commercial hold back over the next few months. In the longer term, our gas production is, we expect that to remain strong and assets to perform very well. I think it's fair to say that, you know, we expect turnarounds coming, which will impact, you know, both gas and oil production for the next, for the year. I mean, we have, we have on toll, we have on Osta Hansen and on Melange. maintenance, which are all large gas producers. Then, on your second question, when it comes to LNG diversions, we have quite a bit of flexibility related to our Snowvit cargos, and clearly we steer them to the best paying markets. And the M&P margin this quarter is related to that we divert cargoes to Europe compared to their original landing point. there are sort of LNG premium also in the M&P results. So when we see large geographical differences between Asia, Europe, and U.S., that typically generates trading opportunities within M&P related to LNG.

That's great, Torgrim. Thank you. Your next question comes from the line of Biraj Balagali of Royal Bank of Canada. Your line is open.

Hi. Just a couple of point. So since last year, you were re-injecting less gas in order to obviously supply more gas to Europe, and that was much needed. But obviously, the market looks much better in terms of supply-demand relative to what we expected maybe a few months ago, and prices have come down quite a bit. So I'm just trying to understand, are we close to the point where you look to switch And related to that, is that something you need to consult the government with, or is that purely a commercial decision? Yeah. And then the second question is on working capital. You had quite a big benefit this quarter, except working capital is around $9 billion. If I'm looking at your accounts over the long term, it looks like something like $5 to $7 billion is the long-term average, but maybe that prior average is not relevant. So I'm just trying to get a sense of, you know, what is the kind of normal structural amount of working capital you carry for your business and whether we should see some of that reverse out over time. Thank you.

Thank you very much, Biraj. So on your first question related to injection of gas, we have no plan to switch back to injections. So this is something that is relevant for Gina Krogh in particular, but also a series of other fields on the NCS. We have flexibility that we will use. I think it's important to keep in mind that even if the sort of gas prices in Europe, you know, has dropped significantly, we are still at a very high level of gas prices. And we do expect, of course, you know, a rather tight market in Europe during the year. And actually quite small changes can actually make significant impact in the prices, as we know, are coming into Europe. out of the winter and sort of the spring and summer seasons. We clearly need to follow that situation closely. So we are prepared for a lot of volatility also on the gas side. These are decisions that can be done on license level mostly. Then on your second question related to working capital, you're right. So the working capital level end of first quarter was $9 billion. It is down by five compared to last quarter, which is, of course, a significant reduction in working capital. That is driven by lower prices. It is driven by reduced use of storages. We're freeing up the storages and also changes in third party trading. So clearly a significant shift. I think it's important to point out that sort of when we discuss or cash flow from operations and the $20 billion and all of that, That is without any movement in working capital. That is pre-working capital movements. So we just need to keep that in mind. On your point on sort of what is a normal level, we don't guide on that. But I think it's fair to note that our ability to use or balance it to trade and make commercial decisions has a significant value. And you saw that last year with sort of the significant results from our trading and marketing business. That was given by that we could use, you know, our balance sheet, collaterals and working capital to actually extract that value. And we clearly, we aim to continue to do that given that the market structures are in place. So I would say that the working capital will be a function of volatility and absolute price levels and sort of, you know, if there is a contango or backwardation in the markets where we want to use storage as such. So it's very hard to guide, but we'll keep you updated as we go on how working capital are developing.

Okay, very clear. Thank you.

Your next question comes from Lydia Rainforth from Barclays. Your line is open.

Thank you and good morning. Two questions, if I could. The first one, just coming back to the idea of the cash outflow in the second quarter, you talked about it being $17 billion, I think. that would still leave you with net cash position. So clearly, we've got a lot of volatility in prices, and you touched on that at the beginning. But just in terms of how long you think it might take to get back to that 15% to 30% range, and is that actually still where you're comfortable with it? And then secondly, it was just on the cost base. And clearly, the OPEX in dollars, I think, went up to 10%. And I think you referred to that as environmental costs and the higher rates and things like that. But are you seeing productivity improvements as well for some of that? So is it kind of good cost as well as inflation?

Thank you very much, Lydia. So first on the $17 billion in cash outflow, I think it's important for me to lay out that is the cash outflow only related to tax and capital distribution in the quarter. So on top of that, of course, we will pay investments and what have you. So we expect a negative cash flow for the next quarter. And you are absolutely right. If we take the year as a whole, we said at the capital markets update that we plan for a negative cash flow. for the full year. You know, at that point in time, we said cash flow from operations, 20. We said investments, 10. And we said capital distribution of 17, meaning minus $7 to $8 billion as the expectation for the year, based, of course, on the assumptions that we laid out on prices and all of that. So that remains firm. And what you have seen this quarter is in line with what we sort of had expected. But your point is that that will not sort of bring us back to a sufficiently efficient capital structure. And I think it's very important for me to say that the balance sheet as it sits today is not an optimal capital structure. And clearly we have a clear intention to bring it back to a more efficient way. And capital distribution is a key tool or an important tool for us to use to bring that back. So we have said $17 billion in capital distribution this year. You know, we are very committed to that. And we are also saying that beyond 2023, Capital distribution will be a tool that will be used to bring capital structure back to a more efficient level. Yeah, that was the first one. Let me see the second one. Cost, yes. Let me speak a little bit to that. You have probably seen that our operational cost and SDNA is up 16% quarter on quarter or $400 million. there are a lot of sort of special things happen. So if you strip out currency impact and if you strip out some one-offs here and there, the underlying change in OPEX is 18%. And let me give a little bit of a color to that. Half of that increase is related to increased transportation costs, which is related to shipping, increased shipping rates, fuel costs and also increased volumes that we transport. Around 40% of that increase is related to operating and maintenance costs, which is increased activity and inflation. And, you know, as the last 10% is related to increased activities within renewables and low carbon solutions. So as you understand, there is a lot of You know, commodity cost in there, in addition to increased activity and some inflation. So we clearly steer this, you know, pretty hard and we are prioritizing activities. to really have good control on the cost side. We increased our unit production cost guiding at the capital markets update from five to six dollars per barrel and what we see now this quarter is in line with the development we had expected at that point in time. So this is happening but it's not surprising.

Perfect, thank you very much.

Your next question comes from Linus Theodor Sven Nielsen of SB Markets. Your line is open.

Good morning, Torbjörn, and thanks for taking my question. First, I'll leave this follow-up on the working capital question asked earlier. Do you expect that to reverse in second quarter, or will that be distributed during second quarter, third quarter, and fourth quarter? And then a quick question on dividend and buyback. In the long term, what's your preference between dividend and buyback? I expect both to, of course, stay at a higher level given your strong balance sheet. And the final question is on the European gas market. In the long term, what do you believe will be the marginal cost for gas in Europe? Will that be Asian LNG? Will it be US LNG? Or will there be other sources that set the price of gas in Europe?

Thanks, Theodore. Thank you very much. Three very, very important questions. So first on working capital. So I'm not in a position where I can give you some steer on the direction, but I can give you some sort of Key points to look for in that regard. One is, you know, the absolute price levels. I mean, high price levels typically take more working capital to manage. The second one is volatility in the market. That typically trigger use of working capital to manage. And the third one is the structure of the market, whether it's a contango or a backwardation, because that gives strong price signals to whether... putting volumes at storage or taking out volume from storages or ships or value chains as such. So I guess if you look for those three things, you will get some sort of direction on where the working capital is moving. But again, everything we have said on guiding and targets and cash flow is not impacted by working capital movements. Then on buyback, yeah, so we have a split between share buyback and dividend payment. Currently $6 billion in share buyback and $11 billion in dividend. So there is a limit for us to how large the share buyback can be due to limitations in how much we can share. We have a mandate from the annual general meeting on number of shares that we can use for share buyback. And in addition, there are trading restrictions on how big part of the traded volume you can actually share. during a share buyback program. So that puts limitations to how much we can do as the free flow of the company is sort of not taking, it's not including the stage level. So, I mean, The split that we have currently is probably a fair split, taking everything into account. And then on the European gas markets, the way we see it is clearly in the shorter term, it is very much driven by Russian gas that is sort of not there, that needs to be replaced. and is very much driven by weather and is very much driven by tightness as such. So we need to be prepared for a lot of volatility. In the longer term, which is actually your question, we see that the marginal price for gas in Europe will be much closer linked to international trading of LNG cargos, whether that be sort of Asian or European prices for that LNG. So the market dynamic is changing from being that Russian gas is the marginal price sector for gas to actually international energy being that. So clearly, price signals from Asia will be very important in sort of the prices for gas in Europe for the future.

Thank you. That's useful. Thanks.

Your next question comes from Christiane Malik from JP Morgan. Your line is open.

Hi. Thank you very much for taking my questions. I've got two questions, and I know you've addressed sort of the outlook on the gas market. But, you know, say we – I just want to talk a few blind spots. First of all, in the context of a peace deal between Russia and Ukraine, let's say that played out over the next 12 months. I'd be interested to know what would be your reaction function. What would you do? particularly given you have ramped up in order to deliver into Europe, and how would that change the dynamic on gas markets from Equinor's perspective? The second question, and sorry to sort of come back on blind spots, but assuming we do see a sort of deteriorating outlook on demand and it sort of stays relatively bearish, how would you think about your special dividend on a medium-term view? Because I sort of think about pre the GFC, the financial crisis where you had this special dividend that sort of became a sort of a rod on your back. And ultimately, it wasn't sustainable. So I just want to understand, if you think it's sustainable, why don't you convert it into a real dividend? I know that's not a fair question, but particularly given the backdrop, I'm just trying to square out the sustainability of a very, very high yield. Thank you very much.

Thanks, Christian. So first on the gas market. I mean, we are in a position where the Norwegian gas is, you know, the most efficient gas available. I mean, it's short distance to market. It's very, very low marginal cost of supply. So we will always be a competitive supplier into the market. Clearly, I'm not in a position to speculate on any outcome of the terrible war on Ukraine. But what I do know is that Europe is not ready to rely on Russian gas import, you know, as far as I can see into the future. And we clearly recognize that in sort of a very, very strong interest in speaking to Norway and ourselves around future delivery of gas. So we see a long-term strong demand for Norwegian gas to Europe. And we take that responsibility very, very seriously. Then second one on the special dividend. Important to me to say that the extraordinary dividend is based on money already made. So it is not dependent on future earnings or blind spots or drops in gas prices. It is there, you know, based on a very, very strong balance sheet. And I just want to repeat that clearly the $17 billion that we said that the capital markets updated in February remains very firm. And beyond 2023, we will use capital distribution as a tool to bring capital structure to a more efficient place. And that is as far as I can go on this call on that topic.

Thank you.

Your next question comes from Amy Wong of Credit Suisse. Your line is open.

Hi, good afternoon. A couple of questions from me, please. Just to go back to the European gas market again. I know a lot of questions have been asked there, but I just wanted to circle back on some of the initiatives that the European Commission floated last year, such as clubbed buying for storage or potentially longer-term contracts with Norway. Where are you? Can you shed some light on the progress on those types of initiatives there? And then my second question is just a bit of clarity on your upstream CO2 intensity figures that you provided. I mean, the 6.6 in this quarter, am I reading it correct that you have a target that is below 8? So does that mean you are already at your 2025 target of being below 8 kilograms of CO2 per BOE? And also that 6.6, is that an operated number or is that your entire target? equity ownership.

Okay. Thank you. Thanks, Amy. So on your first question on the European gas market, yes, there's a lot of discussions and initiatives being discussed. So there is the joint purchasing and the hub that is sort of being put in place in Europe. is happening and we are open to participate in that. We do believe that it will be supply and demand that ultimately sets the price for the market and we do think that that will be the case also here and important also to help out ensuring that storages are being filled. This will happen on commercial terms. It will happen on commercial terms. I think that's very important. Long-term contracts, yes, I mean, there is discussions and requests for that, and we are also open for those discussions. But also, clearly, they need to happen on commercial terms, and they are typically linked. to a traded market and then pricing of those contracts are typically, you know, pegged to hubs and noted market prices. Let me see here. The second one is the CO2 intensity. Yeah, so 6.6 kilo per barrel, which is, you know, less than half of industry average. I think it's pretty close to one third almost of industry average. So that intensity has decreased and we're happy to see that. And we're happy to see that all the efforts we are doing to making our CO2 footprint as low as possible is working. We have set the target that we are going to reduce the absolute emissions on the Norwegian shelf by 50% by 2030 compared to 2015. And I'm happy to share with you that we are halfway there already. And that is good to see. So this has a very important part of a strategy and electrification of assets on the NCS will be a key measure to get to a target like that. So, thanks, Annie.

Just to follow up on 6.6, is that your operated field only?

Oh, yeah, yeah, exactly. You're right. That is the operated asset. Yes.

Okay. Thank you very much. I'll turn it over.

Your next question comes from the line of John Oleson of ABG. Your line is open.

Good afternoon, gentlemen. Two questions, sorry. I was reading some of those here. First, you said that you experienced some short-term issues on the US Fed Group in Q1. Could you tell us a little bit about those issues, what kind of issues they were, given being such an important field for both you and for Norway, it would be interesting to hear. The second question is related to the renewable segment. The capex is 851 million US dollars in Q1, which was by far the highest quarterly capex since you started reporting this number for this segment. I wonder what the capex was related to and the increase was related to and what we should expect for the coming quarters, please. Two questions, please.

Thank you very much, John. Two very important questions. So first on Johan Sverdrup. So phase two of Johan Sverdrup has been started up. And we are also in the process of testing out the capacity of the total production. So the operational issues we had in first quarter was related to to gas cooling equipment and manifolds and also some vibration issues related to it. It was in the earlier part of the first quarter and that were fixed and it has sort of worked well in the latter part of the first quarter. We are in the process of qualifying an increased total capacity for the field. I think it's 755,000 barrels per day. That is, you know, what we aim for. Current capacity is 720. So we are in the midst of, you know, testing that and that, you know, will progress. And we will clearly let you know when we have concluded those tests. We all know that Johan Svedrup is very important for both the cash flow and production and everything when it comes to our company. Then when it comes to renewables, CAPEX, yes, you're right. It is a significant step up. A couple of explanations. First, when it comes to the Dogger Bank projects, They have been – the CAPEX have been – I mean, it has been through project financing. It has been, you know, the debt that has been used for investments, you know, to a large degree now. Now it's sort of equity that is being injected as such. And those assets are – booked by the equity method from an accounting perspective. So you'll see a significant shift there now because we are actually injecting equity instead of using debt. So that is one explanation. The other one is the B green acquisition in the quarter. the Danish solar developer. And we also see increasing investments into US projects and the Polish projects in the Baltic projects. So all in all, this is in line with what we are expecting and what we have planned for. And we aim to spend 30% of our investments towards renewables and low carbon solutions by 2025, which is just a couple of years ahead, and actually 50% by 2030. So this is in line with what we have seen, but you will see a growing investments into this area. Back to maybe the first part of it, I mean, off-balance sheet financing. I mean, on Dogger Bank, for instance, we have that and we have it other places as well. So all in all, we have $2.5 billion now off-balance sheet finance related to the renewable business.

Thank you. Just a very quick follow-up on your question. The potential increase in capacity, would that require more drilling or is it more the infrastructure which is employed? place or the processing capacity or something else?

No, it is not related to subsurface. This is facilities and, you know, it's fine-tuning it.

Okay. Thank you very much. Very useful. Thank you.

Next question. Your next question comes from the line of Henri Petriot from UBS. Your line is open.

everyone thank you for the presentation um i have two questions please the first one coming back to uh an mp and a very strong performance this quarter it's not that long ago that you you raised that the guidance and you already were above that this quarter so it's really exceptional quarter should we Perhaps have in mind it's like a different range in near term. We're close to the upper end of the guidance range given current quality, et cetera. Or if it reaches first quarter, it was exceptional. And then secondly, gas and your gas sales over the rest of the year, you talked about volumes. And I wanted to ask about pricing and to the extent that you can comment, whether we should expect any changes in terms of the split between the head, month head, and then different markets for the rest of the year.

Thank you. All right. Thanks, Henry. So very quickly, the guidance on M&P remains firm between $400 and $800 million on a quarterly basis. We will see fluctuations. And first quarter, I mean, clearly we overshoot that. I think it's also important to notice that that there are different legs in that business and they deliver differently under different market sentiments. So last quarter it was very much natural gas and this quarter it was very much oil and gas. So it's a diversified portfolio that is there. On sort of the gas prices and the gas volumes, I spoke to volumes a little bit earlier when it comes to prices. you should use 70% day ahead and 30% month ahead. That's sort of a good benchmark for what you should expect on prices. So thanks, Henry. Okay, thank you.

Your next question comes from the line of Martin Ratt of Morgan Stanley. The line is open.

Yeah, hi, hello. I know much has been asked about the European gas market already, but there's perhaps one sort of wildcard scenario that I sort of wanted to run by you. It's not entirely out of the question, given how high European gas inventories already are, that at some point over the summer we will hit 100% inventory fill before the winter starts. LNG imports into Northwest Europe was an all-time high in April. Pipeline imports in April outside of Russia was an all-time high. That sort of, it could happen. Now, you can say, well, maybe that reflects how quickly supply patterns have changed. But you can also say, well, maybe your storage capacity is just really very small. And there's something to be said for that, that if we rely on these sort of very lengthy LNG supply chains, with LNG coming from all over the world, rather than a pipe from Russia, sort of Europe needs more storage. And I can see how that could be in Equinor's interest. Now, therefore, I thought I wanted to ask you if there's any interest or consideration at Equinor to perhaps expand European gas storage capacity, either new facilities or perhaps via a way of filling existing storage capacity under a higher pressure, which I also understand works. can at least at the margin give us some more gas storage capacity. That was my main question. The other one I wanted to ask you is that earlier this month I read an article saying that the Norwegian government is looking to nationalize key parts of the Norwegian gas pipeline network from 2028 onwards. I know it's several years into the future, and I expect that the answer is no, but I wanted to ask you if this is in any way – could this in any way impact Equinor?

Okay, thanks, Martin. Two very good questions. Your first question is that we are very well placed with our gas compared to Europe, and we have a lot of flexibility. So you might actually look at the Norwegian continental shelf as a very, very important flexible gas tool to serve Europe. As an example, the Oseberg asset, which is a large one, you can produce the production permit over 200 days of the year as such. So that is effectively an important storage of flexibility produced research. Overall, general, I mean, clearly, you know, storage in Europe is important. But we have no sort of particular ambition in that regard. Secondly, on the gas infrastructure in Norway, yes. What is important for us is reliable and flexible gas transportation systems, which we have today. And as long as we have that, I think the structure around it you know, can be in many different ways. Clearly, we are working closely with the Norwegian government and will clearly give our input in that regard. So we don't see this to disturb or distort the competitiveness of the Norwegian continental shelf in the long run. Thanks.

Wonderful. Thank you. on the line of Stefan Isvil from D&B Markets. Your line is open.

Yes, thanks. Good morning, Zoghedin. One question for me on your projects that are non-functioned. The Rose Bank you just acquired, Another portion there from Suncor, and we also have Badenoir and BMC33 in Brazil. Could you just briefly touch upon the progress here, and if we should expect any PDOs or sanctioning of these this year or over the next 12 months? Thank you.

Okay, thanks. So, I mean, three great projects, all in the international portfolio with significant value creation potential. So, on the Rose Bank and BMC33, I mean, we are planning to sanction them, you know, not too far into the future. On the Rose Bank, it is, we clearly know, after the Sunco acquisition, we hold 80% in that asset, which is, you know, significant value. This is a very important project for the UK, for energy security in the UK and also for jobs and tax revenues in the UK over a period. So clearly we see that we have an important role in providing reliable energy for many decades towards the UK. On BMC 33, so that is, you know, probably going to be sanctioned not too far into the future. Also a very profitable and good project and a significant development in Brazil, working closely with Petrobras, naturally. Moving forward with that as well. So we will, this is a candidate, but we need to progress it more. And next year, we'll see this is not sort of as imminent as the two others. So thanks, Stefan.

Thanks. Just a follow-up on Rosebank. So 80% obviously quite high interest in what they say. quite complex project. Do I understand you correctly if you are more comfortable reducing this with time, or do you expect Equinor to still continue owning that high share in this project in the future?

I think, as you understand, I can't comment on any specifics in this regard, but clearly we have an active view on the totality of our portfolio. So, I mean, so, yeah, thanks.

Your next question comes from the line of Kim Fusler of HSBC. Your line is open.

Hi. Good morning. I have two questions, please. The first one is just to follow up on the acquisition of Rosa Bank from Suncor. I guess just given the backdrop of the UK energy profits levy, it just might seem a little bit surprising. certainly a kind of a vote of confidence in the UK North Sea. It looks like it. I'm just wondering whether the deal is predicated on a view from your part that there might be a change later this year in the UK EPL terms, or does the project work under current fiscal terms as it stands? And just my second question is on offshore wind. I saw that Norway is looking towards significant new acreage of floating offshore wind. So maybe just if you could share your latest thoughts on the opportunity for floating wind in Norway and perhaps elsewhere as well.

Thank you. Okay, thanks. Thanks, Kim. So let's see here first on the Rose Bank. And clearly what is important for us is predictable. tax environment and tax environment. So that is important for us. I'm not in a position to give any direction on political discussions in the UK on this topic. I think what is important is that the Rose Bank investment enables us to to credit that against all the taxes in the UK. So it is a very tax-efficient investment as such. But it will, over time, pay significant taxes back to the UK through its life. I think it's actually £30 billion in taxes and investments to the UK. So it is important for UK oil and gas industry and for the country. Then on the second question on offshore wind Norway. You know we have been active within offshore wind for 15 years. So we are very glad to see that Norway is now opening up. So we are clearly preparing for that. But I think it is important for us to state that you know we have been disciplined. in sort of bids when it comes to lease rounds as you have seen over the last years and we will apply the same discipline when it comes to lease rounds and bids in Norway. But we are very glad to see that opportunities are now opening up in Norway as well.

That's great, thank you.

Your next question comes from Johan Charlton from Society General. Your line is open.

Good afternoon, Torgrim. Just a quick question on looking at the balance sheet and looking at the financial investments, which are now equivalent to more than one-third of market cap. You have reported decreases in cash collaterals and margin requirements in recent quarters. But at the same time, this line, so financial investment, has been rising. Is that linked to higher interest rates? Can you please provide some more color on this, please?

Yeah, so we combine, you know, cash, cash equivalent and short-term investments as what we call... Oh, all right. Okay. No, I probably misunderstood your question. Your question was that related to the financial items in the P&L.

No, just on the balance sheet, please.

Okay, all right. So we hold around $52 billion in cash equivalent and short-term investments, which is, of course, a very significant number. And given what will happen now in the second quarter, we expect that number to be lower. as there are 17 billion that will be paid in taxes and capital distribution in the quarter. And I think I'll just need to repeat, you know, we don't see the current structure of the balance sheet to be efficient or optimal, and we will continue to use capital distribution as one tool to get to a more efficient balance sheet over time.

Thank you, Tarek.

And unfortunately, that's all the time we have questions we have time for now. I'd like to hand back to board for closing comments.

Thank you very much, Gavin. And I would like to thank all of you who have called in and asked questions. If you have any follow-up, as usual and as always, please reach out to the investor relations team and we will help you as good as we can. So with that, we can conclude the call and say goodbye to everybody.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.