Equinor ASA

Ladies and gentlemen, thank you for standing by. Welcome everyone to the Equinor Analyst Call Q1. At this time, 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'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the one once again. Thank you. I would now like to hand the call over to Mr. Baud Gleb-Pedersen, Senior Vice President and Head of Investor Relations. You may begin your conference.

Thank you, operator, and good morning to you all. My name is Bård Glad Pedersen, and I'm heading up investor relations in Equinor. As usual, I'm here together with Torgim Reitan, our CFO. Torgim will take you through our results first before we open for the Q&A, and we will keep this within one hour. So with that, I hand it to you, Torbjörn.

Okay, so thank you very much, Bård, and good morning. And thank you all for joining us. I hope you all are doing well and are being well since we last met in February. So let's dive straight into the results. Today, we deliver solid financial results. driven by strong operational performance and production in a quarter with increasing liquids prices, but lower gas prices than we saw last year. The solid results are also supported by M&P coming in above the guided range. From this quarter, we have introduced adjusted net income and adjusted earnings per share as new performance measures. We also renamed some measures to better align with industry practice. And we no longer adjust for over- and underlift. In the quarter, we report adjusted operating income of $7.5 billion before tax and a net income of $2.7 billion. We deliver solid cash flow from operations of $9.7 billion and $5.8 billion after tax. And earnings per share were 96 cents. We continue to make strategic progress across the portfolio. Earlier this year, we were awarded 39 new production licenses on the Norwegian continental shelf. We know that area well, and we are confident that we will make new discoveries. We are cutting emissions while we invest. And recently, the Sleipner and Gudrun fields on the NCS were connected to power from shore. We reduced CO2 by 160,000 tons per year, and that will lead to around $27 million in reduced OPEX on an annual basis. We recently announced high grading of a US onshore gas position through a transaction with EQT. We will swap our operatorship and interest in Ohio for non-operated interests in the Northern Marcellus Shale in Pennsylvania with lower breakeven and lower emissions and also leading to increased production and profitability. Within renewables, we remain value focused and disciplined. As you have seen in the recent Norwegian offshore wind auction, Sørlige Nordsjø 2. In that auction, we participated, but we stopped at a bid level that would have created value. And we were okay not to win. Value creation is and will be our top priority. 2024 is the year of de-risking for the Empire Wind 1 project in New York, and we are progressing. After CMU, we were awarded a new off-take agreement with significantly better terms. Next, we aim to take an investment decision and secure project financing later this year. And with a new contract and project financing, we expect a nominal equity return between 12 and 16% for our US East Coast offshore wind portfolio. From there, we also aim to farm down and bring in a new partner, which will significantly reduce our CAPEX. We continue with strong capital distribution in line with what we communicated at our capital markets update in February. For the quarter, the board approved an ordinary cash dividend of 35 cents per share and an extraordinary dividend of 35 cents on top of that. As you know, we intend to grow the quarterly cash dividend by 2 cents on an annual basis. In February, we also introduced a two-year share buyback program to increase predictability. The program is 10 to 12 billion dollars in total, with 6 billion allocated for 2024. For the quarter, and subject to AGM approval, we announced a second tranche of up to $1.6 billion in line with this program. This tranche will start following the AGM in May. For 2024, we then therefore expect to deliver a total capital distribution of $14 billion, as we have said earlier, and this translates into a yield of around 17%. Turning to safety. In late February, we had a fatal helicopter accident and we lost a dear colleague and five people were injured. We are working closely with authorities and we have an ongoing internal investigation with a focus on helicopter safety and emergency preparedness. So although we have had positive trend for safety performance, this is a very strong reminder to keep safety as our number one priority. Production was strong in the quarter, in line with our expectations, and growing by 2%. The share of liquids in production increased compared to the same quarter last year. Our NCS production is driven by strong production efficiency and increased capacity at Johans Föderup and ramp-up of Bredablik, an asset we started last autumn. Internationally, production grew around 3%. That was driven by partner-operated Vitofield in the US Gulf of Mexico, Buzzard in the UK, and New Wells in Angola. US onshore gas production is somewhat down. And operators are now planning curtailment of production in a response to lower prices. So we have not included this in our production guiding. So that leads to a larger downside risk to our guiding. But you know the curtailment is done to create more value and prioritizing value over volume. And as you know, we are supporting this. Power generation is up and our renewables production is almost 50% higher than in the same quarter last year. Mainly driven by the Rio energy acquisition and the startup of the 500 plus megawatt Mendebeam solar plants in Brazil, where we own 30%. Offshore wind production is also increased in the quarter. But gas to power production from Triton was lower due to low spark spread. So now let's turn to our financial results. Oil prices increased through the quarter, while gas prices were down by actually 50% from the same quarter last year. Strong production drove EMP Norway's results, delivering adjusted operating income of $5.8 billion and $1.3 billion after-tax. Our international EMP segments delivered around $1 billion in adjusted operating income and actually more than $800 million after-tax, driven by production growth and a portfolio which has been high-graded over time. Then M&P, they have delivered within or above the increased guiding for the past five quarters. And this quarter, the results came in above the range at $887 million. Strong liquids and LNG trading contributed to these results. Renewable energy assets in operation contributed with $46 million in the quarter. As we continued to build the renewables business, the adjusted operating income for the segment was negative as expected. Our OPEX and SGA increased by 1%, while our production grew by almost 2%. However, we are not shielded from market effects, inflation and cost pressure. And because our accounts are in dollars and the Norwegian kroner remains weak, the impact is not easily seen in the accounts. So there is an underlying growth in OPEX, and it is primarily driven by operation and maintenance, transportation costs, and increased activities within renewables and low-carbon solutions. We maintain a strong focus on cost control and prioritization, and we work closely with partners and suppliers on this. So over to our cash flow. This quarter, we have solid cash flow from operations of $5.8 billion after tax. We made one NCS tax installment of around $3.5 billion. Next quarter, we will pay the two final installments based on the 2023 earnings, totaling around 75 billion kroner. So higher tax payments in the second quarter than in the first quarter. At the capital markets update, we were expecting a cash flow from operations this year of around $17.5 billion after tax. Now, and based on forward prices and including interest elements, we still expect to deliver around this level. And although gas prices are around $4 per mbtu, lower than our CMU assumptions, but also oil prices are higher than we assumed. Next year, we expect to be back to delivering around $20 billion in cash flow from operations after tax. You may also want to note that our sensitivity towards changes in gas prices is dampened by the Norwegian tax system. As a general rule of thumb, and disregarding the tax lag, a $4 change in the gas price equals around $1.5 billion change in cash flow from operations after tax. In the quarter, we spent $3.2 billion in cash dividends and share buybacks executed in the market. The state's share of buybacks will be paid in July, impacting our third quarter cash flow. Our organic capex for the quarter was $2.8 billion. In addition to all of this, working capital decreased by $3.2 billion. This is mainly due to lower gas prices and lower third-party and equity crude volumes at the end of the first quarter. After taxes, capital distribution and investments or net cash flow came in marginally positive at $8 million. So we have a solid financial position with more than $37 billion in cash and cash equivalents and a net debt to capital employed of negative 20%. As we said at the Capital Markets Day in February, we expect the net debt to become positive by the end of this year, and this still remains the case. So lastly, since February, our guiding remains unchanged. But as I mentioned, there is uncertainty related to commercial curtailment of gas within US onshore. So with that, I hand it back to you, Bård. And I do look forward to your questions.

Thank you, Torgrim. We are then ready to start the Q&A, and I see we have a good list already. I remind you that if you want to ask a question, you can press star one on your phone to be on the list. I also ask that you limit yourself to one or maximum two questions so that we can cover as many as possible during the hour. We then start, and first on the list was Biraj Burkartaria from RBC. So please, Biraj, go ahead.

Hi, thanks for taking my question. I've got two, please. The first one's on M&P, and obviously another strong result this quarter. I was wondering if you could just help dissect the drivers and give a bit more colour on the trading front, because volatility is obviously still... you know, high, but relative to the last couple of years, it's lower. So I'm just wondering, is this Equinor taking on, you know, more risk than before? Or is there something else driving it? Just trying to understand the sustainability of these results. And then the second question is on Johan Sverdrup. There's some expectation that that field will come off plateau, you know, either later this year or early next year. Is it possible to give some color on what the next two to three years will look like for the field? Should we expect a relatively steady decline post-plateau, or do we have a decline and reach another lower level of plateau or something else? So any incremental information would be helpful there. Thank you.

Okay, thank you very much Biraj. Two important questions. So first on MMP. So let me try to sort of give you a little bit more insight into that. Traditionally, it is sort of the gas trading that has sort of been the largest contributor to that result. Still, gas and power is delivering well with above $500 million in earnings. Crude is almost at the same level and they normally are not. They are normally, or historically at least, at a lower level. But what we see... is that with the Russian oil going to Asia, that creates a good opportunity for our portfolio and our assets. So that enables us to take advantage of the qualities that we have in our portfolio. It gives us opportunities to trade in the time dimension, and it gives us opportunities to trade geographies as well. So those are the three elements that drives it. It's driven by the assets that we have with certain qualities. It is a flexible, large shipping fleet. And it is a trading organization that trades 24-7 around the clock and global books. So that has sort of proved to deliver well. On the gas side, I would say it's still a good result. But volatility within natural gas and also the geographical arbitrage opportunities within gas are sort of less than it has been over the last few years, but still they continue to deliver well. On your question whether we take more risk, well, you know, not really. This is asset-backed trading and sort of the spec book is very, very limited as such. So this is based on underlying portfolio and assets and the flows. On your second question, Johan's further, yeah, so... What we have said is that we expect Johan's Verdub to come off plateau towards the end of this year or early next year. I think it's important to remind ourselves that we have accelerated production on Johan's Verdub significantly over the last years. And as you remember, in April, we sort of qualified 750,000 barrels per day in capacity. Then I really would like to leave with you that Johan's wardrobe is designed and built for massive water handling with a very, very large water handling capacity. So what we see is exactly what we should expect. Out of curiosity, we actually plan to flush the reservoir several times with water during the lifetime of Johan's wardrobe. to improve and increase regularity, not regularity, but recovery of the life that we live. So as you would understand, water management is a very, very integrated part of the value of the assets. You have seen over the last few months a little bit of increasing water cut in the wells. That is as expected. That would continue to, over time, increase as you would understand. So the way to sort of work with the client is to drill new wells, it is to optimize production and water management, and it's also about future phases like Johannesburg phase three as such. So on that note, We have put in one new well recently. There are two wells ongoing. And when those are done, there are more wells to be drilled as well in that reservoir. Johan's further phase three might be of interest. That is a tool to manage the climb. And that is underway, and we expect that to start up in maybe late 27 or 28 as such. I mean, it is progressing. So this is, you know, I'm giving you a very long answer, Biraj, but this is, of course, very important for us. And, you know, this is at the core of the competence of the company to manage decline and optimize recovery rate. So thanks, Biraj.

that's very helpful thank you thanks uh next on my list is theodore sven nielsen from sparbanken markets so theodore please go ahead uh good morning thanks for taking my my questions two questions from me i just want to follow up on sveidrup of course understand that

This is a complicated field and complicated operations we currently are carrying out. But I just wonder for 2025, we know that the field is coming off Platona. What should we model in terms of spider production next year? Will it be 5%, 10% or 15% below the 2024 production? Any kind of thoughts or guesses around that would be useful. Second question is on on the gas market and the gas value chain. I just wonder, in the long term, do you plan to take any additional positions in the value chain for LNG from US to Europe, or are you happy with your current position? Thanks.

Okay, thanks, Theodore. Yeah, so on the Johannesvördrup, yes, it is a complicated field, but clearly also with a very, very significant potential for recovery. and we have assumed a 70% recovery rate on that asset. The flow characteristics are very good. We are not ready to give you a rate that you can use for your calculations, but as the field is coming off plateau and it will come off plateau, Clearly, we will help guiding you all on that development. I think it's very important for me to say that the production guiding that we have put forward for this year, next year, the 5% growth in production towards 2026 takes into account decline on Johans Rørup, And, you know, the development of Johannes Rørup is exactly what we expect and have forecasted in our... Communication. Then on the gas market. Clearly, the European gas market has been through a few very turbulent years, and there is a new reality surfacing in the market. the european gas market has moved from um from being priced based on piped gas to becoming an lng priced market so our long-term expectation for price in in europe is based on actually competition for LNG between Asia and Europe. And we expect that to be around $10 per MB2 in the long term. So I would say indirectly, we have actually a very, very large exposure to LNG pricing to the piped gas position in Europe. So, we already have that. I mean, we also have a couple of third-party contracts with Cheniere in the US. So, I mean, it's there, but we have no sort of plans to build a significant LNG business beyond what we have currently.

Okay, thank you. That's clear. Can I just follow up on Sverdrup? For your 2026 guidance of 5% growth, how much Sverdrup decline have you factored into that estimate?

um thanks thanks theodore that's actually the exact same question as you asked so i can't i can't give you a different answer then you know we'll we'll have to keep the dialogue going on that it is developing um as as expected and and you know clearly it boils down to our ability to to to manage water to drill new wells and optimize the reservoir and production characteristics thank you

Thank you, Teodor. The next one is Martin Ratz from Morgan Stanley. So, Martin.

Yeah, good morning. Thanks for taking my question. I have two as well. There was a Bloomberg headline this morning that says that Equinor sees additional risk to oil projects in the UK and North Sea from the Labour government, if the Labour government were to come in. And I was wondering if you could provide some color sort of behind that comment, sort of the risks that you would see if that were to happen, that would be helpful. And just very briefly to follow up on sort of Biraj's question on MMP, I fully understand the The comment about gas is still good as per normal, but then oil was a bit of an upward surprise in terms of the trading result for this quarter, partly because of the diversion of Russian cargoes to Asia. But Russian cargo is being diverted to Asia. That started already sort of back in 2022. Is there something like why this is now surprising to the upside? Couldn't you have said the same thing already over the last couple of quarters? Is there something sort of changed from that perspective?

Thanks, Martin. So on your first question related to UK, first of all, as an industry, we are very dependent on stable and predictable framework conditions and tax systems as well. And when labor is putting forward potential changes, that creates uncertainties. And that is something that we need to take into risk management and the way we think about capital allocation in the portfolio. And the UK is a very important country for us, and it will remain so, but we will also be very, you know, diligent in sort of that there needs to be a good link between risk and return as such. So predictability, you know, very, very key, and that is what Anders spoke to Bloomberg about this morning. On your second question on MMP and oil trading and oil gas, the results related to oil trading, a portfolio of producing assets and the quality differences or shipping fleet and trading organization gives this opportunity. It will... Opportunities will arise between quarters, and even if there is a good asset base to take advantage of it, the results will go up and down on the oil side as well. But what we clearly see is that what we have is actually a flexible set of assets that enables us to take opportunities of arbitrage situations when they occur.

Okay, thank you.

Thank you. Next on the list is Michele Della Vigna from Goldman Sachs. Michele, please, the microphone is open.

Thank you very much and congratulations, Tagrim, on the strong results. Two questions, if I may. The first one is on the operating working capital release, very impressive in this quarter, around $3 billion. I was wondering if you could shed a bit of light, especially on how much do you think this can be structural or how much it may reverse into the coming quarters? And then secondly, you've given a very good layout of how you're thinking about Empire Wind and the pricing you got there and the move towards FID and project financing. But I was wondering, do you think we could get a farm out this year and therefore the deconsolidation of

about one and a half billion dollars of capital or maybe that could could come later and so going to 2025 thank you yeah thanks thanks michele yeah very good so first one on on the working capital reduction uh so in the quarter the reduction was you know 3.2 billion billion dollars Currently, working capital level in absolute terms is around $5.5 billion. This comes on the back of lower gas prices. It comes from lower third-party volumes when it comes to oil and liquids, and lower volumes sold in March compared to December. So that's sort of the drivers behind it. And then sort of on your question, you know, is this structural or not? Well, you know, it will varies over quarters. And it's typically driven by volumes, is driven by absolute price, and it is also driven by volatility. And you might remember during 2022 with very high gas prices and rather extreme volatility, we had at one point in time $10 billion in collaterals in the balance sheet. That's, of course, not the case anymore. So I would say that the current working capital is sort of a fair reflection on current portfolio, current prices, and current volatility, but we must be prepared that it goes up and down on a quarterly basis going forward. Yeah, and then the second one was Empire Wind. So very glad to have received the new contract with the state of New York. The price that we have in our contract has not been revealed, but the average of two contracts is 150.5%. When the contract is finally signed, we will be able to communicate a specific price. I'm looking forward to that. The old contract was $118 per megawatt hour. As you understand, this was a significant step up, and it significantly changed the economics of the project. Then, when it comes to fine investment decision, that is progressing. all contracts are settled for practical purposes there are very little very little exposure to inflation left in the procurement and you know we have vesta delivering 15 gigawatts turbines which are sort of you know if I may say, plain vanilla compared to, it's not plain vanilla, wrong word, but it's a proven technology compared to what others have been planning for. So we feel confident in the delivery of that. Then, you know, the financing package will be put in place and then it will be farmed down. And actually this asset will be farmed down for the second time, as you would remember. So when this is de-risked, financed, there is a broad set of potential interested party in this asset. And we will get on with that as soon as we can. I don't have a specific date for you, but clearly it is very important for us to have it de-risked and farmed on as soon as we practically can. So thanks.

Thanks, Michaela. Next question is Kim Fustier from HSBC. Kim.

Hi, good morning. Thanks for taking my questions. The first one is just a quick one, a housekeeping question on the EQT deal in the U.S. Could you quantify the positive impact on production and maybe more broadly, what should we read into your decision to no longer operate anything in the U.S. onshore? Are there any other areas around the world where you'd like to relinquish operatorships? And then my second question is on gas fired power. You've got the Triton power station in the UK, but you're also building up renewables positions elsewhere. So are there maybe other countries where you think you might need to buy gas fired power generation capacity in the future? Thank you.

Okay, thanks, Kim. Very good. So first on the EQT transaction, on production side, it typically will add around 15,000 barrels per day in increased production. And as I mentioned, lower breakeven, lower emissions, and better returns. This was sort of the last piece of operated activities within US onshore activity. And it was a small operations where we lacked scale. And we have come to the conclusion that we don't see ourselves as a future operator within US onshore activities. And we instead want to prioritize working with the best operators around and within the gas portfolio. That is not the case. This is another example of high grading the international EMP portfolio and building size and scale in certain areas where we do operate and where we can take advantage of that. On your second question around CCGTs, CCGTs are a natural sort of an important part of an energy system with an increasing share of renewable and interruptible power in it. And it creates a good link. between natural gas and renewables. And we do see natural gas to be a very important part of the long term here. What we typically will consider are CCGTs that can be ready for either capture or hydrogen ready. And as an example, we have an MOU with RWE related to five hydrogen-ready CCGTs in Germany, a landing point for a significant part of natural gas to Europe. So it is an integrated part of the way we think about the future markets.

Thank you. The next question is Johan Scharenton from Bernstein. Johan, please go ahead.

Thank you for taking my question. Good afternoon, Togrim. I would like to ask about your answer up again, if you don't mind. You have stated that you have very significant water handling capacity at the field, and you confirm as well that the production train is in line with your expectations. At the same time, your largest partner in the field said yesterday that this year's activity program will involve the drilling of 10 production wells instead of eight I stated earlier this year. So for production to continue to trend in line with expectation, are you ready to drill more wells this year? And can you explain why as well you are adding two wells to this year's program?

OK, thanks. Thanks, Johan. Yeah, you're right. So drilling of new wells will be a key element of optimizing the production profile on Johan's word rep. So there are currently two wells ongoing, and there are more to come. I think we have said by end of second quarter up to – five wells so you know there are there are more wells you know being being you know started and progressed during this quarter cell and then we will continue continue with that during the rest rest of the year So there's no magic in this. This is hard work, good planning, and optimizing the field. And as we produce and as we drill, we learn more and more about the reservoir and the placing of the wells. And everything that we see is... you know very good and in line with what we what we have seen and expected since the start of the field so but clearly i mean we will give you an update as we drill and as we progress and as we report thank you thank you joan the next question is paul redman from bnp paribas hi morning guys and thank you very much for your time and i've just got two quick questions

You mentioned a couple of times the curtailment impact and the fact that that's not in your guidance for production. Any idea of kind of what the impact of curtailment would be and the conversations you've had with EQT, kind of how likely this would be? And then the second one is just a more general question. Just you've got some big projects coming online over the next couple of years. Any updates on progress on Johan Casberg and on Bacolau? Thank you.

Thanks, Paul. Very good. So gas prices in the US are on a rather low level. And we see that the way our operators there are typically working is that they sort of hedge prices. the gas price for a certain amount of time. But now gas prices have remained low for quite a while, so those hedges are coming off. And that sort of discovers a sort of a true exposure to underlying gas prices. So what they say, and this is Chesapeake and EQT in particular, is that they will adjust activity to optimize for value. And Chesapeake have said they're going to reduce by one rig. And then, of course, they have an inventory of wells that can be completed. They also say they're going to adjust that, you know, Then beyond that, I mean, there are also opportunities to choke production as such, which is also an opportunity across these operators. So I will leave it to them to be specific on the impact of this. so i just encourage you to follow eqt and chesapeake's communication around this to to and then try to find a readout on impact on our portfolio it is still too early to for us to have a specific number for you we just wanted to be you know ahead of the game so you're aware of it i think it's important for me to say that you know we clearly support this and secondly these are barrels with low earnings impact because of the gas prices is low and they will come back at a higher price and with higher earnings as such and that's of course something i i do appreciate um on your second question the big projects yeah So let us take Johan Kasberg, you know, Barent's development. It now sits in the yard of Stord on the west coast of Norway. And we do plan... a sail away you know very soon all the sort of offshore work is done and quite a bit of commission is finished so the risk in sort of you know completing that asset has come down quite a bit during the quarter as you would remember there was quite a bit of carryover work from Asia when taking this to Norway, driven by COVID and that period as such. So, I mean, it has been some challenges, but that is now considered to be handled in a good way. On Bacalao. So Bacalao came out of the yard in China and now sits in Singapore and came there last summer. Also here, you know, work is progressing well and, you know, we expect first oil next year. So this is progressing well. I think it is worth mentioning that clearly in Brazil, there are inflationary pressures as such that we monitor very closely and are prepared for managing as such. So those are sort of the two big ones that are under construction. Then we have Rosebank, as you know. We have Araya in Brazil as well coming. And then Sparta operated by Shell in the Gulf of Mexico. Those are sort of the big ones underway.

Thank you, Paul. The next question is Henry Patricot from UBS.

Yes, thank you, everyone. Just one question, please, on the European gas market. Could you perhaps share some of your views on How do you see the balance of risk to European gas prices for the rest of the year? And what do you think in terms of demand recovery at this point?

Thank you. Okay, thank you very much, Henri. Yeah, I mean, we have come through a very, very warm winter. And gas prices, you know, has come down. Now it's sort of stabilizing a little bit. But clearly it is a market that is colored by the temperature and is also colored by the high level of inventory. So 59% in April, which is very high if you compare it to the five-year average. I think still there are some, we can talk about a few things. Maybe we can talk about sort of European demand first. I mean, clearly we see that it's down. We see industrial demand is around 15% below the five-year average now. But then we see some positives because if you adjust for temperature, we see actually a five to 10% increase in demand over the last year, both industrial and sort of commercial research. So my point is sort of the European demand picture, is quite a bit impacted by temperature research. Then, beyond that, China is particularly an area to follow. And the Chinese gas market has passed Europe market in size, meaning that Actually, demand growth in China is more important for European gas prices than European demand. So watch out. And we see that it's sort of ticking upwards. And then there are a couple of other things to watch. One is sort of the sanctioning of Russian LNG. And also the Russian gas coming through Ukraine, that's around 12 BCM. The gas coming through Ukraine, that contract is sort of ending by year end. And there were some solid remarks from Ukrainians that this is it. I think those are elements to watch in addition to operational disruptions either in LNG chain or in pipe gas operations. My point is we are now entering spring and summer with solid gas storages. There are some underlying growth in demand in Europe and China, and small changes can have significant impact on price. That is still the case. so um so yeah and then of course i can you all know that sort of current price level is still high in a historical setting and you know we have a two dollar uh cost of our gas supplied into this market so so we are going to this is going to be a very healthy business for us no matter what

Thank you, Henry. Moving to the next on the list, that is Jason Gabelman from TD Cowen. So, Jason, please go ahead.

Yeah, hey, just one quick one for me. It looks like international EMP tax rate was pretty low for the quarter. Just wondering what drove that and what the expectations are for that segment's tax rate moving forward. Thanks.

Very good, Jason, thanks. In the US segment, we reported a 25% tax rate, and we have said that we guide that around 22 to 30. So that is sort of a normal tax rate. Where we saw this quarter deviation was with the EPI. If you look away from the U.S., where we reported a tax rate of 15%. And that is below our guided range, which is 35% to 50%. 30% to 45%. That is due to UK and assumptions related to EPL, the windfall taxes and methodology. We have had comments from auditors that maybe I have been too conservative in the past. not too conservative but that sort of the the there's an adjustment to that going forward that that makes sense so so so we have made some some some adjustment for for based on that methodology as such that is a one-off effect um related to that so still you should should expect tax rate to come into sort of the the guided range

Thanks. Thank you, Jason. Next one is Peter Lowe from Redburn.

Hi. Just a couple of quick clarifications. You talked about a 12% to 16% nominal equity return that you expect to Empire Wind 1. That's post-project financing. But does that include a successful farm down, or would that increase the returns further? And the second one was just on the $17 billion cash flow guidance for this year, you said that remains despite the change in the commodity price. Does that include any working capital or is that an ex-working capital?

Okay, very good. Thanks, Peter. Yeah, so let me just be clear that sort of the 12 to 16 does not include any future farm down. But I think it's fair to say that the 12 to 16, that is sort of full cycle up to where we are currently, taking into account the divestment to BP a few years back, but no future divestment and gains as such. Then on your 17 or 17 and a half billion dollars in cash flow from operations. Yeah, very good that you asked that because I had told myself I need to say this on the call. It does not include working capital movements as such. This is sort of before that. The only place in the reported numbers where you'll see the working capital movements is in the balance sheet numbers on net debt and the cash position as such.

Thank you. Thank you. Next one is Chris Coupland from Bank of America. Please go ahead, Chris.

Yeah, thanks for taking my question, Torgrim. You've covered a lot of ground, so let me just take the opportunity to ask you, you've streamlined your international portfolio over the last few years, and yet here we have a 10 billion, perhaps more, discovery in Namibia. So I just wanted to double check how jealous that makes you, whether potential opportunities for farming into those kind of discoveries, you don't have to comment on the specific data rooms, may yet increase.

add new territories and countries to your international portfolio thank you okay thanks chris uh you know i'm uh i'm not in uh being jealous is not part of my job description so i'm not not jealous but clearly congratulations to to those who have made made that discovery and then hopefully they they can develop it in in good manner um so uh clearly or or what we do in our international businesses to see where do we want to deepen and where do we want to be large. We have decided there are three countries that are really areas for deepening. It is Brazil, it is the US, and it is the UK. Clearly, there we will be looking for opportunities to continue to build the business. And then there are other countries still important for us. And clearly we will work and mature and optimize. Angola, Algeria as two examples. And then there are countries that we are leaving. And as you know, we have announced divestment of Nigeria. business and azerbaijan businesses you know very good and healthy cash flows but we found it you know better to to to divest and and take benefit of the price environment we are in currently and redeploy that other places in the in the portfolio thanks thank you chris uh next one is uh nash chewy from uh from barclays uh nash microphone is open

Good morning, everyone. It's nice to hear two questions, if that's okay. So, the first one is, you've outlined big payouts this year and for next year, then a drop in payout for 2026 onwards. So, I appreciate it's a long time away, but at what point do you start to look at whether your 2026 payout can be competitive? And then my second question is on MMP. I think you mentioned in the presentation that MIP performance has been better than guidance five times in a row. So I guess with your potential better underlying performance or better trading volume, do you expect to give updated guidance on that? Thank you. Okay.

Very good. Thanks, Nash. On your first question, yes, it is a significant payout this year and also next year. The way we want to communicate around our capital distribution is that we want to have an ordinary cash dividend that you can bank that is there and it will grow by two cents on an annual basis. In addition, there will be sort of a $1.2 billion share buyback that will be sort of the run rate that you should believe that comes on a steady basis. Then, on top of that, we aim to use share buyback to increase or adjust the capital distribution. Clearly, we are very determined that we are going to provide you with a competitive total capital distribution package going forward. We have now given you sort of outlook for two years and that is sort of what is out there. I think it's also very important for me to say that this is a high priority for us as a company and we do have a significant flexibility in our investment program to adjust our spending and adjust our activity to find a good balance between serving all purposes as such. On your second question, whether we are going to update the guiding on MMP, the answer to that is no, we are not. This was recently updated and I'm glad to see that the business is performing well and in a predictable manner, but we have no plans to update the guiding.

Arved, thank you.

Thank you, Nash, and thank you, Turgim. We are fast approaching the hour, and I know it's a busy day for all of you, so I want to thank you all for calling in and for asking questions. As always, the IR team remains available if you have additional follow-up after the call. So with that, I wish you all a good rest of the day. Thank you all.

Thank you. This concludes today's conference call. We thank you for participating and you may now disconnect.