Q3 2024 Equinor ASA Earnings Call
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Speaker Change: I'd like to welcome aboard Clark Peterson Senior Vice President of Investor Relations to begin the conference all over to you.
Clark Peterson: Thank you operator, and good morning to all I'm here together with the tolling agreement item or CFO as usual he will take us through the numbers and then we'll open for questions and answers.
Speaker Change: So with that I hand, it over to Rick.
Thank you Robert and good morning, everyone and thank you for joining.
Rick: Before we go into the results.
Take a look at the photo of Johan Sverdrup.
Rick: It's a truly remarkable assets.
Rick: After five years in production. It has no produced more than 1 billion barrels.
Rick: It continues to create significant value and cash flow quarter after quarter.
And total revenue is already higher than $80 billion.
Rick: On the 21st of September we set a new record with over 756000 barrels of oil produced.
Rick: We optimized water management and continue to drill new wells.
Rick: And this has helped to extend the plateau into next year.
Rick: Let me dive into the numbers.
To date, we delivered solid financial results and operational performance in a quarter with extensive turnarounds.
Rick: We report adjusted operating income of $6 $9 billion before tax and Ni Srs net income of two 3 billion.
Rick: Year to date, we have delivered cash flow from operations off the tax of 14 billion.
Rick: We are on track to deliver in line with what we said.
Rick: At our capital markets update in February.
Rick: Our adjusted earnings per share came in at 79 cents.
Rick: We saw an all time high production from controls in the gas year ending in September.
Rick: We have gone improvements and debottlenecking across to get gas value chain for many years, ensuring reliable supply of natural gas to Europe.
Rick: And this has created quite a bit of added value from increasing gas prices in this quarter.
Rick: You won't cost Berg as Youll see on the slide is on location in the balance is on track for production startup by end of the year.
Rick: In September than Northern light facility was completed on time and on cost and there's no ready to receive Sidoti.
Rick: We recently announced that we have acquired 9.8% in <unk>.
Rick: This is an important transaction.
Rick: So let me share a few thoughts.
Rick: This is a good time for a transaction like this.
Rick: Offshore wind industry is facing challenges.
Rick: And this is also reflected in the market value of that.
Rick: As an offshore wind developer of cells, we know this and what it make what it takes to resolve it.
Rick: As such this is a counter cyclical investment and we do know how important it is to get the timing right.
Rick: Offshore wind will play a crucial role in the energy transition and we have a long term industrial perspective.
Rick: We see <unk> as a leading developer with a high quality portfolio of producing assets.
Rick: And this complements our own ongoing offshore wind projects in the U S U K and Poland.
Rick: These were accessed early at low cost and deliver competitive returns on equity.
Rick: We continue to focus on value over volume and or renewable strategy stays firm.
Rick: We will not overbuilt in lease auctions, rather we will be value driven value driven and flexible in our approach.
Rick: This acquisition.
Rick: It requires significantly lower capex than organic opportunities.
And it supports our renewables ambitions.
Rick: Towards 2030.
Rick: So this transaction is not in addition to our existing plans.
Rick: Our near term Capex is defined by projects in development, but towards 2030. This transaction will help us prove progress towards our ambitions with lower capex spend.
Rick: The rest of the transaction is also done within our financial framework and has no implications to our communicated capital distribution program.
Rick: Today, we are delivering on what we said at the CMU with competitive capital distribution.
Rick: For the quarter the board approved an ordinary cash dividend of <unk> 35 cents per share and 35 cents in extra ordinary dividends.
Rick: And the fourth tranche of share buybacks of $1 $6 billion is starting tomorrow.
Rick: In total we are delivering what we said $14 billion capital distributions for the year.
Rick: Yeah.
Rick: Safety remains our top priority.
Rick: This week, we had an incident on slate in the beef and unmanned platform in the North Sea.
Rick: We take an incident like this very seriously.
Rick: And are well prepared to handle it gas.
Rick: Gas production was shut down and our emergency preparedness organization mobilized.
Rick: In this incident will also be investigated to understand root causes and to ensure learning.
Rick: In the quarter, we had high activity with extensive turnarounds, while maintaining strong safety results.
Rick: We continue our efforts to ensure that all our people return safely home from work every day.
Rick: So over to production.
Rick: On the NCS, we had strong operational performance and the planned high turnaround activity was well executed.
Rick: Total NCS production was up 2% from the same quarter last year.
Rick: The increase in gas production was 8%.
Rick: Driven by high gas production from Troll and.
And good contributions from <unk> and it was about.
Rick: The ramp up of new fields like the Bacon Hans also contributed.
Rick: For E&P International production was also impacted by turnarounds, mainly at Pellegrino, partly offset by new wells in Angola.
Rick: Okay.
Rick: For E&P U S liquids production was impacted by shut ins due to hurricanes in the Gulf of Mexico.
Rick: And well Workover at the field Caesar Tonga.
Rick: Renewables production.
Significantly.
Rick: Renewables production is significantly.
Rick:
Rick: Higher than last year, mainly driven by onshore power plants in Brazil and Poland.
Rick: For Dogger bank in the U K the operator for the development Phase No expect full commercial production during the second half of 2025.
Rick: It impacts our production outlook this year and I will revert to this.
Rick: Now to our financial results.
Rick: Liquids prices declined during the quarter and were lower than last year.
Rick: At the same time European gas prices were up 14%.
Rick: Driven by increased guest demand from growing economies like China.
Rick: Higher political risks and supply disruptions.
As expected storage in Europe are almost full but the market remains fragile.
Rick: And small events can give a large fluctuations.
Rick: As we approach winter European demand will again depend on weather and temperatures and with a normal or cold winter there will be upward pressure on prices.
Rick: LNG demand in Asia, and the Russian volumes.
Rick: Volumes through Ukraine will also impact prices and in addition, there is significant uncertainty related to the timing of new LNG projects coming online.
Rick: This quarter, we had strong gas production on the NCS and captured high prices.
Rick: Delivering adjusted operating income of $5 9 billion.
And $1 3 billion after tax.
Rick: Our international E&P segments, combined delivered more than $600 million in adjusted operating income and almost $500 million after tax.
Rick: Lower liquids production and exploration expenses impacted the results.
Rick: Our MMP results were driven by strong LNG and poetry.
Rick: Our ability to capture geographical arbitrage in LPG through our shipping fleet.
Rick: Since third quarter last year, adjusted Opex and SG&A is up by 3%.
Rick: The underlying cost increase is somewhat higher due to currency effects and some one offs.
Rick: And we continue to maintain a strong focus on cost control and capital discipline.
Rick: This quarter, our cash flow from operations was more than $6.2 billion after tax.
Rick: We paid one NCS tax installments of $2.9 billion.
Rick: But next quarter, we will pay two installments.
Rick: We distributed six and a half billion dollars to our shareholders in the third quarter.
Rick: But remember this included.
Rick: And the annual payment of the state's share buybacks of around $4 billion.
Rick: Organic Capex was $3 1 billion and $8 7 billion year to date.
After tax capital distributions and investments our net cash flow was negative $3 4 billion.
Rick: As expected.
Rick: So we have a solid financial position with over $30 billion in cash and cash equivalents and our net debt ratio increased to negative 2% this quarter.
Rick: As we indicated at CMU, we expect the net debt ratio to move into positive territory by year end.
Rick: And the impact of the <unk> acquisition will be around 5%.
Yeah.
Rick: Finally to our guidance.
Rick: We guided on $13 billion in Capex for 'twenty 'twenty four.
Rick: We now expect.
Rick: Come in on the downsides and are therefore, adjusting or guiding to $12 billion to $13 billion.
Rick: This is due to phasing of project Spence towards year end.
Rick: Adjustments within onshore renewables.
Rick: And currency effects on our NCS projects.
Rick: There is no change to our guiding for oil and gas production, but as we have said previously there is more risk to the downside related to curtailments from U S onshore operators.
Rick: We have adjusted our renewables production guidance to grow by around 50% this year, mainly reflecting the progress on Dogger Bank.
Rick: So no.
Rick: Back to your board and then I look very much forward to your questions. So thanks.
Speaker Change: Thank you towards him and we are then ready to start the Q&A and money.
Speaker Change: Haven't understood all that they're.
Speaker Change: Let me remind you that if you press star one.
Speaker Change: Your name to the list.
Speaker Change: First one on the list is a big rush, but katayama from RBC. So please go ahead.
Hi, Thank you and thanks for the comments on the oil side in particular and intentions there.
Speaker Change: Just wondering how we should think about the 12 to 16 gigawatt target that you previously put out.
Speaker Change: Based on your comments around development costs going up and obviously your commitment to return it seems like it's going to be tougher to get to that amount.
Speaker Change: And stick to the returns criteria unless you want to use the other option, which is to buy more stead I'm. So how should we think about that target in the context of the recent move.
Speaker Change: And then the second question is just on the Empire wind could you just update us on on the progress on project financing and when that is expected to close. Thank you. Okay. Thank you Ross.
Speaker Change: They are important questions.
Speaker Change: So just let me.
Speaker Change: Sure.
Speaker Change: Sort of dead into the context of our deliveries on energy transition in general, but first you know.
Speaker Change: We do like the company.
Speaker Change:
Speaker Change: We want to be a part of it.
Speaker Change: And we are supporting of their strategy and their management and you know we see this as a good time to two two to go into it.
Speaker Change: As it is you know as we sort of.
Speaker Change: Very much into the reality of this industry, we see that sort of making a transaction like this.
Speaker Change: Is.
Speaker Change: If you we get access to offshore wind project at a much more reasonable price than actually building things from scratch for the time being and so what we currently are doing is that we.
Speaker Change: We are.
Speaker Change: <unk>.
Speaker Change: With sort of the key developments that we are developing you know dogger bank in the U K Empire in the U S and Baltic in Poland. So those will be important part of the deliberate over towards 2030 beyond that.
Speaker Change: You know, we do see that.
Speaker Change: Yes.
Speaker Change: This investment in understood replaces investments that we could do organically as such so so this will be an integrated part of our delivery towards 2030.
Speaker Change: And sort of what we have said.
Speaker Change: I would like to call it qualify that even more I mean 12 to 16 Gigawatts.
Speaker Change: It's not a target.
Speaker Change: It is a guiding for what we think we can deliver but you need to.
Speaker Change: Really would like to leave with you that value creation.
Speaker Change: Trump's volumes so of value creation over volume is very critical and we are happy to let it go or delay. It if you don't see the sufficient value creation. So.
Speaker Change:
Speaker Change: Our hopes are you all can see a little bit of a pattern in what we do in sort of get trying to get timing right within offshore wind. We have entered early at low cost.
Speaker Change: We have divested.
Speaker Change: And sort of when prices were high and we are taking the opportunity to get access to 10% of <unk>.
At the at a reasonable price or getting timing right is clearly a very important.
Hum on sort of you had a question on more instead so.
Speaker Change: We have no sort of more than nine 8%.
Speaker Change: We are.
Speaker Change: Applying for foreign investment approval from the Danish government and then we have that in place we will increase to around 10% and beyond that there are no current plans to do do you do more.
Speaker Change: On your point on the question on <unk>.
Speaker Change: Empire wind yes.
Speaker Change: So 'twenty 'twenty four is the year of de risking that assets and what we have gotten so far we have got a new contract price contract in place.
Speaker Change: The price has increased from 118 to $155 per megawatt hour.
We have completed permitting and and are well underway in sort of developing it.
Speaker Change: And we are now approaching financial close of the project. So we expect that to be a few weeks down the road and happening before a year and as such so then that asset will be de risked.
Speaker Change: I also said that we also said at the capital markets update in February that we intended to farm down.
Speaker Change: Empire wind.
Speaker Change: And that is the plan to farm it on for the second time.
And and when that is done.
Speaker Change: Don.
Speaker Change: Capex related to Empire wind will go significantly down certain impacts.
Speaker Change: Capex going forward that was a long answer be rush, but you had three very very important questions. So I appreciate it. Thank you.
Speaker Change: Thank you brush the next one on the list this tailored orders, where Nelson from Sberbank end markets.
Speaker Change: Your microphone is open.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Good morning Julien.
Thank you.
Regarding us a stat that says it all work Oh, it's more about that a little bit on the gas market now with a pretty healthy long term gas prices or at least the poor with Corona 12 or $13 per and then beat you always wonder are you tempted at all our all the hedging cymbalta and evista or selling them a fixed price contract.
Speaker Change: So that's the first question second question that is a rich gold production guidance for full year for the oil and gas production to remember you said that there is some downside risk and instead of a site in the second quarter.
Speaker Change: So I just wonder how you view that risk now called character.
Speaker Change: And months ago, it looks like some of the production may come up again and it comes around that would be useful.
Speaker Change: Alright. Thank you. Thank you Thiago so.
Speaker Change: Gas prices are currently you know what you say around $13 per btu and sort of in line with what we have sort of believed.
Speaker Change: Believe that sort of the.
Speaker Change: The price for this year and maybe a few reflections on the level because I mean, it was a warm winter and we are working with very high gas storage. This and steel the price is sort of a certain dollar per Mb to use so it sort of.
Speaker Change: Clearly tells a story about.
Speaker Change: Vulnerable situations in the gas markets are search so so.
Speaker Change: So.
Speaker Change: In removing parts to watch out for here.
Speaker Change: He is clearly.
Speaker Change: Asian demand for LNG, and remember 50% of gas needed in in Asia needs to come from import same assay in Europe, So Europe and Asia will compete for this and we see a growing demand, particularly from China. This year and we see that continue with around 3% per year.
Speaker Change: The way to 2030 actually so that's clearly wanting to watch the second one is better we all know about that in a normal winter would actually leave the gas storage is around 40% in April compared to 60%.
Speaker Change: This year as such so that will have an impact on loan prices during during the winter.
Speaker Change: And then of course Ukrainian.
Speaker Change: Gas and operational issues of course on your question specifically no we're not.
Speaker Change: Going to hedge.
Speaker Change: I want our owners and investors to get exposure to European gas when they buy the share in with us and as you know.
Speaker Change:
Speaker Change: We keep our exposure at 70% day ahead, and 30% multi heads.
Speaker Change: So if you see volatility in the European gas prices, you can rest assure that it translates into earnings.
Speaker Change: With with us.
Speaker Change: And you know very important for us that we can.
Speaker Change: Keep the machine ready to manage this we have increased <unk>.
Speaker Change: Production capacity in the troll gas value chain.
Speaker Change: We have.
Speaker Change: Access to all the landing points and we have a trading organization that is ready to take out any arbitrage opportunities that may arise. So so we're not planning to to hedge we want you and other investors to have full exposure to the value creation opportunities that comes from volatility.
Speaker Change: There was one one more sorry.
Speaker Change: So yeah, there are still some uncertainty on curtailment in the U S. So that might have an impact on gas production in the U S. I think it's fair to say that with the current gas prices in the U S.
Speaker Change: A little bit, but the earnings impact is is less than sort of gas production.
Speaker Change: Yes for the time being there is there is a little bit onsite compared to what we had guided but we have decided to keep it keep it that way the stable production has been call. It.
Speaker Change: Yes.
Speaker Change: Thank you. Thank you. Thank you totaled a next one on my list. This martijn rats from Morgan Stanley Martin. Please go ahead.
Martijn Rats: Yeah. Good morning, two questions. If I may I was hoping you could give us.
Martijn Rats: An update on the Rosemont project I understand there was a court case going on and also.
I was interested in your latest view with regards to the.
Martijn Rats: Two tax treatment.
Martijn Rats: So if you could say a few words about that project that would be great and the second question I wanted to ask relates to Capex of course there are.
Martijn Rats: As a small tweak downward for this year I guess, we'll have to wait for a fuller update for.
Martijn Rats: Felipe.
Martijn Rats: Full year results announcement, but I was wondering.
Martijn Rats: And the comments that you made we could also start to expect that this tweak downwards for 2025 foot rollover into sorry for 'twenty 'twenty four would roll over.
Martijn Rats: Into future years, I'm, just trying to 'twenty five and beyond.
Martijn Rats: I was hoping you could say a few words about that.
Speaker Change: Okay. Martin Thank you very much so on Roes bank it is.
Speaker Change: At the outset are good and the robust project. It is a very important project for the U K.
Speaker Change: 1600 jobs.
Speaker Change: And actually 24 billion Sterling of palms in economic impact so for the U K and this is it is a very very important project both from an energy security point of view and also for economic activity over.
Speaker Change: Over there.
Speaker Change: So, but clearly there are uncertainty and you know.
Speaker Change: Related to the project, let me first talk about.
Speaker Change: On the tax side.
Speaker Change: As an investor it is very important for us to have.
Stable.
Speaker Change: And and.
Speaker Change: And stable stable and then.
Speaker Change: Tax conditions and predictable conditions.
So what has happened lately.
Speaker Change: We see that and clearly as a negative and increases the risk of investing in <unk> in the U K.
Speaker Change: There is.
Speaker Change: When it comes to the EPL labor has announced that they want to increase the rate by three percentage points and also extend the time of the EPL a little bit.
Speaker Change: So that is a that is something that we are aware of what we do see in sort of the earlier statement is that a they are not going to change.
Speaker Change: Capital allowance.
Speaker Change: Which is very important for investors in the U K.
Speaker Change: So, but we have to wait until.
Speaker Change: Turkey as of October when the budget is released and there will be clarity around this but the decision and what comes through through.
Speaker Change: Through the budget, we'll define the attractiveness of future investments in <unk> in the U K.
Speaker Change: So so so that's that's on the tax side on the.
Speaker Change: Legal case, there is Judy.
Speaker Change: Judy show.
Speaker Change: Review related to scope three emissions related to the asset and the permitting given.
Speaker Change: Where that was not the court decided that that was not sufficiently.
Speaker Change: Taken care of so we are wasting no.
Speaker Change: Awaiting clarifications on that.
Speaker Change: To proceed.
Speaker Change: And you know we do believe we will get that and that we will be able to continue with the project under the same assumption that we haven't done earlier expected startup of Roes Bank is in 'twenty.
Speaker Change: 27.
Then your second question was on Capex, yes. So we are taking down the guiding from around 13 to 12 13.
Three elements there one there sort of some facing off of.
Speaker Change: Of the Capex, but in reality just payments that are coming in sort of a little bit later in the life of the project and then earlier it is related to to currency changes.
Speaker Change: Changes currency impact because the Norwegian projects have a certain Norwegian kroner.
Speaker Change: Content and as that has weakened it sort of reduces the the.
Under the Capex and the third one is lower investments related to onshore renewables. So these are key elements that sort of play into this whole sort of the pacing of investment is not a very significant part I mean, it's one of the key elements here and sort of.
Speaker Change: It's it.
Speaker Change: It is not unheard off or or strange we see that came in from time to time that phasing of payments are diverse.
Speaker Change: So.
Speaker Change: So there is no drama on this at all.
And we will give an update as you say in February when the capital markets day on how we see the coming years on investments.
Speaker Change: Thank you.
Speaker Change: Our next one is hungry Patrick <unk> from UBS.
Speaker Change: The market is open.
Speaker Change: Yes, Thank you run to.
Speaker Change: Two questions. Please.
Speaker Change: The first one just on results in the third quarter and in cost with total unit cost in E&P U S or international moving on the high end you mentioned the interest impact of maintenance in the quarter.
Speaker Change: So I wanted to get a sense of how much of that cost increase cost increase was driven by these one offs of cycle.
Speaker Change: And what's the shelf the structural let's say cost increase and then secondly, going back to the big guns backdrop common side, you've made you mentioned that the record production recently and the field coming off early next year.
Speaker Change: Can you share any more details on what you expect in terms of your.
Speaker Change: The ability to slow down the pace of the decline next year and beyond anything that you took the whole country.
Speaker Change: Alright, Thank you very much so first on costs.
Speaker Change: So our cost discipline and capital discipline is very very important to us and reverse that.
Speaker Change: Every hard so, but clearly we are not immune to inflation as such.
Speaker Change: On a group level, we see growth in <unk> in in Opex and SG&A.
Speaker Change: 3%, 3%.
Speaker Change: There are sort of the underlying cost increase is somewhat higher due to two two.
Speaker Change: One office in a way like under lift and also on the currency.
Speaker Change: Currency side and also some removal cost in there. So I mean, it's it's it's it's it's but it is fairly stable I would say you had a specific question.
Speaker Change: On the U S cost, we see that the.
Speaker Change: Opex and SG&A, there is down 6%.
Speaker Change:
Speaker Change: 6% compared to last year and that is due to lower transportation cost and linked to sort of volumes that they sort of lower this quarter.
Speaker Change: I think in general.
Speaker Change: Cost levels. This quarter, if you measure it on a per barrel level, we have had massive.
Speaker Change: Massive turnaround program 104000 barrels per day in the quarter.
Speaker Change: And that is of course.
Speaker Change: Attracted the costs and that is impacting this quarter constant if you will.
Speaker Change: If you if you divided by buy barrels to sort of is there, but you know you also see that there is a stable unit production cost. So so so we've worked this versus this very hard.
Speaker Change: Your second question Henry on.
Speaker Change: On Johan Sverdrup Yeah.
Speaker Change: So far so good we are we see that we are now in a position where we can say that.
Speaker Change: The Pro tour, we will be on plateau until early 'twenty 'twenty five.
I think it's very important for me to say that you know.
Speaker Change: We are not surprised at all.
Speaker Change: That we will come off plateau in 2025. It is a function of that we had invested in higher capacity.
Speaker Change: The 755000 barrels per day, pushing cash flow and net present value higher and that leads to that we will get off plateau earlier. So this is as expected, but we actually are able to extend it somewhat.
Speaker Change: A couple of things here I mean.
Speaker Change: Optimizing recovery rates and the reservoirs that is really really the core competence of this company something that we have done for 50 years.
Speaker Change: Cros in order and then the.
Speaker Change: Large assets on the shelf. So this is about optimizing water management. It is about drilling capabilities of reservoir management and doing you know for the seismic to really really understand how everything works so a little bit of status on what we currently doing.
Speaker Change: So by year end, there will be 40 wells.
Speaker Change: Producing.
Speaker Change: Next year, we will start to reach profit some of these wells into multi laterals I mean, taking one wellbore and then.
Speaker Change: Use that two two to spread into into more.
Speaker Change: And we are also working on Johan Sverdrup Phase III.
Where we expect to take our what we call a D G to towards the end of this year and maybe a startup of that towards the end of 2007.
Speaker Change: So this is a this is as expected we are working this of course hard and applying all the competence we have in the company into this field.
Speaker Change: It is producing 756000 barrels per day on Maxim moment, and just to put that in context, it's almost.
Speaker Change: It's almost 1% of global supply.
Speaker Change: On a daily basis from one asset on the NCS. So that gave just gives you a little bit of sense of the size of it and you might hear a little bit of progress in my voice, saying that so but thanks Andrea.
Speaker Change: Thank you.
Andrea: Thank you Emily.
Andrea: <unk> and <unk>.
Andrea: It is an external third please go ahead.
Bob: Thanks, Bob.
Bob: Oh, I'm, sorry to come back on Wall Street.
Bob: So important.
Bob: As I understand that you've gone through a strategic review on the renewables business.
Bob: You follow the lead of what you did on F. L X.
Bob: The business outside of HQ2.
Bob: We're fortunate to be more competitive.
Speaker Change: Can you talk about how the decision to invest in Australia has really come about the strategic review.
Bob: Acquisitions.
Bob: In my experience are normally done because companies do you ever have a shortfall in portfolio or expertise.
Speaker Change: Or what is that I'm, just trying to connect the dots between where I can or thoughts was 12 24 months ago, where the strategy seems to be now. Thank you. Okay. Thanks. Thanks Seltzer.
So.
Bob: We are.
Yeah.
Speaker Change: Very much driven by that the investments and the strategy that we pursue needs to create value for our shareholders that is sort of where it all starts and typically the way. We do that is that we operate developed and put into production.
Speaker Change: It's like we are now doing with sort of Empire wind Dogger Bank and Baltic.
Speaker Change: So that is all of the main model of value creation in all of these three are delivering you know.
Speaker Change: Tractive equity returns on the money that we invest.
Speaker Change: But from time to time, we see that there are opportunities to do something differently and that is what we also see here where.
Speaker Change: Where there is a way.
Speaker Change: To build and deliver on this strategy in a more value creative way, we see that for the time being.
Speaker Change:
Speaker Change: It is very expensive to acquire seabed leases.
Speaker Change: There is very high inflation, you know within the renewable business and there are no.
Speaker Change: Our clear bottlenecks in the supply chain assets.
Speaker Change: So comparing that with acquiring 10% in Austin, where studies clearly coming across with.
Speaker Change: Better way to deliver on this strategy and deliver on the on.
Speaker Change: The growth over the next next few years, but I think it's also very very important to get the timing right.
Speaker Change: We have time to wait for better investment assignment.
Speaker Change: In some of the offshore wind opportunities it will come but for the time being we are doing some changes organizationally to focus or business development activity to reduce over.
Speaker Change: Cost levels and set ourselves up for playing this.
Speaker Change: In the long long run a search so that's sort of the swap process going and going into this.
Speaker Change:
Speaker Change: Yeah sure.
Speaker Change: To talk them connect yourself.
An alternative would have been north American industrial minerals that at all.
Speaker Change: The comparison versus.
Speaker Change: Organic seabed leases, but there could be an alternative so we're not going to make this acquisition and we'll just we'll do a pause on the renewable strategy overall.
Speaker Change: Thanks Alastair.
Speaker Change: And then you know clearly when we do see a good investment opportunity, we do like to pursue it as well and sort of the challenges that are you know the offshore wind industry is currently living through has been reflected in the share price of that.
Speaker Change: And we see this as a good time to take a 10% share in the company. We have a very long term sort of perspective on that investment and we are very sure that that will deliver deliver.
Speaker Change: Good value to our shareholders overtime.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Third our next one is Alejandro vigil from Santander.
Speaker Change: Alex Please the market's open.
Alejandro Vigil: Yes. Thank you for taking my questions. The first one is again sorry about the Allstate.
Speaker Change: In the in the commentary you don't forget about that.
Speaker Change: The optionality is cheaper than in the investments in Greenfield projects.
Speaker Change: That's interesting but is there any.
Speaker Change: Conversations are projects ongoing to develop together with our states on some.
Speaker Change: <unk> also has a pretty big pipeline of Oh.
Speaker Change: Projects could be could be interesting as well so that we.
Speaker Change: It will be the first question and the second question is about.
Speaker Change: Looking at the your comments about the uncertainty on the OXXO we.
Speaker Change: Also the possibility of some delays in <unk>.
Speaker Change: Yes.
Speaker Change: Most of them.
Speaker Change: All in all the roads lead to higher distributions next year can you elaborate on the outlook for it.
Speaker Change: 25, a share buybacks are also looking at your strong balance sheet and that will be the questions. Thank you.
Speaker Change: Okay Alondra. Thanks.
Speaker Change: Yeah. So.
Speaker Change:
Speaker Change: We.
Speaker Change: At 10% around 10% in Russia that sort of what we what we have done and sort of there are no current plans to do that there's no further current plans and that also covers.
Speaker Change: Prague doing projects together as such so we will operate as two separate companies.
Speaker Change: And do that so there is no no plans for that.
Speaker Change: On your question on on on if there is an outlook for an attractive capital distributions next year.
Speaker Change: The answer to that is yes, we have said that next year, you should expect capital distribution to be between eight and $10 billion.
Speaker Change: Where the competition is is cash dividend.
Speaker Change: <unk> 35 per share them, you said, it's going to grow with two cents per year and on top of that a share buyback.
Speaker Change: Between four and $6 billion. So that is that as you know.
Speaker Change: What we have said and this is something that we have clearly tested against oil price scenarios and all of that for you you should consider that is as important commitment from oversight.
Speaker Change: Beyond that.
Speaker Change: It is a very.
Speaker Change: Very important to us to be able to provide or owners with an attractive capital distributions, but this is not a time and place to talk about that but next year eight.
Speaker Change: Tom.
Tom: Thank you. Thank you.
Speaker Change: Next on the list is from Bernstein Yong sung Yong. Please go ahead.
Speaker Change: Yes, good afternoon program.
Speaker Change: It looks like the net debt ratio will not ask John.
Speaker Change: By year end 2024, which is your guidance.
Speaker Change: This deal, which you think will have a roughly 5% impact on the on the net debt ratio.
Speaker Change: Are you able to comment on the implications does this add from an M&A perspective, and especially in terms of the jet that was made available to you.
Speaker Change: M&A activity from a design perspective.
Speaker Change: And to make me was turning into a net debt position by year end.
Speaker Change: Financial years.
Speaker Change: Important guidance items from your perspective as a CFO.
Speaker Change: Can you repeat the final sentence you all know there was a bit harder to her here.
Speaker Change: Sure. So final Sundance is ultimately when thinking about the <unk>.
Speaker Change: Question just raised.
Speaker Change: Has this expectation of turning into a net debt position by year end. The most important guidance item as part of this year our guidance from from the perspective of a CFO.
Okay. Okay. Thank you yeah. So.
Speaker Change: What you know what we said at the beginning of the year was that we expected net debt.
Speaker Change: To move into positive territory by year end and that was without taking into account understood.
Speaker Change: Decision and this is still valid. So so this year has developed according to plan and according to what we said at the capital markets day, both on cash flow from operations and also from a from a net debt perspective on top of this.
Speaker Change: The rest of the acquisition will add around five percentage points to the net debt I think it is important for me to say that when you net debt ratio is around zero.
Speaker Change: It becomes very volatile so small changes can actually change the percentage is quite a bit but the better but that's all of the best guiding I can give for the time being that is 5% related to that.
Speaker Change: Then I will say that going forward.
Speaker Change: It is important for.
Speaker Change: US to run with a conservative balance sheet in a conservative financing and that is of course to be prepared for volatility.
Going forward, we have talked about higher prices, but of course, we cannot exclude a lower prices and sort of.
Speaker Change: Managing the balance sheet. This is an important part of doing exactly that so thank you Ron.
Speaker Change: Thank you. Thank you. We then turn to Lydia <unk> from Barclays. Please go ahead.
Lydia: Thanks, and good morning, two questions actually follow ups on what we've already had just going back to the balance sheet and say I take your point that if you make it slightly.
Speaker Change: I shouldn't say that.
What is the balance sheet now versus where you thought it would be clearly.
Speaker Change: Clearly I think twice right.
Speaker Change: I forget Betsy I think you saw the Capex guidance has come down a bit so it's just kind of flat.
Speaker Change: Well, that's just what you thought you'd be at this stage and then if I come back.
Speaker Change: I'm sorry.
Speaker Change: You bet.
And it doesn't actually.
Speaker Change: The cash at this point you don't have the dividend.
Speaker Change: Are you thinking about this investment is this idea that you become a long term shareholder in that.
Or something you want to hold for the next 510 years.
Some kind of back to the point that it was probably other things you could've center in Austin and.
Speaker Change: Telephone since they say I am taking something that doesn't give you cash net.
Speaker Change: I'm still a little bit confused about that capital allocation cycle, thanks, sorry to belabor that point Scott.
Speaker Change: Okay. Thanks, Thanks Lydia.
Speaker Change: So the balance sheet this is developing.
Speaker Change: According to two.
Speaker Change: Due to what we are.
Speaker Change: What we believed in the beginning of the year prices has been a little bit up and down gas prices has been sort of a little bit lower and also oil prices. But then we have seen seen sort of a reduction in working capital as well.
Speaker Change: A function of lower prices.
Speaker Change: So those things hanging together, so so I would say that we are actually pretty spot on what we believed in the beginning beginning of the year.
Speaker Change: On your.
Speaker Change: Last question Lydia.
Speaker Change: Cash flow, yes, so so.
Speaker Change: So.
Speaker Change: <unk> is currently.
Speaker Change: In sort of what they call a dividend holiday.
Speaker Change: I think clearly it will be for the rest of management to speak to how they think about that.
Speaker Change: And and.
Speaker Change: But to be more precise on your question, Yes, we are a long term.
Speaker Change: The holder of shares.
Speaker Change: And in her stead.
Speaker Change: We.
Speaker Change:
Speaker Change: No the issues within the industry fairly well our idea to say, we have a trusting that management will.
Speaker Change: We'll deal with those in a very good way and we're also very certain that that will come out as a strong.
Speaker Change: Our company when things normalize in this industry and a leading company as such and therefore, we do see.
Speaker Change: Good value creation opportunity.
Speaker Change: As a shareholder.
Speaker Change: Understood. Thank you. Thank you Lydia.
Speaker Change: The next one is Giacomo Romeo from Jefferies Tacoma. Please go ahead.
Giacomo Romeo: Yes, Thank you and apologies I have to ask again about are all set.
Giacomo Romeo: One first question is about your comments you had in the.
Giacomo Romeo: Press release, a few weeks back you mentioned that you won't see Gebara presentation. This is obviously a sizable investments you talked about important something I think timing right and invest in projects also doesn't have the best track record in terms of execution and management has been volatile just wanted to understand why you think it could be.
Giacomo Romeo: Therefore to see couple of our presentation.
Giacomo Romeo: Yeah.
Giacomo Romeo: As a as you are aware there are some concerns around also the ability to fund its growth portfolio.
Will you consider injecting equity into also the if needed at some point in the future you talked about you ruled out plans to do further investments in Allstate, including two projects together, but is does that include the potential for additional funding in the future.
Speaker Change: Okay. Thanks Yaacov.
Speaker Change: Yeah no so.
Sure.
Speaker Change: We.
Speaker Change:
Speaker Change: We on our shareholder of 9.8% and you know we are.
Speaker Change: After approvals have been given we're going through to be around 10%.
Speaker Change: So we are a long term holder we of shares and we have not been seeking.
Speaker Change: Board representation.
Speaker Change: As part of this and there are no current plans to do that either.
Speaker Change: But clearly you know we know the company well, we know the management well.
Speaker Change: And also so I mean, clearly there is natural to have a dialogue.
Speaker Change: With you now.
Speaker Change: With management around our own topics as a shareholder that's like everyone else are having.
Speaker Change: Then on your last question.
Speaker Change: Our ability to finance.
Speaker Change: Hum.
Speaker Change: Good advice to to ask the management around their outlook for that and and I think that's sort of the place where those questions needs to needs to be managed as such.
Speaker Change: Thank you Giacomo our next one is our mckellar della Vigna from Goldman Sachs Mackellar periscope.
Speaker Change: Thank you very much the agreement.
<unk> on getting northern lights on stream.
Speaker Change: Wondering in terms of your future carbon capture strategy you are one of the leaders in the industry.
Where do you see the most attractive returns from here is it in the U S with the IEA and the huge network of industrial plants, especially on the Gulf Coast or do you see it in Europe with activity further expansion and then if you forgive me one more question on <unk>.
Speaker Change: I think back to the very successful investment you did the timing Dean you ultimate exchanged a big part of that state for an asset which was more ownership in Johan Sverdrup, which proved to be the right choice I'm wondering is there any plan here.
Speaker Change: In to some of the dust settled some of those assets potentially interesting to you or it's more just about thinking about the value of the overall company.
Speaker Change: Thank you.
Speaker Change: Thanks, Michaela so first on northern lights, yes. So that is now ready to receive C. O. Two and we are glad to see that and it will be an important project for establishing <unk>.
Speaker Change: Yes value chains.
Then you know we do see the Ccs strategy is moving forward.
Speaker Change: In a very positive manner, and I would actually say that the speed within Ccs is very different than hydrogen. So hydrogen is slowing down while ccs is moving forward.
Speaker Change: Your question was where the where we see sort of attractive returns and then we do see that in the U S. And we also see that in Europe clearly.
Speaker Change: In the U S you have the.
Speaker Change: You know a lot of.
Speaker Change: Single point of emissions.
Very closely located and also very close to rest of the world where we can.
Speaker Change: It can store them in the rehab and we have.
Speaker Change: It will have a storage position there in the Bayou Bend.
Speaker Change: Wish we had received.
Speaker Change: Clearly gifts gifts attractive returns on sort of Ccs.
Speaker Change:
Or the C O two highway as we call it.
Speaker Change: From the European continent to denote recent continental shelf that is also progressing and currently we have this EMEA, Ohio reservoir.
Speaker Change: With your capacity to inject.
Speaker Change: Maybe 20 million tons per year and also the plan for building these pipelines from the continent.
Speaker Change: Mitch also can transport 25 to 30 million tons per year that would be a 1000 kilometer pipeline by the way.
Speaker Change: And but this is progressing and we expect you know a pipeline like that to be.
Speaker Change: Onstream and operating you know around 2000 and therapy.
Speaker Change: So this is.
Speaker Change: You know our value chain that doesn't need very much support to really get going and we do see that this is a place where we can the game.
Speaker Change: Attractive returns.
Speaker Change: And when sort of.
Speaker Change: Value chain like this is built clearly.
Speaker Change: That creates a lot of opportunities to.
Speaker Change: Further value creation as well so we are optimistic different mechanisms in Europe, and the U S. But we do see attractive returns in both places.
Speaker Change: On your last question.
Speaker Change: I'm, sorry, Micaela I'm going to give you a very boring answer and that is that we have acquired 10% share in <unk> and there are no current plans to do anything else.
Speaker Change: Thank you there post approaching the hour, but we'd like to cover as many as possible. So if I can ask you to limit yourself to only one question. Please our next long as Kim for steel.
Speaker Change: HSBC Kim please.
Speaker Change: Yeah, Hi, Thanks for taking my question and I'll keep it to one then and I just wanted to ask about the recent cancellation of the Blue hydrogen project and hydrogen pipelines in Germany with arguably could you just maybe talk about why the project wasn't viable and what isn't that finger hydrogen plants. Okay. Okay. Thanks Kim.
Speaker Change:
Speaker Change: We do believe that blue hydrogen is going to be very important for Europe.
Speaker Change: We also do believe that that needs to be significant before any green hydrogen can actually be there.
Speaker Change: The Bible search.
Speaker Change: For Blue hydrogen.
Speaker Change: Value chain to work there are three things that really needs to be in place. One is there needs to be an economic framework for investing into it.
Speaker Change: The second is you know there needs to be a customer base and I would say actually a significant customer base to lift an investment like this and the third one is actually a well functioning market to two to do that and I'm sorry to say none of these are in place sufficiently to two to justify an investment like this so.
Speaker Change: That is the reason that things are going slower than we had hoped and we think we are all better than actually.
Speaker Change: Maybe thinking all the different ways of creating a blue hydrogen value chain.
Speaker Change: In Europe.
Speaker Change: Thank you Kim and next one is Matt Lofting from Jpmorgan.
Speaker Change: Please the microphone is open.
Matt Lofting: Thanks, James for the update and taking the question.
Matt Lofting: And I Wonder whether you could just talk about the extent to which.
Matt Lofting: After marks.
Matt Lofting: Georgia and structural shift.
Matt Lofting: <unk> strategy and capital allocation by the tail and the extent to which that could be applied more widely now across its low carbon and renewable growth. Thank you.
Speaker Change: Thanks, Matt.
Speaker Change: So first of all.
There are no current plans to do more we are a 10% holder of shares.
Speaker Change: But on your question I can ask that more.
Speaker Change: Answer that more generally and that is that sort of the energy transition.
Speaker Change: Whether that is sort of within renewables and low carbon solutions typically will take a different approach to wholly own finance and govern those businesses and assets and you have seen us acquiring companies like <unk> energy like event to like here.
Speaker Change: Like nautica and a few others.
Speaker Change: And don't see commodities of course.
Speaker Change: The green. So it is it is it is a more complex picture than the way, we want to own and Goldman. These businesses are such so if anything there's a trend there.
Speaker Change: Thank you.
Speaker Change: But next Thomas almost so rothman from RCB almost please.
Thomas Adolff: Thank you.
Thomas Adolff: It sounds as if from SB I. Thank you for taking my question.
Thomas Adolff: Hum.
Thomas Adolff:
Thomas Adolff: You are working for the.
Thomas Adolff: The company and the company is working for the shareholders. I was just curious if you could say something about the.
The feedback the company has received from various stakeholders preferred with shareholders. After the acquisition of <unk>, whether it's in general is positive or whether you received questions that you didn't expect before making that investment. Thanks. So much. Thanks so much.
Thomas Adolff: So clearly the the there is.
Speaker Change: I spent quite a bit of my time on the road meeting investors you know across Europe U S and.
Speaker Change: In other places and it.
Speaker Change: It would be wrong for me to sort of go into any details here, but I think it's fair to say that that there are different views on this acquisition.
Speaker Change: Some take the view that I can buy this stock myself and others are clearly curious about you know what it is and then a modest is that this is probably a good opportunity to differentiate.
Speaker Change: <unk> your delivery model for for energy transition. So I think that's I don't think I want to go further than that but you know clearly it has triggered a lot of interest and discussions.
Speaker Change: Thank you your owners are.
Speaker Change: We have passed the one hour mark and I want to be respectful for everybody's time, let's take one final short one it's Peter low from.
Speaker Change: And then we'll conclude the call after that.
Peter Low: Hi, Thanks, Yeah earlier this month, you announced some increases in capex or some of your projects you had cast back off the back end stuff that future.
Peter Low: Your capex guidance for the year has actually come down can.
Peter Low: Can you just help explain kind of the moving parts. There I know you mentioned kind of currency and phasing but.
Peter Low: But yes, any extra color would help thanks, okay. Thanks Peter.
Speaker Change: Yeah. So you know we give an update to all the Norwegian project to do you know in the national budget filing.
Speaker Change: And they are sort of the full transparency on that and there are some projects as always that have a slight increase in capex and the older stuff or have lower complex assets solar portfolio level.
Speaker Change: The sanctioned project portfolio is fairly stable our search and that is also reflected in or or capex guiding our search. So so so theres no sort of trend or significant elements in that as visits.
Speaker Change: Thank you Peter.
Speaker Change: Thanks, very much and thanks, everybody for calling in and I'm sorry, if you did not get through the full list. There was a lot of Christian but our IR team remains available. So if you have follow up questions. Please give us a call in the afternoon. Thank.
Speaker Change: Thank you all for calling in this morning and have a good rest of the day.