Equinor ASA

Ladies and gentlemen, thank you for standing by. Hello, and welcome to F&R Analyst Call Q1 Conference Call. All lines have been placed on mute to prevent any background noise. Thank you. I would now like to turn the conference over to Board Blog Patterson, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Thank you, Operator, and good morning to all. Welcome to the presentation of Equinor's first quarter result. As usual, I'm here with our CFO who will take us through the results and then take your questions. We plan to complete the session within one hour. So with that, Torbjörn, I hand it to you. Thank you very much, Board.

Good morning and good afternoon to all of you. So thank you for joining us today. This quarter, war and conflict, first and foremost, are impacting people in a severe way. Energy markets are also fundamentally shifting, and we have a particular role in providing reliable energy. Against this backdrop, I'm glad to report excellent operational performance with high regularity, new fields on stream, and in this quarter, we delivered our highest production ever. This is important for energy security and for our investors. The war in the Middle East is creating high volatility and imbalances in the markets. It is not clear when this conflict will be resolved or how long it will take to restore infrastructure in the region or what the lasting impact to the markets will look like. We will focus on what we can control and influence. Maintaining cost control and capital discipline and being a reliable supplier of energy delivering all of this in a very safe manner. A good example of this is the Guldfax field right now. where oil is flowing into shuttle tankers bound for European customers, just as it has gone for steadily 40 years. When we started the Guldfax field in 1986, we expected to produce 1.3 billion barrels. We have now passed 2.5 billion, and we are still counting. The world needs energy it can trust. And the Norwegian continental shelf is a stable oil and gas province that continues to deliver above and beyond expectations. So, over to the results. This quarter, we delivered record high production, 9% up from the same quarter last year. High regularity and new fields on the NCS, combined with record high production in the US, contributes to this growth. With this, we capture value from higher prices, and the trading business captures value uplift from increased volatility. This quarter, the adjusted operating income was $9.8 billion, and our net income was $3.1 billion. Year-to-date, our cash flow from operations after tax is $6 billion. An increase in collaterals supports strong trading results during volatility, but reduces our cash flow in the quarter. I will revert to this later. Our adjusted earnings per share was $1.48, positively impacted by strong results on financial items. On the NTS, we made seven commercial discoveries, and in January, we were also awarded 35 new licenses. With this new acreage and strong exploration results, we will continue to be a reliable energy supplier. In Brazil, we started drilling at the Rayar gas field, which we expect to be on stream in 2028. Portfolio optimization continues to deliver value, and this quarter we received the first quarterly dividend of $150 million from Adura. Then to capital distribution. For the quarter, the board approved a cash dividend of 39 cents per share and a second charge of the share buyback of up to $375 million. This is in line with what we indicated at our 4Q presentations. At that time, we expected to lean on the balance sheet in 2026 to maintain stable investments and competitive capital distribution. Higher prices will strengthen our cash flow, but there is still significant uncertainty. Competitive capital distribution remains a key priority for us. As always, safety is our top priority, and our safety performance has steadily improved over time. This quarter, we have, however, seen an increase in the number of incidents. And we must continue our work to improve safety and ensure everyone working with Equinor returns home safely every day. In the quarter, we produced more than 2.3 million barrels per day. This is an all-time high, up 9% compared to the same quarter last year. We are on track to deliver on our guidance of a 3% production growth for the year. Production on the NCS was up 10%, mainly driven by high regularity across the portfolio, and ramp-up of Johan Casper, Halton East, and Berlande. In the US, we had record high production driven by Cesar Tonga offshore, and our US gas position onshore. Outside of the US, all international production also increased. driven by Adura and Bacalao, but it was partly offset by our reduced ownership in Peregrino. Power production was stable at 1.4 TWh. Then to the finances. EMP Norway's adjusted operating income totaled $7.7 billion pre-tax and $1.7 billion post-tax. This reflects the high production and strong price realisation. Crude qualities that can be used for jet fuel and diesel have seen stronger differentials, and we have benefited from this at Guldfax and Johan Sverdrup. Normally, crude from Johan Sverdrup trades at a slight discount to Brent, but we are now seeing a premium of $5. And in March, we sold cargoes at a $13 premium from Johannes Fertig. Our EMP international results reflect increased production and some overlist in the quarter, and they're impacted also by high depreciation in Adura. Results for the U.S. are driven by record high production and strong realized gas prices, particularly during the cold spell at the start of the quarter. M&P delivered close to double our quarterly guidance, $787 million before tax, mostly due to strong products and U.S. gas trading. The M&P results demonstrate how we continue to capture value from a volatile market. This is the first quarter where we report power as a separate segment, or as a segment, combining renewables, flexible power, and power trading. The result came in close to zero, with strong contribution from the power trading business. Adjusted operational cost and SG&A was up 9% compared to the same quarter last year. Underlying OPEX and SG&A, including portfolio changes, was down 6%. And adjusted for currency, it was down more than 10%. which was the ambition we set in February, and we deliver cost reductions even if we have more fields on stream and we are growing production. This quarter, cash flow from operations after tax was $6 billion. In addition, I want to highlight two points. First, we have a cash inflow of around $800 million from a positive price review settlement This is cash in, but it is not included in the cash flow from operation for the quarter. Second, we have put in cash collaterals of almost $900 million. This is to be expected during times of volatility, and it supports strong trading results. But, however, it do reduces the cash flow from operations in the quarter. Also, there is a net increase in working capital of $800 million in the first quarter. We paid two tax installments on the NCS this quarter, totaling $4.2 billion. Next quarter, we will pay three installments of 20 billion kroner each. In June, we will determine tax payments for the second half of this year and the first half of 2027. Organic CapEx for the quarter was $3 billion, in line with our CapEx guidance for the year. And we have a strong cash position of $20 billion. Our net debt ratio decreased to 15%. Higher prices will impact our outlook for cash flow and net debt towards the end of the year. In February, we expected a cash flow from operations of $16 billion after tax in 2026. This was based on a scenario with $65 Brent and $9 per MBTU for European gas. We see large movements in forward prices on a daily basis, and there is significant uncertainty, making it hard to predict our cash flow for the year. However, if we assume that Brent averages $85 per barrel this year and European gas prices of $13 per MB2, we expect the cash flow from operations to be around $8 billion higher for 2036. At the same time, our future tax liabilities will increase with around $4 billion due to the tax lag in Norway. This is when we measure it compared to what we expected in February. With higher prices, we no longer expect to lean on the balance sheet this year. With the scenario of $85 oil, we expect our net debt ratio to remain fairly stable through the second quarter when we will recognize the state's share of buybacks for 2025 as net debt. Then we expect it to reduce to somewhat below 15% during the second half of the year. So, our guidance presented in February remains stable. There are no changes to that. For 2036, we expect $13 billion in organic complex, and around 3% growth in oil and gas production. So by that, I would like to say thank you very much for your attention, and I give the word back to you, board, for the Q&A.