Equinor ASA

Thank you for standing by. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ekinor Second Quarter Analyst Conference Call. All lines have been placed on mute to prevent any background noise. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to the presenters. You may begin.

Thank you, operator. My name is Bård Glad Pedersen, and I'm heading up investor relations in Equinor. Welcome all to the analyst call for our second quarter results. As usual, I'm here together with our CFO, Torgrim Reitan, who will take us through the results before we open the Q&A. So with that, I hand it to you, Torgrim.

Thank you board and good morning and thank you for joining us and I hope that you are enjoying your summer. So let's dive into the results. So the second quarter demonstrates good progress and it confirms what we said at our Capital Markets Day. Today we deliver solid financial results driven by continued strong operational performance. In the quarter, we report adjusted operating income of $7.5 billion before tax and an IFRS net income of $1.9 billion. Year-to-date, we have delivered cash flow from operations after tax of $7.7 billion. The taxes in the second half of 2024 will be lower. And we expect cash flow from operations to be in line with what we have said, around $17.5 billion for the year. I will revert to this. Adjusted earnings per share were 84 cents. Across the portfolio, we are making strategic progress. On the NCS, we started production from the Kristin South area earlier this month, and the partner-operated Hansfield came on stream in April. Together with our partners, we made an investment decision for the Trollfield, which will accelerate the production and maintain high gas export levels. This investment is highly valuable, with a net present value to Equinor of more than $500 million. We continue to high-grade our oil and gas portfolio. In Norway, we align our ownership interests across licenses through a swap with Petoro. Aligning ownerships will be important for accelerating production, reducing costs, and driving the full potential in key areas. In the U.S., we closed the swap transaction in onshore gas with EQT, creating more longevity and robustness and reducing the break-even for those assets. With more than 30 percent, 10 million tons in injection capacity per year. Finally, for Empire Wind, we achieved a new higher strike price of $155 per MWh earlier this year. We continue to move forward with the project, and our next external milestone will be the financial close. The competitive capital distribution continues, in line with what we have said at our Capital Markets Day. For the quarter, the Board approved an ordinary cash dividend of 35 cents per share, and in addition, 35% in extraordinary dividend. At CMU, we introduced a two-year share buyback program to increase predictability. The program is 10 to 12 billion in total, with $6 billion allocated this year. In line with this, we announced a third tranche of up to $1.6 billion starting tomorrow. For 2024, we expect to deliver a total capital distribution of $14 billion. Safety remains our top priority, and our long-term safety trend is positive. Our reported safety performance has never been better. But we do know that this is a race without a finishing line. In June, we presented the internal investigation report of the helicopter accident in February. We will use the report to further strengthen our work. We deliver around 3% production growth this quarter, in line with our expectations. On the NCS, we had strong operational performance and good regularity. Total production was up 5% from the same quarter last year, and gas production was up 13%, with strong contribution from Troll and Oseberg. The ramp-up of new fields like Bredablik and Hans also contributed. In addition, turnarounds were well executed, impacting production less than expected. So we have reduced the overall turnaround impact for the year to 55,000 barrels per day. For E&P International, production was up 2.5%. The buzzard field in the UK and the U.S. contributed positively. partly offset by turnarounds and lower production in Brazil. For EMP US, production was down in the quarter, as expected. US offshore was impacted by the planned turnaround on Cesar Tongo. Within our onshore gas production, we indicated there would be curtailments, and we saw some of that in June. For the year, we still expect containments based on our operators' commercial decisions to create higher value. Our renewables production is significantly higher than last year, mainly driven by onshore power plants in Brazil and Poland. In the UK, offshore wind production increased. At Dogger Bank A, 27 turbines have been installed, But full commercial production is now expecting during first half of 2025. And this impacts our production outlook this year. Now over to our financial results. Liquids prices remain higher than last year. And this quarter we saw an increase in European gas prices. As expected, storage levels in Europe are healthy, but the market remains fragile. And small changes can give large fluctuations. Going forward, prices will depend on the weather, European demand and competition for LNG. As well as uncertainty related to transit through Ukraine. And as always, supply side disruptions should that happen. Our E&P Norway results were driven by strong production, delivering adjusted operating income of $6.1 billion and $1.4 billion after tax. Our international E&P segments delivered $963 million in adjusted operating income and close to $700 million after tax. The Argo Rich Well in Argentina was dry and expensed in the quarter. The overlift in the second quarter contributes to around $250 million in adjusted operating income for EMP Norway and around $170 million for EMP International. Our MMP results were driven by European piped gas and strong LNG trading and supported by successful power trading. These results were also impacted by turnarounds at Mongstad and high activity in low carbon solutions. Our renewables assets in operation contributed with $41 million this quarter. As we continue to build Our renewable business, the adjusted operating income, was negative, as expected. We will continue to be disciplined and not overpay for access. And this is key to building a profitable business. Since second quarter last year, adjusted OPEX and SG&A is up by 11%, driven by higher production, Overlift effects, general inflation, and increased activity in renewables and low-carbon solutions. We also see an underlying upstream cost increase of around 4%, quite in line with the production growth. We continue to maintain a strong focus on capital discipline and cost control. Then to our cash flow. This quarter, our cash flow from operations was $1.9 billion after tax. We paid the final two NCS tax installments based on 2023 results, totaling $7 billion in the quarter. For the second half this year, we will pay three NCS tax installments, one in the third quarter and the remaining two in the fourth quarter. Each installment will be 31.3 billion Norwegian kroner, which is lower than in the first half of the year. We expect a cash flow from operations for this year of around 17.5 billion dollars after tax, as we said at the CMU. While gas prices currently are below our CMU price assumptions, oil prices remain somewhat higher. And the impact from the lower gas prices is softened by the Norwegian tax system. Next year, we expect to be back at around $20 billion in cash flow from operations after tax. In the quarter, we paid total capital distribution of $2.5 billion. Organic COPEX was $2.9 billion and $5.7 billion year to date. After taxes, capital distribution and investments, our net cash flow came in negative as expected at $4.2 billion for the quarter. We have a solid financial position with $32 billion in cash and cash equivalents. And on net debt, to capital employee ratio increased to negative 3.4% this quarter. It is important to note that following our AGM in May, the state's share of buybacks from last year was treated as a financial debt, impacting the net debt ratio for the second quarter. However, the payment of $4 billion was done in July, which will impact the cash flow in the third quarter. We are planning for a negative net cash flow for the year in line with what we indicated at the CMU, and we expect a positive net debt ratio by the end of the year. Finally, our guidance for CARPEX and oil and gas production remains firm. We have updated our renewables production guidance. We now expect it to grow by around 70% this year, mainly reflecting the progress on Dogger Bank A. Now I hand it back to you, Bård, and I do look forward to your questions. So thank you.