Equinor ASA

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Equinor Analyst Call Q3. All lines have been placed on you 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 the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Board Glad Peterson, Senior Vice President and Head of Investor Relations. Please go ahead.

Thank you very much, operator, and welcome to everybody who has called in for the analyst call for Equinor's third quarter results. Torgrem Reitan, our CFO, is here with me, and he will take you through the results before we open for the Q&A. As usual, we will close this session within one hour. So with that, Torgrem, I hand it to you to take us through the results.

Okay, so thank you, Bård, and good morning, and thank you for joining us. Before we get to our results, you know, have a look at the photo of Bacalao, which came on stream in October. It is the first pre-sold project in Brazil developed by an international operator. With reserves more than 1 billion barrels and production capacity of 220,000 barrels per day, this will contribute significantly to our international growth. The results and cash flow we report today are driven by strong operational performance. Production is up 7% from third quarter last year. Johan Sverdrup delivered close to 100% regularity, and Johan Cosberg is producing at Plateau with a premium to Brent of around $5. The adjusted operating income was $6.2 billion before tax, and the net income was negative $0.2 billion, impacted by net impairments mainly due to lower long-term oil price outlook. Year-to-date, our cash flow from operations after tax has been strong at 14.7 billion. Our adjusted earnings per share was 37 cents, impacted by negative results from financial items and a one-off effect related to decommissioning of Titan. Energy markets continue to be volatile. Geopolitical unrest, tariffs and trade tensions continue to impact pricing and trading conditions. We are prepared for this. We have a solid balance sheet, strong production and a robust portfolio. In addition, we take forceful action to manage costs. These efforts are visible in our results. Costs are now stable year to date compared to last year. And this is in line with what we said at the capital markets update in February. Operating costs for our renewables business have decreased by around 50% compared to the third quarter last year. And we expect it to be done by 30% on an annual basis. And this is driven by less business development and reduced early phase work. On the NCS, we have stopped two early-phase electrification projects that were not sufficiently profitable, and this reduces costs now and CAPEX going forward. By this, we are demonstrating that we can beat inflation and we can keep costs flat, even if we are delivering strong production growth. At Bakalau, we started production from the first producer, and ramp-up will continue through 2026. On the NCS, we had seven commercial discoveries, and I want to highlight Aker BP's important discovery in the Yggdrasil area, where we have a material ownership position. And then let me also mention Smørbok Mitt. It was discovered and put in production during the third quarter. And we expect payback within six months. As you know, we participated in Ørsted's rights issue. It was executed at a significant discount. An overview of the underlying value in Ørsted supported our participation. The cash flow impact of around $900 million will be in the fourth quarter, impacting our net debt ratio by around two percentage points. Following this decision, we will now seek a more active role by nominating a candidate for the board. We believe a closer industrial and strategic collaboration between Ørsted and Equinor can create value for shareholders in both companies. Then to capital distribution. For the quarter, the board approved an ordinary cash dividend of 37 cents per share and a fourth and final tranche of the share buyback program for 2025 of up to 1.266 billion, including the state's share. With this, total capital distribution for the year will be around $9 billion. Safety remains our top priority. This quarter, we continue to have strong safety results. However, we had a tragic fatality at Mongstad, and we know that safety work needs to continue with full force. Learnings from the accident will be implemented. In the quarter, we produced 2,130,000 barrels per day. This is 7% up from last year, and we are on track to deliver on our guiding of 4% production growth for the year. On the NCS, production was even stronger with 9% growth. Johan Kasberg, a new field on stream, or developments in Barents, and strong performance at Johan Sverdrup are important contributors. NCS gas production was impacted by planned maintenance and the prolonged shutdown of Hammerfest LNG. U.S. onshore gas production was up 40%, capturing higher prices, and U.S. offshore was up 9% from last year. Internationally, outside the U.S., production was down due to the temporary stop at Peregrino and the divestment in Azerbaijan and Nigeria. We produced around 1.4 terawatt hours of power this quarter, mainly driven by the startup of new turbines at Dogger Bank A and contributions from onshore renewable assets. At Empire Wind in New York, all 54 monopiles are now installed, and the project execution is progressing well. In October, Maersk informed us of an issue concerning its contract for the wind turbine installation vessel that is planned to be used at Empire Wind in 2026. We are working to solve this quickly. Now over to our financial results. Liquids prices were lower than the same quarter last year, while average gas prices were higher, particularly in the US. Adjusted operating income from E&P Norway totaled $5.6 billion before tax and $1.3 billion after tax. These results were impacted by production growth, but also increased depreciations due to new fields coming on stream. Our EMP international results reflect lower production, but also lower depreciation. Peregrino and our assets tied to Adura IGV are classified as held for sale. As such, we no longer depreciate them. EMP US results are driven by increased production, but these results were impacted by a one-off effect related to decommissioning of the US offshore Titanfield of $268 million. It has very limited cash flow effect in the quarter, but we are now booking expected future operating costs related to this. For M&P, we are changing our guiding and expect to deliver average adjusted operating income of around $400 million per quarter. The upside potential is larger than the downside risk to this guiding. The updated guiding is mainly due to changed market conditions. In addition, it reflects that we have previously divested some gas infrastructure. Our renewables results reflect high project activity, but also significantly lower business development and early phase costs. In our reported financial results, we have net impairments of $754 million. The main driver for these impairments is lower long-term oil price assumptions. Our E&P international business booked an impairment of $650 million tied to our assets being transferred to the Adura IGV due to lower price assumptions. More than half of the impairment is due to NOB depreciation on the assets held for sale. In our US offshore assets, we have impairments of $385 million, mainly due to lower price assumptions. In M&P, we have a reversal at Mongstad of $300 million due to higher expected refinery margins. This quarter, cash from operations was $9.1 billion. We paid two NCS tax installments, totaling $3.9 billion. Next quarter, we will have three installments of around 20 billion Norwegian kroner each. We distributed $5.6 billion to our shareholders, including the state's share of buybacks from last year of $4.3 billion. Organic CapEx was $3.4 billion, and our net cash flow was negative $3.6 billion. We have a solid financial position with more than $22 billion in cash and cash equivalents. Our net debt to capital employed ratio decreased to 12.2% this quarter. At current forward prices, we expect the net debt ratio at the end of the year to be in the lower end of the guided range, 15 to 30%, the same as we have said at earlier quarters. Finally, we maintain our guiding from CMU in February, both in terms of production and CAPEX, as well as capital distribution. So thank you, and then over to you, Bård, for the Q&A session.

Thank you, Torgrim. Let me remind you that if you want to sign up to ask a question, you can press star one on your phone. We have a good list already, so let's get going. And first one on the list is Irene Himona from Bernstein. So, Irene, please go ahead with your question. Thank you very much.

Good morning. So my first question is on the unit depreciation charge in Norway. It's up about 13% from Q2. Can we assume that is the new normal level going forward? And then my second question is on Ørsted. You obviously decided to participate in the rights issue and to turn from a passive to an active shareholder with a board seat. Can you elaborate a little bit on what it is that you think is perhaps not doing very well where your active participation may help them improve? And then what type of industrial cooperation do you envisage that would benefit both sides? Thank you.

Thank you, Irene. First of all, the unit depreciation charge on EPN is up. That is driven by new assets on stream this quarter, and in particular, Johan Casberg and also smaller developments coming on stream as well. So these will sort of depreciate over time, so you should expect a gradual reduction going forward on that basis. So that's the first one. The second one was related to Ørsted. yes so um let me give you a little bit of further context around that um we participated in the in the rice issue uh and clearly uh that's sort of a recommitment to or shareholding and and we would like to use the opportunity to to clarify more around how we think around the ownership position. And we do want to take a more active role as a shareholder with also a board seat in due time. Then... It's important for me to say that the offshore wind industry is living through its first real downturn with a lot of challenges. We have seen that with Ørsted and we have seen that in the share price development in Ørsted. In times like that, consolidation is typically what happens. We also do think that this industry needs consolidation. We do think that a closer collaboration, industrially and strategically, between Ørsted and ourselves, will create shareholder value for, you know, our shareholders, I mean, Equinor shareholders, but also Ørsted's shareholders in a way. And we do believe that sort of the competence base that we have, you know, very well complement Ørsted and being part of the board with a long term industrial perspective in a company like this will benefit both parties. Then I do appreciate that there are uncertainties related to what this means. Let me be very clear that in the current environment, we are going to limit capital commitments into offshore wind. It is an industry that is challenged. The assets that we have in our own portfolio, we will continue to develop, you know, Empire Wind, Dogger Bank and Baltic projects. Beyond that, we will be very, very careful with further commitments into offshore wind. And the same goes to our holding in Ørsted. So the threshold to commit new significant capital is high for the time being. So I just want to leave that with you, because I do appreciate that there are sort of questions to what might happen here.

Thank you. Thank you, Irene. The next question is from Biraj Borkataria from RBC. Please, Biraj, your line should be open.

Hi, thank you both. Just the first one's on the MMP guide. So I wonder if you could just dive into a bit more detail around the changing factors there. And also, you've gone from a range, the 400 to 800, to a single figure. And I was wondering if there's a sort of signal factor in there that either you see fewer opportunistic opportunities to trade or if you're just taking less risk given the environment's changing. And then just to follow up on the question before on Orsted, just trying to understand why you didn't consider a board seat in the first place. Because I recall it just wasn't really part of the discussion at the time or at the CMU. So just trying to get the understanding of, you know, obviously the environment has changed, politics has changed, but has your investment thesis changed? on that business investment change. Thank you.

All right. So thanks, Viraj. So first on M&P guiding. Yes, so we are changing the guiding to around $400 million on a quarterly basis. We see that the risk is asymmetrical here, so more upside than risk to the downside. It is a change. We used to have 400 to 800, as you might know. I think it's important to remind you what we had before the war on Ukraine. Then the guiding was 250 to 500 million as such. So what we see now is that the market has changed rather rapidly. rather a lot. On the gas side in Europe, the situation has normalized both on the absolute price levels and volatility. Also, the volatility globally and the market globally is driven to a larger extent by political decisions than actually structures in the market. making it quite harder to trade around and position ourselves around. The market dynamics that drives this. In addition, we have earlier divested gas transportation assets that we don't have anymore, so we take the opportunity to take that out as well. Then why not a range? You have seen that even if we had a broad range from 400 to 800 earlier, we tended to overshoot quite a bit even with a range. It just explains that opportunity might be very good and we don't want to have it limited by a range. What we want to do is that on the invite to consensus that we send out a few weeks ahead of the quarter, we will give an update related to MMP results and specialities to give you a little bit more guiding into it. But on a regular basis, on a longer term, I mean around 400 is a prudent number. Last point on this, that this is not Equinor specific. This is what sort of all of us are currently experiencing. So if you listen to your peers and if you listen to the trading houses, we all see that you need to work much harder for every dollar you can make in the trading environment for the time being. So that is that one. The second question was related to Ørsted. We do believe that we have something to offer in the board in Ørsted, and it is particularly related to having a long-term industrial owner that the company can rely on through cycles and through developments. And as a company, we have extensive experience in managing cycles and thinking long term. In addition, we have clearly a lot of competencies related to project developments and projects.

and risk management as such so so we do do see that as something that can benefit benefit both parties okay uh thank you uh next one on my list is theodore sven nielsen from sparbanken markets theodore please go ahead with your question good morning and thanks to take my question first one just want to follow up on on the

After the question recently asked here, I just want to know what has actually changed in what you can offer from the first time you acquired shares until now, the recent shares issue. So that is the first question. And the second question that is on Bacalao. Congrats on First Oil there. How should you think around the ramp-up pace you've got? Thank you.

Yeah, so thanks, Theodore, on your first question. Well, you know, in the current situation, it was also important to signal that we were a supportive shareholder in what has sort of happened over the last few months. And as part of that, taking a board seat is important. On Bacalao, Yeah. So Baclau started up on 15th of October. And, you know, it is probably the most complex development that we have done. It is at more than 2,000 meters water depth. And it is massive. So I'm very proud of reporting that it is started. On your question on the ramp up, So, I mean, there are two drill ships on location currently. There will be 19 wells being drilled on phase one, 11 producers, but also injectors, both water injectors and gas injectors as such. This will gradually happen. This is not going to be a ramp-up like you have seen on Johan Casberg. This is continuous drilling and completion through 2025, and it will continue in 2026 as such. It's too early to give you an exact date when it will be on plateau. but things are progressing well.

Thank you, Torge, and thank you, Theodor. Next one is Jason Gabelman from TD Cowen. Good early morning, and please go ahead with your question.

Hey, morning. Thanks for taking my questions. I am going to start also on Orsted, and it's, I guess, a bit tangentially related to what's going on. But as we think about potential outcomes, one of the thoughts in the market is formation of a joint venture between the two parties. And with that, there's a lot of speculation on cash that would need to be contributed into the joint venture from an Equinor standpoint. So the question is really, as you look at your three offshore wind projects, how much equity capital have you spent in those projects thus far, and how much is left to be spent on those three projects? And then my follow-up is on the global gas market. There's been maybe a surprising amount of LNG projects sanctioned. year-to-date. You've seen China demand slowing down. Some thoughts on Power of Siberia 2 coming online at some point next decade. Can you just talk about your outlook for the global gas market and if it's shifted at all, just given the developments that we've seen year-to-date in that market? Thanks.

Okay, thanks, Jason. On Ørsted, you know, the potential outcome here is, you know, I don't want to speculate on that, and it's not natural to say much more on that now. But clearly there are various alternatives. I can give you a little bit insight in sort of what is it that sort of, you know, we will be looking for in this. we will be looking for in sort of improving the free cash flow for Equinor. That is one driver. The other one is, you know, are there ways where we can... you know visualize or make clearer the underlying valuation within the offshore activity that we currently have are the ways to do that and the third one is that clearly we will be very careful in with significant you know further capital commitments within offshore in the current environment so those are the things which are sort of driving us When it comes to the three projects and remaining equity injections, I can give you a little bit of insight into it. Dogger Bank is well underway and production is gradually being started up. So there are some more equity that will be injected, but clearly project financing... I mean, the leverage on those projects is in the 70s, as such. Within Empire Wind, what you will see there is that we have a significant equity injection in 2026, which is close to $2 billion. The year after, we expect to receive investment tax credit for approximately the same amount. So Empire Wind over the next two years is pretty cash flow neutral before it is finalized. And then we have the Baltic two and three projects in Poland. with a very high leverage, you know, good projects. So it's fairly limited equity that is needed to fund those. So I just want to leave with you that sort of clearly there are three mega projects underway with limited remaining capital needs associated with them. Okay, let's see here. That was a long answer, but it was an important question. than on the global gas market. First of all, I would like to say that in the short term, this winter, the market seems tighter than many actually think. We are on the storage levels around 83%, which is 12 percentage points below last year. So if we see a cold winter, you know, it can really have a significant impact on the market. I would say if we see normal winter, you know, we might see prices, you know, where last year sat a surge. so so i would say in the short term price is very much driven by weather and and temperature as such if you look a little bit further and that's sort of where you have your question related to more lng and yes there are more lng coming this is not new information this is not a surprise this is what the whole world has been sort of planning for for quite a while And the question is, of course, you know, how fast will this come on stream and will there be delays? So clearly something to watch. We see, you know, still actually quite healthy demand from Asia, Asia in totality, around 3% growth per year. And that sort of will take up significant part here. What else is to watch is actually U.S. gas prices. And U.S. gas prices has become recently much more a political topic internally, domestically in the U.S. because everyone sees that with all data center and AI will have a significant impact on power prices and power has to come from somewhere and natural gas clearly important. So utility bills in households is more and more becoming an election topic as such and that might put limitations on exports of natural gas. This is clearly an area we follow very closely, but there's no doubt there is a significant amount of LNG coming. Our gas, $2 per mbtu, cost and transportation, selling into an $11 market, we are very, very robust. And one maybe last point to mention here, that is sort of the sanctioning on Russian LNG, potentially 17 BCM that will leave the European markets as well. All right. Okay. Thanks, Jason.

Thanks, Jason. Next question is from Chris Coupland from Bank of America. Please, Chris, your line should be open.

Yeah, hi there. Thank you. Hope you can hear me okay. Just some, I guess, rather boring questions, Torgrem, about detail. I wonder whether you can help us review what's happened in the nine months on your networking capital. Great results, I guess. And whether you can combine that review with an outlook where you think we're heading. And if I could ask you to do the same, particularly for your Norwegian business, I understand that. There's a lot of moving parts in terms of assets for sale outside of Norway. But Norway has seen a significant decline in the discounted rent that you've been able to achieve in Q3. Again, would love to have your review of that and an outlook if possible. Thank you.

Thanks, Chris. Yeah, so working capital is clearly a very important part of what we manage and manage diligently. So this quarter, working capital is down by $1 billion. The total working capital now is $3.7 billion. So that is the reduction. And during the year, actually done by some $3 billion. So the question you had is, what is sort of a normal level and what have you? I mean, the reduction we have seen... is very much linked to commodity prices and M&P-related reductions. So I won't sort of give any outlook on this, but I would say that given the structures in the markets, the volatility in the markets and absolute price levels, it is sort of a fair level. I mean, you remember during the energy crisis, we had a massive amount of working capital and, of course, earned a lot of money, right? But volatility and price levels are not there anymore. But I would say it's a fair level. Then the second question was sort of discount to Brent. Johan Casberg came on stream during the summer and Johan Casberg is able to achieve $5 premium to Brent. And that clearly has an impact to the discount to Brent overall on the shelf.

Thank you, Chris. The next question is from Henry Patricot from UBS. Henry, please go ahead.

Yes, Léon, thank you for taking my questions. I have two, please. The first one is, can you give us an update on the latest thinking on timing of the Peregrino disposal? And then secondly, on Johan's backdrop, you mentioned the field continues to produce at a very high level. Are you thinking about the evolution of that going into 2026? And to what extent do we start to see a decline next year? Thank you.

All right. Okay. Thanks, Henry. First, Peregrino. So, Peregrino was shut in during the autumn. It came back on stream on October 17, as such, and is currently producing at more than 100,000 barrels per day. So... So we have transacted and we will divest out of our 60% ownership position in the assets and that will be divested to Prio in Brazil. There are two legs of this transaction. 40% of the 60% we expect to close during the fourth quarter, and the remaining 20% in the first quarter next year. The headline transaction value was $3.5 billion. with an effective date of 1 January 2024, which is quite a while. So there will be a pro and contra settlement since then. So what you should expect is that the consideration we will receive is a little bit below $3 billion that will be split into sort of... two-thirds of that in the fourth quarter and one-third in the first quarter. I just want to leave with you that this in Brazil is still very important to us. The reason why we did it was two-fold. It was a attractive opportunity and also we are redeploying resources to bacalao and raya in brazil sort of high grading hydrating the portfolio in in brazil so so the long-term commitment to brazil is very much intact Then Johannes Rodrup. Yeah. So Johannes Rodrup keeps delivering very well in the quarter, close to 100% regularity, which is a very good achievement in itself. You know, we have worked the asset very, very hard to optimize production and recovery rates. Now we are looking at a recovery rate of 75%. in that asset, it was 65% when we sanctioned it. And 65 is still a very, very high number. So what we are currently working on is multilateral wells, retrofit existing wells into multilateral wells. So we have successfully done that. And then water management is very, very important because water management will continue to increase as we produce these wells. And that has also been done in a... in in a very good good way and then you know we we sanctioned phase three this summer um which will come on stream by end 2027 so in 2025 we were able to maintain the production more or less on the same level as 2023 and 2024. But we have fast-forwarded a lot of production, so this asset will start to decline. So next year, you should expect lower production from Johans Rørup than in 2025. But you know what we're doing. This is at the core of our competence base. So we will clearly work very hard on maintaining as high production as possible from that asset.

Thank you, André. I still have quite a few on the list. I will ask now that you limit yourself to one question so that we are able to cover as many as possible. And the next question is Michele Della Vigna from Goldman Sachs. Michele, please go ahead.

Thank you. And thank you for all of the clear explanations. I wanted to come back to your comment about effectively restricting or being very capital efficient on offshore wind. Given the acceleration in power demand we're seeing globally, I was just wondering, are there some other areas? in the power markets where instead you see opportunities and you could look at redeploying some of the capital you're taking away from offshore wind at this time of low returns for those developments. Thank you.

So we do believe that there is value to be had within sort of the power segment. And we have recently established a new business area called exactly power as such. So what we clearly will be looking for are sort of opportunities that sort of builds on the portfolio we have and the customer base that we have. And we have a big presence related to our gas positions in Europe and in the US. So that's sort of the totality, the way we think about it. I have to be very clear that we have no intentions to significantly step up investments into this area. We are facing a period with lower prices. And for us, it will be very important to remain very capital disciplined in anything that we do. And everything we do needs to have a significant profitability and returns before we commit any capital to it.

Thank you, Michaela. Next one, please, one question from you too, Peter Lowe from Rothschild and Redburn. Peter, please go ahead. Your line is open.

Hi, thanks. Perhaps a question on the cash tax paid in the course, which I think was maybe a bit lower than expected. So it looks like you paid two NCS installments for $3.9 billion, but the total cash tax paid in the cash flow statement was $3.8 billion. Were you getting refunds in other regions, or can you perhaps explain that number a little bit? Thanks.

Thanks, Peter. So a couple of things. So two tax installments in the second quarter. There will be three next quarter in Norway. So just be aware of that. There is a timing effect related to falling prices. So we are still paying taxes based on a higher price environment. So you just be aware of that. And also internationally, you know, the reported tax is much higher than paid tax. That goes particularly across the UK with the EPL and sort of Rose Bank investments being offset against tax and in the US as well. So, yeah.

Thank you. The next one is Nash Kiwi from Barclays. Nash, please go ahead.

Hey, good afternoon, everyone. Just one follow up on MMP guidance, please. I think you mentioned in your report that part of the reason you cut MMP guidance is because divestment of gas infrastructure assets. I wonder if you could isolate the impact on that place rather than the market condition change.

Okay, thanks. You know, I can do that's $40 million per year. We did that sort of a year and a half ago or something like that, or two years ago. At that point in time, you know, we delivered above sort of our guiding repeatedly in the quarter, so we didn't see the need to sort of strip that out. But when we now changed the guiding, we thought it was useful to mention it.

Just to be clear, Nash, the 40 million effect is on a quarterly basis. I think you might have said per year, but it's per quarter. Yeah, that's per quarter. Yeah, thanks, Bort.

That's very helpful. Thank you.

Thank you, Nash. Next one is Paul Redman from BNP Paribas. Paul, please go ahead.

Yeah, thank you very much. And I might be a little bit early, but I just want to ask about how you're thinking about your distribution program for next year. We're going into 2026 with quite volatile view on oil prices. difficult view into gas prices your debt came down this quarter and i think you're guiding to a reversion of some of that into uh 4q so i just want to ask about how we should maybe think about a distribution program for 2026 and then just confirmation of whether you're going to guide to that the 4q results or at the capital markets day later in the year

Okay, thanks, Paul. Yeah, all right. So, first of all, there's a lot of good reasons to be prepared for lower prices, and we are that. Last year, we took down investments by $8 billion. for a few years and also cost down, we will continue to push on this to improve free cash flow in the current environment. This is an ongoing thing. I just want you to be aware of that. Secondly, capital distribution will have a priority in our capital allocation model. The cash dividend, you should consider that as bankable. That will come. On top of that, we will use share buyback, and share buyback will be used on a regular basis. It is a natural part of our capital distribution framework. We clearly aim to be competitive when it comes to the overall capital distribution. To be precise and competitive, I'll leave with you a couple of things. We know that our peers are using formulas related to cash flow. You should think about that type of sort of levels as sort of being competitive when it comes to ourselves. I think it's worth mentioning that sort of we have specialities around the Norwegian tax. So percentage points, you know, we should be a little bit lower for consistency as such. Then your question on sort of what will happen next year as such. We will announce this on the fourth quarter results in February. There are a couple of specialties I would like you to draw your attention to. And that is next year, we have significant investments related to Empire Wind Equity. That is around $2 billion. The year after, we will get it back. through the investment tax credit. So when we consider capital distribution for 2026, we will look through that. We will take a two-year perspective when we do consider our capital distribution for the year. so you know and and this is why it doesn't make sense to have that's why we are not sort of running with a formula because there might be years where we would like to lean on the balance sheet and there are other years where we clearly would like to build a balance sheet as well but i think that is very important for me to say that those type of effects we will see through and we will see to that we are competitive when it comes to to capital distribution you You also mentioned the net debt, and I just want to use the opportunity to say a few words there. We are currently at 12%. We expect to be in the low end of the range by year end. There are a couple of things I would like to bring with you. To you, point one, there are three... tax installments there will be payment of the rights issue 900 million dollars in the quarter and they will also be part of the peregrino transaction you know funds coming back but my point is we maintain the guiding for net debt to year ends even if we have participated in the oersted right issue with 900 million dollars it is driven by strong underlying operations and cash flow and also improvement in the working capital as we talked about earlier so long answer paul but an important question thank you paul next one on the list is martin rats from morgan stanley martin your line should be open

Yeah. Hi. Good morning. Well, only one for me. But I wanted to ask about the impairment charge, because it's more of a question of just sort of trying to make sure I interpret this correctly. So the long-term oil price assumption has come down, but it's still $75 a barrel. But that has triggered $750 million of impairments, which sort of suggests that there were projects in your portfolio that that had break-evens well above $75 a barrel. And I was wondering if that is the correct interpretation. If your projects have break-evens below $75, but you lower the long-term assumption, it wouldn't trigger an impairment, right? Am I interpreting this correctly?

Martin, thank you for your question. Well, there are qualifications that needs to be made. So first of all, we have the assets on the UK side which are impaired with $650 million. First of all, I would like to say this has absolutely nothing to do with a transaction with Shell. This is an isolated effect and it is driven by lower oil price assumption as you said then you know a very important driver for this is that these assets are held for sale in the book so they haven't been depreciated for since since the beginning of the year if they had been depreciated on a normal basis you know the impairment would have been significantly lower the second point on the uk portfolio is that part of that asset base is linked to the acquisition we did with suncor and the buzzard field which sits in the balance sheet at acquisition cost as such, and that has also had an impact for that asset. There are two assets in the Gulf of Mexico also impaired. Those are also mainly driven by price. Those are assets run by operated by significant US operators as such, and one of the assets has been a challenging asset operational-wise for several years. It is one asset in the US group of Mexico that has been a challenge. The remainder of the asset portfolio there is very robust for impairments. Thanks, Martin.

Okay, thank you.

Thank you, Martin. Next one is JP Morgan, Matt Lofting. Matt, please go ahead.

Hi, thanks for still going on the questions. I just wanted to come back to Empire Wind Torgrim. I think you mentioned in your opening remarks that there was an availability issue that's emerged on an installation vessel with MES. Could you just expand on what's happening there and sort of any risk that that poses to the future development and progress of Empire Wind into next year. Thank you.

Thanks, Matt. So first of all, I think it's fair to say that Empire Wind has had a demanding year. with a stop work order that has been reversed. And I just want to use the opportunity to say that the lost time has been catched up and we are back on track. And I must say that I'm very proud of what the organisation have been able to do in a critical year like this. We are 55% complete, all monopiles are in the seabed. So this is a dispute between Maersk and Citrium, which is the yard in Singapore. The vessel is more or less completed and finished. And Maersk has sort of cancelled the contract as such. So we are close to the situation. We are working to either see to that this solution is solved or looking for other opportunities. Important for me to say that This is a well-functioning market and there are other opportunities available in the market. So we will manage this, not risk-free naturally, but we will give you an update as this progresses.

Thank you, Matt. We move on to James Carmichael from Berenberg. James, please go with your question.

Hi. Morning, guys. Just quickly on the UK and Rose Bank. I was just wondering what the latest is on that approval process. And then I guess maybe just sort of general thoughts on the UK as we maybe get a bit closer to some clarity on the fiscal outlook here. Thanks.

okay all right thanks thanks james so on on rosebank um as you might be aware of sort of the permit was sort of you know taken away due to you know that scope 3 mission should have been taken care of into the in the in the in the award so we have submitted our response recently to the regulator and they turn around and put it into public consultation right away. That has started and we expect the consultation to end at the 20th of November. There is no set date for the decision, but clearly we work very closely with the ministries to get this moving as quickly as possible as such. The second part of your question, what was that, James, about fiscal outlook in the UK?

Yeah, I guess just, you know, your General thoughts on the UK, obviously some uncertainty on the fiscal outlook, but hopefully we'll get clarity there soon. Yeah, just some context.

Yeah, no, I think it's fair to say that there has been repeatedly tax changes on the UK side over years. This is nothing that we appreciate and clearly would advocate for a strong and stable fiscal framework to create a basis for investing as such.

Yeah. Thank you, James. Kim Firstier from HSBC is next on my list. Kim, please go ahead with your question.

Oh, hi. Yeah, good afternoon, and thanks for taking my question. I noticed that one of your Norwegian competitors has recently expressed some concerns that there may not be enough projects on the NCS within a year or two to sustain a healthy domestic supply chain. Obviously, you're also moving away from big greenfield projects to smaller brownfields, so it's kind of an industry-wide issue. Just interested in hearing your views on the outlook for the NCS supply chain and constant inflation.

All right. Thanks, Kim. We are currently having a period with very high activity. A bit of that is driven by the tax incentive program put in place during COVID as such, and many of these projects are soon coming into production. So it is natural that there will be a lower activity past that as such. So I think our job as a company is to adapt to that and adjust. I just want to use the opportunity to talk about a project that we have established called NCS 2035. And this links very much to what we said at the Capital Markets Day in the winter, maintaining production level on the NCS all the way to 2035. that future will contain more but smaller discoveries it will take quicker developments and we have to operate at lower costs so for instance we will drill 30 exploration wells per year That is more than we do currently. And we will put forward six to eight subsea developments per year, which is also more than what we have done currently. So by what we are doing, clearly we will be a significant contributor to maintaining a high activity level on the Norwegian continent itself and also the industry in Norway. So very optimistic about what we can achieve through different way of working and different way of working with suppliers.

Thank you, Kim. We are fast approaching the hour, but let's take one final question. And that is you, Stefan Evian from DNB. Stefan, please go ahead with your question.

Yeah, thanks. So a quick one. Just remind me on the tax credit in the US. What's the milestone you have to get that credit paid? Is that the first power or COD on the project?

Yeah, it is production start that is sort of the criteria, and it is first power that is sort of the ultimate. So that is what we plan for in 2027. Okay, thank you. Thanks.

Thank you very much. We are now at the hour. I would like to thank you all for calling in and for your questions. As always, the investor relations team remain available. So if there is any outstanding question, please give us a call and we will do our best to help you. Thank you very much and have a good rest of the day.

Ladies and gentlemen, that concludes today's call. You may now disconnect. Thank you and have a great day.