Equinor ASA

Good afternoon, ladies and gentlemen. It's a pleasure to welcome you all to the presentation of Equinor's 2023 results and capital markets update. My name is Bård Glad Pedersen, and I'm heading up investor relations. Before we start, I want to give some safety instructions for those of us here in the room. If an emergency situation should occur, the evacuation signal is a voice alarm. Please note that we only evacuate if the voice announcement says that we should do so. Then, please use the fire exits, follow the signs and messages from the guards. The procedure during an evacuation is to exit and disperse safely away from the building. And then further notice will be given during normalization. Today, we will have four presentations in the plenary session. First, our CEO, Anders Opedal. Then, the EVPs for EPN and TDI, that is Kjetil Hove and Hege Skryset. And finally, our CFO, Torge Mereda. After the presentations, we will have a Q&A session in this room, and the full CC team is here and available and ready to answer your question. During the Q&A, we will also take questions from those of you following us online. After the Q&A, we have three breakout sessions. One with Anders and Torgrim, The second with the EVPs for EPI and PDP, Philippe Mathieu and Geir Tungesvik. And the third with the EVPs for REN and MMP, Paul Eitrem and Irene Romelhoff. Finally, let me remind you that this presentation does include forward-looking statements and non-GAAP measures, and we refer you to slide number two in the pack in this respect. Then, we are ready to start, and I hand it over to you, Anders.

So thank you, Bård, and welcome to all of you. It's really good to see you here in London, and I've looked forward to meet all of you today. So let me start with my key messages. We present strong results for 2023. Second, we deliver on what we said last year. and are on track for our 2030 ambitions. Third, we provide visibility for the cash flow and transition all the way to 2035. And finally, we sustain returns and continue to deliver competitive capital distribution. geopolitics remain tense in 2024 with wars in ukraine and in the middle east uncertainty and volatility continue to impact economic growth transition frameworks and energy markets despite all uncertainties one thing is clear energy security and energy transition will be on top of all society's agenda. In this environment, Equinor's strategy is resilient, secures transition and growth, and we remain firm on our direction. We are developing the energy solutions for tomorrow while securing the energy needed today. We believe in a balanced energy transition and will develop new growth engines to stay competitive long term. Our market position in Europe and our industrial legacy from the Norwegian continental shelf is a strong competitive advantage. Currently, European gas storage levels are high, and industrial demand is below average. Forward prices have come down for 2024 and for 2025, but are at a higher level than we have been used to in the past. We see signs of demand recovery in Europe and higher demand in Asia. This may put upward pressure on prices. We are well positioned and our strong project pipeline gives line of sight to 2035. We can deliver a stronger cash flow, a broader energy offering and lower emissions. I will revert to this, but first our 2023 results. Safety of our people is our number one priority. Last year, we had a tragic fatality when a crew member fell overboard from a contracted LPG tanker in Malaysia. It made a deep impact on all of us. And together with the ship owner, we follow up the incident and implement learnings. Our key safety indicators have improved over several years, and we maintain this level for 2023. But we are not satisfied and will continue our efforts to improve. Our goal is clear. all our people returning safely home from work every day. Securing our assets is important to safeguard our people, operations and energy security. We have continued to improve by implementing new measures and closer collaboration with authorities and industry partners. In 2023, we delivered strong results with adjusted earnings of $36 billion. This is our second best results ever. We set the bar high at our capital markets update last year, and we have delivered around $20 billion in cash flow from operations after tax, and capital distribution as communicated overall our financial performance was strong with 25 percent return on capital employed last year we increased our guiding for the midstream segment and we have delivered in or above the range for all quarters In total, 3.2 billion dollars. We produce close to 2.1 million barrels per day with a CO2 intensity of 6.7 kilo per barrel. This is less than half of the industry average. Gross carbon share to renewables and low carbon was 20%. We are on track to above 30 by 2025 and above 50 in 2030. And we added 8 gigawatts to our renewable project pipeline. In sum, we are on track delivering on our strategy and our energy transition plan. This is hard work in a challenging and competitive context. I'm proud of the strong efforts by competent colleagues across Equinor. Through this year, we have welcomed around 2,000 new colleagues, replacing and renewing competence, demonstrating our continued attractiveness in a tight labor market. We are on track to our 2030 ambitions, delivering on our strategy. We demonstrate transition, profitability and growth coming from the actions already taken. And for the first time, we extend the outlook further to 2035. We are changing. We will grow our cash flow and become stronger. we will transition and be broader, and we will cut emissions as a leading company in the energy transition. In 2035, we expect a stronger cash flow. Oil, gas and trading is expected to contribute with an annual average of around 20 billion dollars after tax, all the way to 2035. Cash flow from renewables and low-carbon solutions come on top of this. We expect this around 3 billion dollars in 2030, increasing to more than 6 billion in 2035. We will transition and grow while maintaining profitability. We expect around $13 billion of CapEx in 2024 and indicate $14 billion to $15 billion in 2025 to 2027. It is important to note that Empire Wind is fully included here, consolidated in our accounts and with 100% ownership. Excluding this effect, our CapEx outlook is fully consistent with what we said last year. And remember, we intend to use project financing and farm down at the right time, and this will then reduce the CapEx. Towards 2030, we expect above 15% return on capital employed, And we target to maintain around 15% to 2035. And Torgrim will share more when he's on stage. Our energy mix will be broader in 2035. We expect to produce more than 80 terawatt hours of renewable power and decarbonized energy. At the same time, we increase our ambition for CO2 transport and storage, targeting 30 to 50 million tons per year by 2035. We will continue cutting our own emissions, and we will increase renewables, decarbonized energy, and carbon storage. With this, we expect to reduce our net carbon intensity with 40% by 2035. Our oil and gas portfolio will create value well beyond this decade. And our three-year average of organic reserve replacement ratio is 107%. and our three-year average over and we have profitable projects coming on stream with an break average break-even price of around 35 dollars per barrel maintaining this level with the recent cost inflation demonstrate capital discipline and improvements johan kasberg is the first of the big ones, expected to come on stream late this year. We expect to increase our production by more than 5% from 2023 to 2026 and deliver around 2 million barrels per day in 2030. We have a pipeline of projects to half emission from operations by 2030. About half of the projects needed to achieve this are already approved by governments, and we expect to progress more projects this year. Towards 2030, we expect annual investments of around $10 billion in oil and gas, and get on average around $20 billion back in cash flow from operations after tax. Our oil and gas portfolios in Norway and internationally are distinct. Internationally, we are improving the quality of the portfolio and expect to increase the cash flow by 50% by 2030. and on the Norwegian continental shelf, we have a unique position and can increase recovery, creating high value for longer, well into next decade. Let me share some details. Our international portfolio is becoming more robust and profitable. last year we announced divestments in nigeria and azerbaijan and we continue to deepen in core areas with final investment decision on rosebank in the uk raya in brazil and sparta in the u.s these large projects bring high value growth And we expect to increase our international oil and gas production to around 800,000 barrels per day in 2030. But more important, we expect the cash flow to grow more than the production. Therefore, cash flow per barrel will be $5 higher. In total, we expect to grow our production by 15%. and our cash flow from operations by more than 50% from 2024 to 2030, and keep this level towards 2035. This is quality improvement. On the Norwegian continental shelf, we work systematically to drive long-term production. And we know the geology. We have the expertise, the competence and technology. The infrastructure is already paid for and will be decarbonized. We use all of this as we plan wells, develop projects and increase recovery. This enables high production for longer, at around 1.2 million barrels per day in 2035. Hege and Kjetil will share how we work and implement new technology to create higher value for longer. We expect to continue to deliver 40 bcm of gas to Europe, Equinor share, on average to 2035. And we have low cost and low emissions with an average supply cost to Europe below $2 per mm BTU. We have proven our ability to deliver renewables projects and value creation. We are firm on our strategy, flexible in execution, and have adapted to the market conditions. The acquisitions of the onshore platforms Vento, Big Green and Rio Energy contribute with capacity and cash flow. And recently we started our first commercial battery storage in the UK. Our trading company Danske Commodities brings additional returns. Danske already has more than 12 gigawatts of assets under management. In total, we are developing an integrated power portfolio. In the US, we are high-grading our offshore wind portfolio, taking the full ownership of the Empire Wind Project, and have delivered a bid for the fourth bid round in New York. This is the solution creating most value, and we intend to use project financing and farm down to reduce exposure and increase returns. Equinor is well positioned in a long-term growth market. We have accessed a renewable pipeline to achieve the goals. the ambition of 12 to 16 gigawatt installed capacity by 2030 and we aim to deliver above 65 terawatt hours of renewable power by 2035. Real base project return is the foundation for prioritization and ensuring capital discipline. On top We capture additional value, pulling different levers depending on the project and the market. We achieve nominal equity return of 12 to 16%, both for Doggebank, the world's largest offshore wind farm, and for our solar plants in Europe. The framework for CO2 storage is improving rapidly. And based on our project pipeline, we increase our ambition for CO2 storage, targeting 30 to 50 million tons per year by 2035. Our first commercial CO2 storage facility, Northern Lights, is on track to be completed this year. This kickstarts the market for CO2 transport and storage needed for reduced emissions for the hard-to-abate industries. Based on almost 30 years of experience with safely storing CO2, we expect to grow this as a business. We expect real returns of 4 to 8 real for the early phase, when we build markets and there is government support. As markets are more developed and commercialized, we expect higher returns. With the profitability and the volumes, low-carbon solutions will be a source for long-term cash flow. Then, turning to capital distribution. Today, we present an outlook for cash flow growth and strong returns. For me, it is important that this is reflected also in our capital distribution. The board proposes a 17% step up in the ordinary cash dividend to 35 cents per share. Our dividend policy is to grow the annual cash dividend in line with underlying earnings, and this remains firm. To increase predictability, we now state our ambition to grow the ordinary cash dividend by two cents per year going forward. In addition to growing the ordinary cash dividend, we also propose an extraordinary cash dividend of 35 cents for fourth quarter. This brings the total cash dividend to 70 cents per share. The board is clear on its intention. to continue the extraordinary dividend for the first three quarters of 2024, and then expect to conclude the use of extraordinary dividends. Share Buy Back is an integrated part of our capital distribution. We continue our program from 2021 of annual buybacks of $1.2 billion. But based on our balance sheet and the plans we present today, we will do more in 2024 and in 2025. We announced a two-year buyback program of $10 to $12 billion in total. For 2024, we continue the buyback level from last year of $6 billion. In total, this gives the capital distribution to shareholders of $14 billion in 2024, $8 to $10 billion in 2025, and increased predictability for the future. I will not repeat all the numbers, but let me sum up. We are positioned for transition and growth. Towards 2035 we can deliver a stronger cash flow from a broader energy mix with lower emissions. And with strong returns, we continue capital distribution continue competitive capital distribution with increased predictability. So thank you all for the attention. I really look forward to all your questions later. And as Bård said, I'm joined here with the full executive team, and we are happy to answer all the questions. But first, Kjetil, the floor is yours.

Thank you, Anders. The Norwegian continental shelf continues to deliver solid results. And we expect to deliver solid production and cash flow all the way to 2035. On the picture on the front page, you see the Breida Bleikfil, which is tied back to the Grane platform. And the picture is selected for a reason. We delivered Breidablikk four months ahead of plan and below budget, demonstrating our project execution skills. In addition, it visualized what we are doing on the Norwegian continental shelf. Grane was put on stream more than 20 years ago, and according to the initial development plan, the field should have been close to life end by now. Based on consistent investment in infrastructure-led exploration and increased oil recovery, the platform is now producing above 100,000 barrels and is expected to be in production until 2060 at least. Now we are working on decarbonizing that production by electrifying the installation, reducing the carbon intensity to below 0.1 kilogram CO2 per barrel within 2030. This is what we are doing on the Norwegian continental shelf. We are utilizing our infrastructure and capabilities built through the last 50 years We're maintaining high production level and thereby creating long term cash flow while we are reducing our CO2 emissions. In 2023, we delivered strong cash flow from the NCS and at the same time, we reduced the CO2 emissions from our operations. In 2023 and 2024, our CO2 emissions will be reduced with more than 10%, and at the same time, we will have a production growth. Towards 2035, we expect to maintain the production level from the NCS at the same level as we started this decade, 1.2 million barrels of oil per day. This will generate an average annual cash flow from operations after tax of around 12 billion US dollars from 2024 and all the way to 2035. To deliver this, we plan to invest at an average level of around 6 billion US dollars annually towards 2035. And these investments will be within four main areas. To deliver on our sanctioned project portfolio, to mature and sanction the large non-sanctioned project portfolio, to increase the recovery from our fields, and to develop discoveries from our extensive infrastructure-led exploration effort. We will also invest in decarbonizing our production, reducing our CO2 footprint with 50% in 2030, 70% in 2040, and close to zero in 2050. We have a very robust project portfolio in the execution phase on the NCS. We have 21 projects with an average break even less than $35 per barrel and a payback time less than one and a half year. The project portfolio will have a CO2 footprint less than four kilos CO2 per barrel, since most of the projects are tiebacks to installations that are or will be electrified. And this project portfolio will add around 250,000 barrels and give us a production growth towards 2026. In addition to the large sanctioned project portfolio, we have an even larger number of non-sanctioned projects. We have more than 30 projects that we are maturing towards investment decisions in the coming years. The projects are in an early maturation phase, but we expect an average break-even of the portfolio of around $35 per barrel and a payback time of around one and a half year. For many of the new subsidy tiebacks fields, we are looking into new ways of working to reduce the maturation and execution time with 50% and the cost level of at least 30%. This will reduce the break-evens from this field with 30% compared to a more standard subsea development. This will be done through new technologies such as the CAP-X subsea wells and by taking out portfolio synergies. These projects will give us around 350,000 barrels in production after 2030 and will therefore be an important contributor for us to maintain the production level after 2030. And these projects will have an even lower CO2 emissions since they will be tied back to electrified installations. In addition to the large sanction and non-sanction project portfolio, we are working hard to increase the recovery factor from our fields. Historically, we have been, since sanctioning, been able to increase the average recovery factor from around 30% to around 50% from our oil fields. And there is still a large remaining potential in our fields. And we plan to deliver 50 to 70 increased recovery wells annually in this decade. Many of these wells are using new technologies such as retrofit multilateral wells, multistage fracking and advanced completion solutions, reducing the cost and increasing the production. And these are highly profitable barrels with a break even of around $20 per barrel and a payback time less than a year. We're also planning for around 300 interventions annually to increase production from our existing wells. And in addition, for many of our late life assets, we are planning to sanction low pressure projects to reduce the reservoir pressure and thereby increasing the recovery from our fields. This increased recovery effort will give us an annual production of around 150,000 towards 2035. with a very low CO2 footprint. And finally, we believe there still is an attractive remaining exploration potential on the NCS. These are high-value barrels, since they can be tied back to existing infrastructure that is already paid for and decarbonized. We are therefore planning to drill 20 to 30 exploration wells on the Norwegian continental shelf towards 2035. In this decade, we plan to be closer to 30 wells yearly, and more than 70% of them will be in licenses that we already hold. The remaining wells will be drilled in licenses from the annual license round. And this year, we were awarded 39 new licenses, which is one of the largest awards we have ever had on the Norwegian continental shelf. Our exploration strategy is that around 80% of the exploration wells will be drilled close to the infrastructure in known exploration place. This is normally low risk exploration with high probability of success. And new discoveries can be put on stream quickly since they will require limited new infrastructure. A recent example is the Oblix discoveries last year that revitalize the deepwater Norwegian Sea close to the Åstahandsten field. The remaining 20% of the exploration wells will be drilled in new place, still quite close to our infrastructure. These are higher potential wells, but with somewhat higher risk than the pure infrastructure led exploration targets. These wells can open new place, also in known area, such as the Kveise, the Heisenberg, and the Norma discoveries during the last years. Discoveries that you may not have heard about, but you should not underestimate them, because there are many of them, and these could open new place with large potential on the NCS. The key driver for our view on the potential on the Norwegian continent itself is the investments that we have made in new exploration seismic the last five years. This is seismic with fit-for-purpose technologies that reveals potential that we did not see on our legacy seismic. And Hege will revert back to this later after me. After 2030, we expect that we will get 100,000 to 300,000 barrels per day from our infrastructure-led exploration effort. And by adding the investments in project, increased recovery and infrastructure-led exploration, we expect to deliver 1.2 million barrels per day in 2035. Our ability to develop and utilize new technology has been a key reason for our value creations on the NCS the last 50 years. Also, in the next decades, we believe technology will enhance the value creation on the NCS. And we are therefore planning to invest three to four hundred million US dollars annually on technology development on the Norwegian continent itself in the coming years. So, Hege, can you please elaborate on the technology effort that we are doing on the Norwegian continental shelf?