Q4 2024 Equinor ASA Earnings Call and Capital Markets Day
Okay.
Yes.
Yes.
Good morning, all.
So Chris.
Great.
Certain days.
Okay.
My name is board of Globe garrison.
Adding up Investor relations are inactive.
Before we start I want to give a few safety instructions to those of us here in the room.
If an emergency situations should the curve the evacuation signal is a public address on voice alarm.
Please note that the only evacuate if they've always salons tends us to do so.
Then please follow the sudden cardiac states unless it just from the gods.
The extra thing is at ground level and please disperse safely away from the building in Florida, No tests will be give them during normalization.
Today, we will have two presentations. He had in are the primary assertion it will be O N E. C. O on this one but all in all our CFO a two degree.
After their presentations that will be out of the Q&A for analysts here in the room and all the members of the corporate executive team are here I'm ready to provide answers.
Later after that.
We will have three breakout sessions.
Well it all miss him to the game.
Phillip Mattera: One bid here till all the Phillip Mattera, the executive Vice Presidents for E. P M on epi.
And one mediums are glum and Iran.
Phillip Mattera: The rumor of the E V P S for renewables and M P.
Phillip Mattera: But before all of that we will do as we do we in all likelihood would mean things maybe ill start with a safety moment.
Phillip Mattera: This will be made O N E V P food safety security and sustainability, you'll make in Nielsen.
Phillip Mattera: Just before I hand, it over to you all again I will remind you that the presentations here today really forward looking statements and non-GAAP measures.
Phillip Mattera: When you're ready to start and I'll hand, it over to you.
Phillip Mattera: Yeah.
Phillip Mattera: Okay.
Speaker Change: And thank you to your board and good morning to all of you.
Speaker Change: And that kind of safety and security is strongly integrate that and our leadership and culture and as Paul said, we start every meeting with a safety moment.
Speaker Change: Today, I would like to share a safety moment with your.
Speaker Change: Addressing the link between safety security and operational performance.
Speaker Change: On the left you see the serious incident frequency.
Speaker Change: At the end of 'twenty four.
Speaker Change: Todd would you use to point Street.
Speaker Change: A reduction of 73% since 2011.
Speaker Change: Last year, we had the safety result ever in the company.
Speaker Change: This demonstrates how systematic efforts over time gifts were soft.
Speaker Change: Still we can never rest.
Speaker Change: Last year was marked by a project helicopter accident.
Speaker Change: Well, we lost a dear colleague.
Speaker Change: It require continuous effort to further improve to make sure all our people are safe every day.
Prevent things major accidents and serious.
Speaker Change: A security incident.
Speaker Change: It's also important for energy security.
Speaker Change: Ecmo gas supply has become vital quite Europe's energy security.
Speaker Change: And being a trusted energy provider, it's a role we take very seriously.
Speaker Change: Did you cure our people and assets, we need to perform well within all elements of security.
Speaker Change: But extra attention to cybersecurity infrastructure and business continuity.
Speaker Change: We regular test our ability to handle accident, while maintaining production.
Speaker Change: By reducing serious incidents we protect our people.
Speaker Change: And also minimize production disruptions.
Speaker Change: We can also free up capacity to improve.
Speaker Change: Production efficiency maintenance and asset integrity.
Speaker Change: This is reflected in our long term positive trend on these parameters.
Speaker Change: In 24 months.
Speaker Change: Once filed the central deliver a combined production efficiency close to 95%.
Speaker Change: These elements.
Speaker Change: Russell a systematic work to improve safety security and operational performance.
Speaker Change: Which directly impact the energy production.
Speaker Change: Our ability to secure flow from producing assets to the market.
Speaker Change: There is a strong link between safety security and operational performance.
Speaker Change: Safety and security is integrated into everything we do no matter what the energy we produce wherever you are and who we work with.
Speaker Change: We have great people in the company and also great suppliers and partners, we work closely together with our sort of our face.
Speaker Change: And together, we will continue to improve.
Speaker Change: And making sure all people and assets all safe every day.
Speaker Change: Now I would like to hand, it over to Andre So put all of our C. L.
Take you for of our capital markets update and off the floor is yours.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yes, and good morning to all of you. It's really good to see you again I've been looking forward to today and Oh My God. Thank you very much for the clear message.
Speaker Change: On safety and security of safety is my first priority and a clear commitment for all leaders and colleagues safety and security is the fundamental need for everything we do also the value we create.
Speaker Change: Today I have a poor messages for you.
Speaker Change: First we are positioned to deliver industry leading returns.
Speaker Change: We are doubling our production growth and we are increasing our free cash flow.
Speaker Change: And we are announcing.
Speaker Change: Announcing a competitive capital.
Speaker Change: Capital distribution.
Speaker Change: And.
Speaker Change: We demonstrate our consistent strategic direction at <unk>.
Speaker Change: That thing to changing markets and take clear actions to further increase value creation for shareholders.
Speaker Change: We expect to deliver above 15% return on capital employed all the way to 2030.
Speaker Change: Returns on capital employed is many ways. The most holistic kpis and we are well positioned to deliver on our industry leading level on a lower price than we used last year.
Speaker Change: We expect more than 10% growth in our in our oil and gas production from 'twenty to 'twenty four to 'twenty 'twenty seven.
Speaker Change: We have increased our production outlook by progressing on our projects and high value transactions.
Speaker Change: Over the next three years, we know expect $23 billion in free cash flow.
Speaker Change: This is a significant improvement achieved by optimizing the portfolio cutting capex and addressing cost.
Speaker Change: The stronger free cash flow enables competitive shareholder distribution.
Speaker Change: An important priority for me and a clear commitment from the board.
Speaker Change: For 2025, the board has decided on a total capital distribution of $9 billion.
Speaker Change: It represents our two sense increase in the quarterly cash dividend and $5 billion for the share buyback.
Speaker Change: In 'twenty 'twenty four we took actions to improve short term financial and setting us up for further growth.
Speaker Change: I'm proud of our operational performance industrial progress portfolio shaping transactions and strong trading results.
Speaker Change: All this is made possible by our great people and I would like to use this opportunity to thank all our employees for their dedicated efforts to create these results.
Speaker Change: True strong operational performance, we delivered returns on capital employed of 21%.
Speaker Change: The cash flow from operations was $18 billion after tax.
Speaker Change: Higher than we indicated at the start of the year.
Speaker Change: And our capital distribution was exactly as promised.
Speaker Change: Strong production, especially from the Norwegian Continental shelf contributed to the results.
Speaker Change: In our international upstream business 2024 was a year of change with large transactions improving growth and cash flow.
Speaker Change: In our renewables and low carbon solution business, we adapted to market challenges across our segments. We spent last year optimizing portfolio of assets and projects for strong value creation.
Speaker Change: We face three global trends impacting energy markets.
Speaker Change: Energy demand is growing.
Speaker Change: We expect higher production growth.
Speaker Change: Market and political political uncertainty is high.
Speaker Change: We are robust and set up to create value from volatility.
Speaker Change: The pace of the energy transition is uneven.
Speaker Change: We had the flexibility to adapt.
Speaker Change: We are well positioned to create value in this context.
Speaker Change: First energy demand is growing.
Speaker Change: Global oil demand growth and expected about 100 million barrels to this decade.
Speaker Change: For gas, we expect demand to increase and stay above today's level all the way to 2058.
Speaker Change: ACL drives demand short term and we see U S increasing going forward.
Speaker Change: This impacts the tight European gas market.
Speaker Change: Lower storage levels than last year.
Speaker Change: Great potential for higher prices and volatility.
Speaker Change: And the market balance would be driven by weather renewables production as well as competition for LNG.
Speaker Change: For power, we foresee significant growth towards 2050, creating renewables and flex power opportunities.
Speaker Change: And reduced demand for hydrocarbon overtime.
The second trend is the geopolitical tension tariffs and increased commodity markets in Turkey.
Speaker Change: Oil demand is increasing but slow growth in Asia and higher supply from non OPEC countries add uncertainty to the price outlook.
Speaker Change: Our response is not new but highly effective.
Speaker Change: Robustness and resilience.
Speaker Change: We combine our strong financial position with a competitive and flexible project portfolio.
Speaker Change: Our marketing and trading business is also well positioned to capture value from volatility and market in efficiencies.
Speaker Change: Through the last decade, with all the volatility and uncertainty we experienced.
Speaker Change: We delivered returns well above peers.
Speaker Change: The third global trend is the uneven pace of the energy transition.
Speaker Change: Moving fast in some markets slow in most.
Speaker Change: Even the massive renewable wrote is currently energy addition, not energy transition.
Speaker Change: Inflation interest rates supply chain issues and regulatory uncertainty reduces the pace of the energy transition segments like offshore wind and hydrogen are impacted.
Speaker Change: We adapt to these realities, both facing and prioritizing investments to maximize returns.
Speaker Change: To underline that value creation is at the core of our decision, making we know retire the gross capex ambition.
Speaker Change: In our view the energy transition must be balanced and financially sustainable.
We are increasing our free cash flow generation and expect to deliver $23 billion from now to 2027.
Speaker Change: From 2024 to 2027, we expect our free cash flow growth above 50%.
Speaker Change: The largest driver is an $8 billion capex reduction.
Speaker Change: We reduce our investments in renewables and low carbon solutions by 50% in this period compared to last year's outlook.
Speaker Change: In addition, Comed project financing of Empire wind and the establishment of a joint venture in U K.
Speaker Change: On operational cost, we take forceful action to offset inflation and maintain a stable cost level, all while growing production.
Speaker Change: This drives long term resilience.
On top of this comps, our continuous improvement and scaling of technology.
Speaker Change: We apply AI across exploration concept selection operation and maintenance and create significant value.
Speaker Change: As an engineer I could of course talk a lot more about it but I'll. Let me just give you. One example.
Speaker Change: We use AI in the planning of the Johan Sverdrup tree a project and then we generate that over a million alternative fee layouts, and well trajectories and this added $12 million in value to the project.
Speaker Change: So well not that big but remember we have more than 50 projects on the Norwegian continental shelf and the true value creation comps when we do scale this up to all the projects.
Speaker Change: The improved free cash flow and strengthens our capacity for competitive shareholder distributions.
Speaker Change: For 2025 total distribution will be $9 billion.
Speaker Change: Our competitive predictable and growing cash dividend.
Speaker Change: Has the highest priority.
Speaker Change: When I allocate capital.
Our dividend policy.
Speaker Change: Is to grow the annual cash dividend per share in line with underlying earnings and this remains firm.
Speaker Change: Last year, we set an ambition to grow the quarterly cash dividend with two cents on an annual basis.
Speaker Change: We delivered on this in 2025.
Speaker Change: And you should expect US took us to continue doing that in the coming years.
Speaker Change: We have a clear commitment to deliver competitive capital distribution and we will use share buybacks to do this.
Speaker Change: The strong year free cash flow, we present today provide substantial capacity to deliver.
We have previously indicated our base level of $1.2 billion annually in share buybacks.
Speaker Change: This is not sufficient to be competitive in the current environment.
Speaker Change: We therefore removed this is our guiding.
Speaker Change: Of course, we plan to do more.
Speaker Change: To have flexibility to adapt and make sure. We are competitive we are not providing an exact guiding on long term level.
Speaker Change: We will revert to this for the individual years.
Speaker Change: We have a clear commitment to be competitive are.
Speaker Change: Our strong track record and a stronger free cash flow supporting distribution capacity.
Speaker Change: Yeah.
Speaker Change: We now expect to grow our oil and gas business.
Speaker Change: And production by more than 10% by 'twenty 'twenty seven.
Speaker Change: We also increased our expected production in 2030 to around 2.2 million barrels per day.
From 2 million in last year's outlook.
Speaker Change: We continue to cut C O two emissions from our production to reduce cost and increase value creation.
Speaker Change: Our organic Rip reserve replacement ratio came in above 110 last year and including transactions, we achieved more than 150% with this we strengthen our long term value creation.
Speaker Change: Yeah.
Speaker Change: Our international upstream segment is on track to become close to a million barrels per day business.
Speaker Change: And we expect the free cash flow to grow from $1.3 billion last year to more than $5 billion in 'twenty three.
Speaker Change: The Buck allow F peso is sailing to Brazil expected on stream later this year.
Speaker Change: We closed several large transactions focusing on our international portfolio in core markets.
Speaker Change: In the U S. We deepened our onshore gas position. This increased our production outlook with around 80000 barrels oil equivalent per day in a growing market.
Speaker Change: And after 40 years, serving U K, we write the next chapter, creating the largest operator together with shell.
Speaker Change: We supply one third of our U K gas and given the winter season, Let me I'll show you, we can provide stable supply of gas for decades to come.
Speaker Change: And let's move to the source of that gas the Norwegian continental shelf.
Speaker Change: I know you are interested in Johan Sverdrup.
Speaker Change: <unk> delivered record oil production last year.
Speaker Change: More than any single field.
Speaker Change: Any single year on the Norwegian continental shelf ever.
Speaker Change: At my recent visit at this further afield I got an update from our people describing holidays systematically keep.
Speaker Change: Keep production high and increase recovery.
Speaker Change: And I continue to succeed.
Speaker Change: We now expect 2025 sverdrup production to be close to the level of the last two years.
Speaker Change: And with extensive recovery effort, including the phase III project, we increase the recovery factor ambition to 75% up from 65, when we took the investment decision.
Speaker Change: Okay.
Speaker Change: We continue to invest and develop our NCS portfolio with new volumes from 19 projects, we maintained high and stable production towards 2027 actually a slight increase.
Speaker Change: We continue to improve recovery around our hubs.
Speaker Change: Last year.
Speaker Change: <unk> had record production after almost 30 years in production.
Speaker Change: And we extend the plateau of our gas plants coarseness and Hammerfest LNG.
Speaker Change: We expect to maintain production in Norway at high level of 1.2 million barrels per day, all the way to 2035.
Speaker Change: This is driven by projects no in planning or execution increased recovery efforts and infrastructure led exploration.
Speaker Change: These are volumes with short lead time, low cost and low emissions.
Speaker Change: We expect to deliver around 12.
Speaker Change: <unk> dollars in cash flow from operations after tax all the way to 2035.
Speaker Change: We invest in renewables and low carbon solutions to create shareholder value for decades to come.
Speaker Change: We are taking firm actions in response to challenges in the offshore wind industry.
Speaker Change: To increase value creation, we have high graded our project portfolio and reduced spending.
Speaker Change: Towards 2027, we expect to invest around $5 billion in these segments.
Speaker Change: The value driven protestation impacts the pace of growth and we expect our production capacity at the 10 to 12 gigawatt installed in 2030, including our share interested in Scottish.
Speaker Change: This is down from 12 to 16 gigawatt.
Speaker Change: So far we are delivering above.
Speaker Change: 10% equity return on our current.
Speaker Change: In renewable assets in operations.
Speaker Change: Our focus on returns is persistent and we will continue developing our portfolio to deliver 10% equity returns full cycle.
Speaker Change: This includes the development of the Empire wind project in the U S.
Speaker Change: Our project in a challenging market with returns under pressure and uncertainty.
Speaker Change: The project execution is progressing well.
Speaker Change: We are working to Derisk the project.
Speaker Change: Last year, we won a 30% higher strike price and secured financing of the project.
Speaker Change: All future Capex is covered by the project financing and the tax credits.
Speaker Change: Moving forward is the best way to create and protect shareholder value.
Speaker Change: Not doing that would impact cash flow negatively due to substantial cancellation fees.
Speaker Change: We still plan to bring in a partner at the right time, but reflecting the uncertain timing of this our capex and cash flow outlook presented today.
Speaker Change: Do not assume any farm down.
Speaker Change: This is a potential upside.
Speaker Change: As of now expected lifecycle returns are close to the double digit portfolio requirement, we present today.
Speaker Change: In low carbon solutions different technologies are progressing at different pace.
Speaker Change: Carbon capture and storage projects have many similar traits as oil and gas and our capabilities are in place.
Speaker Change: The regulatory framework are progressing and customers are interested.
Speaker Change: We are ready.
Speaker Change: But we'll only execute if we get long term commitment from our customers.
We have excess storage capacity of 60 million tonnes of cotwo per year, adding 20 million last year and maintained our ambition.
Speaker Change: We have a focused strategy to deliver competitive shareholder returns based on three pillars.
Speaker Change: Oil and gas renewables and low carbon solutions.
Speaker Change: Building on our strengths.
Speaker Change: And technology leadership.
Speaker Change: We invest to develop a resilient built this business and create long term value as energy markets change.
Speaker Change: We see power from renewable sources and low carbon value chains as an important part of future energy systems.
Speaker Change: We have the people skills.
Speaker Change: Skills and ability to build industry overtime.
Speaker Change: Taking responsibility for cutting our own emissions is our most important contribution to address climate change.
Speaker Change: We have an industry, leading low level of emissions from production and maintain our ambition of net 50% reduction by 'twenty three.
Speaker Change: Continued effort to cut emissions, while producing oil and gas reduces cost increases returns and increases their competitiveness.
Speaker Change: As I said earlier the energy transition is currently moving slower than unexpected.
Speaker Change: We are just to the market situation and opportunity set today, we made the following changes.
Speaker Change: We lower our renewables renewables ambition for 'twenty three.
Speaker Change: We introduced a range for our net carbon intensity intensity ambitions and we retire our gross capex ambition.
But our strategic direction remains the same we continue to reduce emissions and build profitable business and renewables and low carbon solutions towards our our net zero ambition.
Speaker Change: So to end.
Speaker Change: Let me remind you of the key takeaways.
Speaker Change: First we are positioned to deliver our industry leading return.
Speaker Change: We are doubling our expected production growth, we are increasing our free cash flow.
Speaker Change: And finally, this enable us to deliver a competitive capital distribution for 2025.
Speaker Change: And as demonstrated today, we have substantial capacity for 2020 six.
Speaker Change: And beyond.
Speaker Change: So I look forward to your question later when my Great colleagues in the corporate Executive Committee will also join us.
Speaker Change: But first I will hand over to our CFO target MRI, Tom and he will give you more details on our outlook and also of course, the fourth quarterly result, so target in the stage is yours and thank you very much for the attention.
Speaker Change: So.
Tom Target: Thank you very much on this and good morning, everyone very good to see you all again here in beautiful London.
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Speaker Change: So first I'll share some rift.
Speaker Change: Reflections on the capital markets day material before I go into the quarterly results and full year results.
Speaker Change: So you have heard on this side as we are.
Speaker Change: Taking firm actions.
Speaker Change: We are improving all our key metrics and then we are committed to.
Speaker Change: Provide a competitive capital distribution.
Speaker Change: So I will provide more details into how we are going to continue to deliver industry leading returns.
Speaker Change: And how we are going to improve or free cash flow significantly.
Speaker Change: Hole were going to.
Speaker Change: Increase of production and by all of this improve the resilience of the company.
Speaker Change: So.
Speaker Change: Let's start with talking about the framework for home, we would like to create shareholder value.
Speaker Change: Crushed all the key metrics as they have improved.
Speaker Change: And that is even.
Speaker Change: With a lower price deck.
Speaker Change: Our oil and gas production continues to deliver very well our own $20 billion in cash flow from operations.
Speaker Change: Then we have taken.
Speaker Change: Firm actions to reduce over organic Capex, we now expect that to be $13 billion per year over the periods of 25 to.
Speaker Change: 26 and <unk>.
Speaker Change: After you know project financing of Empire wind the number will be even lower.
Speaker Change: Then we are resilient to lower prices.
Speaker Change: So our Ah.
Speaker Change: So or cash neutral price after all the investments is now at $50 per barrel that is $5 lower than last year.
Speaker Change: And then clearly we are going to run with a very solid balance sheet.
Speaker Change: As you are well aware and very well aware of so that brings me to the center of this slide and that is you know what we sold for <unk>.
Speaker Change: And who we do think it is best to create shareholder value very very important to us. So first return on capital employed.
Speaker Change: That is the metric.
Speaker Change: It captures it everything.
Speaker Change: And that has always been front and center in the way we operate and run. This company. So we will continue to deliver an industry leading returns.
Speaker Change: Then you know free cash flow.
Speaker Change: Improving free cash flow and $23 billion is what we now expect to provide over the next three years.
Speaker Change: So that's the $23 billion.
Speaker Change: Yeah.
Speaker Change: Leads me naturally into.
Speaker Change: Capital distributions.
So let me start with our track record.
Speaker Change: From 'twenty to 'twenty, four we return $45 billion.
Speaker Change: We made extraordinary earnings in 'twenty, two and 'twenty three and then we chose to.
Speaker Change: To share that with our shareholders and pay that back.
Speaker Change: 425, the board is proposing a quarterly cash dividend of <unk> 37 cents per share and this is almost 6% up from last year.
Speaker Change: On top of this we expect to do a share buyback for $5 billion, leading to total distribution of $9 billion for the year.
Speaker Change: The first tranche of $1.2 billion that starts tomorrow.
Speaker Change: In 25, we are still returning extraordinary earnings and cash from previous years.
Speaker Change: And the total distribution is around 45% of expected cash flow from operations.
Speaker Change: So our capital structure and balance sheets are normalizing.
Speaker Change: So going forward it will be a strong pre castle that support a sustainable capital distributions.
Speaker Change: Our starting point will always be to deliver a predictable and growing cash dividend.
Speaker Change: Then we will use share buybacks to get to a competitive level in total distributions.
Speaker Change: So we are well aware.
Speaker Change: Of the approach of our peers.
Speaker Change: Both in Europe, and U S and we are confident that we will be competitive towards that.
Speaker Change: So.
Speaker Change: Let's look at how this all comes together.
Speaker Change: The Blue bars show, you or solid and stable cash flow around $20 billion on average.
Speaker Change: Over the next three years.
This is an average and it is fairly stable this.
Speaker Change: This year, we expect around 20.
Speaker Change: But with a falling gas price assumptions, we expect it to be a little bit lower.
Speaker Change: Next year before the cash flow again is growing and increasing in 'twenty seven.
Speaker Change: 425 to 37th we plan for our own 13 billion in annual organic Opex.
Speaker Change: But remember a $3 billion project financing of Empire wind came in place last year at competitive terms and that will be drawn upon going forward.
Speaker Change: We have hedged and all in interest rate for a project of around 5% and that equals or one 4% after tax.
Speaker Change: When excluding the Empire wind investments, which are covered by that financing capex will be around 11 billion. This year.
Speaker Change: Average capex for 'twenty, six 'twenty seven will be around.
Speaker Change: 12, and a half.
Speaker Change: So we aim to draw quite a bit on the financing and twenty-five also covering parts of the capex in 'twenty six.
Speaker Change: Then we expect the tax credits from Empire wind to be received in food in 2027 after production startup and that is important.
Speaker Change: Because this means that all remaining capex all the remaining Capex for Empire wind will be covered.
Speaker Change: By project financing and the tax credits.
Speaker Change: So the renewable Capex you see behind me here is largely related to projects in execution.
Speaker Change: Beyond this.
Speaker Change: We have flexibility.
Speaker Change: So let me say a few words also on the outlook towards 'twenty certified last year, we spent quite a bit on that so I just want to give you a brief update so.
Speaker Change: Return on capital employed.
Speaker Change: We expect that to be around 15% also in 'twenty certified and the oil and gas activities.
Speaker Change: Expect that to provide $20 billion in cash flow from operations also in 'twenty certified however.
Speaker Change: The contribution from renewables and low carbon solutions will be lower in 2035, and we said last year.
Speaker Change: That is used to the lower investment levels that we are now planning for.
Speaker Change:
Speaker Change: From 24 to 25, we expect more than a 50% growth in the free cash flow.
Speaker Change: We have reduced our capex by $8 billion over the next three years.
Speaker Change: In addition, we are forcefully addressing cost driving significant improvements in to the free cash flow.
Speaker Change: Inflation has been challenging across our industry. We have worked very hard to fight this.
Speaker Change: And I must say it is encouraging to see.
Speaker Change: And that in the fourth quarter.
Speaker Change: We have almost stopped the underlying cost decrease.
Speaker Change: Going forward, we aim to keep costs flat, while delivering strong production growth.
Speaker Change: In renewables and low carbon solutions, we are cutting cost with our own 20%.
Speaker Change: And me doing that by prioritizing or early phase activities. So in total the estimated impact is around $2 billion in cost savings towards 27.
Speaker Change: And all of this.
Speaker Change: Our important background and drive the $23 billion in free cash flow over the next three years.
Speaker Change: Getting capital allocation right.
Speaker Change: Ifs key to create shareholder value.
Speaker Change: So our highest priority.
Speaker Change: We'll always be to deliver a predictable and growing base dividend.
Speaker Change: Further then we will continue to create value by investing into our high return portfolio.
Speaker Change: And as you have seen today you know we are ready to use the flexibility we are ready to use the flexibility in our investment program to ensure a competitive free cash flow.
Speaker Change: And a sustainable capacity for or distribution.
Speaker Change: So out of the $23 billion in free cash flow.
Speaker Change: The surplus cash the surplus cash after paying or growing base dividend is around $11 billion. So this is setting us up well to deliver a competitive share buyback program.
Speaker Change: So.
Speaker Change:
Speaker Change: We are.
Speaker Change: Well prepared to deal with lower prices.
Speaker Change: First of all we run bid a solid balance sheet and we will continue to do that.
Speaker Change: And as you can see on the graph to the right our cash flow is resilient.
Speaker Change: If gas prices in Europe.
These reduced by two dollar per M Btu.
Cash flow from operations will be reduced by zero point $8 billion going from 20 billion to $19 2 billion.
Speaker Change: And here the Norwegian tax system is key.
Speaker Change: You know it is a neutral.
Speaker Change: It is the linear it is a net profit tax so that means if prices comes down 78% will be offset by reduced taxes.
Speaker Change: And then investments on the NCS are deducted immediately so you know today, we invest around $6 billion annually on the Norwegian Continental shelf.
Speaker Change: After tax that is actually less than one and a half billion dollars.
Speaker Change: So.
Speaker Change: Please keep that in mind, when you compare our investment programs with with others.
Speaker Change: Or portfolio.
Speaker Change: Low breakeven projects insurers robustness.
Speaker Change: And also the significant flexibility in our investment program is key here.
Speaker Change: Less than half of our Capex is sanctioned from 27 and going forward and then you know we operate most of it ourselves and we are in control.
Speaker Change: In addition, we are well prepared to handle the volatility.
Speaker Change: Our MMP business.
Speaker Change: Has consistently delivered within or above the increased guidance range.
Speaker Change: We use or flexible assets to capture value from volatility.
Speaker Change: From price spikes and geographical arbitrage opportunities and as you know we have access to all the major gas hubs in Europe and.
Speaker Change: This handler gas based on 70% day ahead, and 30% most of that.
Speaker Change: And that is important.
Because that means when there is volatility when there are price spikes, we would take advantage of it and the and the money will find its way to our earnings.
Speaker Change: Our oil and gas business has become even better.
Speaker Change: And we get more out of the $10 billion in investments now than we had done earlier so.
Speaker Change: So no we expect.
Speaker Change: A growth of more than 10% towards 2027 that is double or what we indicated last year.
Speaker Change: And production in 2000 and Turkey.
Speaker Change: Is up from 2 million barrels per day to 2.2.
Speaker Change: Furthermore, free cash flow has improved from oil and gas and unit production cost is down.
Speaker Change: So.
Speaker Change: And even better program with quality growth from our project portfolio with low breakeven below $40 per barrel.
Speaker Change: Hi returns around 30% real internal rate of return.
Speaker Change: Short payback time.
Speaker Change: Of around two and a half years, and then low carbon emissions of less than six kilo per barrels.
IGD Mitchell: Our IGD Mitchell.
It's a good example of who we use different structures.
IGD Mitchell: Setting up a specialized entity.
IGD Mitchell: The IDB will be self financed.
IGD Mitchell: It will cover rolls back Capex.
IGD Mitchell: It will derisk or deferred tax assets.
IGD Mitchell: And it will add to our production growth and last but not least it will increase our free cash flow.
IGD Mitchell: We have created value in all different phases, the renewable industry has lived through it.
IGD Mitchell: We entered offshore wind early.
We secured leases at very low costs.
IGD Mitchell: And that is in the projects that we are currently executing.
IGD Mitchell: Then we remained disciplined when market heated up.
IGD Mitchell: And we did not overpay for seabed leases.
IGD Mitchell: Instead, we took advantage of market conditions and the farm downs.
IGD Mitchell: And achieved capital gains of around $2 billion.
IGD Mitchell: We have experience with targets.
IGD Mitchell: And we know that something good all waste comes out of a downturn and we do believe that offering in the industry will come out of beats difficult time stronger and more robust.
IGD Mitchell: So we will remain disciplined.
IGD Mitchell: And as you see we have reduced or capex significantly.
IGD Mitchell: And by the actions. We are currently taking we are well positioned to create value also now.
IGD Mitchell: The challenging situation within offshore wind is also reflected in the valuation of <unk>.
Last year, we acquired.
IGD Mitchell: A 10% stake.
IGD Mitchell: The share price has continued to come down since then.
IGD Mitchell: But we have a long term perspective on these holdings.
This is a more capital efficient way to increase our exposure to offshore wind and today you see that we are reducing our own capex to renewables.
IGD Mitchell: So we will.
IGD Mitchell: Focus on improving returns in our existing portfolio building longer term optionality at low cost and continue to deliver double digit returns.
IGD Mitchell: So let me turn to the fourth quarter and full year result.
IGD Mitchell: Okay.
IGD Mitchell: Last year.
IGD Mitchell: We had our best ever safety ourselves, but as you heard from you on again. This is a race without a finishing line and we need to continue to improve.
IGD Mitchell: For the year, we delivered 21% return on capital employed.
IGD Mitchell: An $18 billion in cash flow from operations after tax.
IGD Mitchell: For the quarter. We report adjusted operating income of $7 9 billion before tax and an IRS net income of $2 billion.
IGD Mitchell: Adjusted earnings were 63 cents per share.
IGD Mitchell: In the quarter International production was impacted by a hurricane and curtailments in the U S, partly offset by new wells in Angola, and the U K.
IGD Mitchell: For the year, we had strong operational performance and delivered in line with our production guidance.
IGD Mitchell: We had record high renewables production in the quarter, mainly driven by onshore pork plants in Brazil.
IGD Mitchell: Then two different answers.
IGD Mitchell: Adjusted earnings in E&P, Norway totaled $6 8 billion before tax driven by strong operational performance.
IGD Mitchell: Our international segment delivered close to 500 million in total and was impacted by and the list and one off effects.
IGD Mitchell: Our marketing and midstream segment delivered solid results.
They've been by strong LNG and gas trading.
IGD Mitchell: Okay.
IGD Mitchell: Our organic Opex was $12.1 billion for the full year in the low end of our guidance.
IGD Mitchell: For the fourth quarter NCS tax payments totaled $5.8 billion.
IGD Mitchell: And for the first half of 2025, we expect.
Three installments of 35 billion Norwegian kroner each.
IGD Mitchell: Our balance sheet is robust with over $23 billion in cash.
IGD Mitchell: Net debt ratio is 11, 9%.
IGD Mitchell: It is important to note that our trading business.
IGD Mitchell: I took advantage of market situations around year end and working capital increased as a function of this so we do expect a lower net debt by the end of first quarter.
IGD Mitchell: So as you have seen we have delivered.
Speaker Change: On your guiding for 'twenty four.
Speaker Change: And then let me take you through the guiding for 25.
Speaker Change: We expect organic opex of Turkey, and billions of dollars for a year.
Speaker Change: And 11 billion after project financing.
We are investing for growth in oil and gas and we do expect our production growth around 4% this year well on track to deliver the 10% in and by 2027.
Speaker Change: So.
Speaker Change: To conclude.
Speaker Change: My presentation based on our consistent strategy and the firm actions. We're taking we are in a good position to deliver premium returns.
Speaker Change: A stronger free cash flow.
Speaker Change: And a competitive capital distribution so.
Speaker Change: No.
Speaker Change: Thank you very much for your attention.
Speaker Change: And then I leave the word to you board to guide us to the Q&A session. So thank you very much.
Speaker Change: Thank you to them.
Speaker Change: On the search for yield.
Speaker Change: Introductions, we are now ready to start the presentation and as I said.
Speaker Change: <unk> also.
Speaker Change: You'll see a C team is are there to answer that.
Speaker Change: We have also participants are online.
Speaker Change: But we will.
Speaker Change: Start.
Speaker Change: Here in the room, and so I will try to take notes and Motorhomes. So.
Speaker Change: Not without them I think we will start with the first question Martijn rats from Morgan Stanley and placed the rest if you can keep your hands up I can take notes, while Larry Martin asked you a question.
Speaker Change: Hi, Hello, It's Martijn rats from Morgan Stanley. Thanks for the presentation I've got two questions. If I may and the relative to the presentation from last year of course, the strategy for renewables and low carbon is quite different.
Speaker Change: And given that these things don't turn on a dime.
Speaker Change: I would imagine that youre thinking on this probably started to change relatively soon after last year's presentation. So.
Speaker Change: We got all the numbers and that makes a little sense, but I was wondering if you.
Speaker Change: Perhaps a little bit the story of how did the how did this discussion come about within the company.
Speaker Change: What are the things that started to change your mind at some point in 2024, and how did that then develop into the the plants that you are now presenting sort of the story behind these changes and the second one is perhaps a little bit more technical but I was wondering if you could say a bit with the guidance that you are now given.
Speaker Change: Would you expect the yen the trajectory for the balance sheets to be are we still tracking into that sort of range for gearing into sort of 15% to 30% range.
Speaker Change: Whereas the comfort zone with what's the what's the bar for the balance sheet. Thank you.
Speaker Change: Okay. Thank you two very good questions. So as we said we have taken clear actions during 2024.
Speaker Change: We have up in last year's outlook, we have all had also added potential.
Speaker Change: Winning bids in the offshore wind industry, where anticipated kind of lower bid bid bid levels and kind of higher returns in some of those projects that did not happen and we deliberately did not win those.
Those are those bids.
Speaker Change: And then kind of this capex is done of course removed. We also went into take a close look at our onshore business and the high graded our portfolio.
Speaker Change: You're probably seeing that we guided on around $13 billion.
Speaker Change: In Capex for 'twenty 'twenty, four we ended up with $12, one and a substantial part of that was actually.
Speaker Change: Not executing projects in our onshore portfolio. So this has been a kind of a ongoing development two of the whole the whole year.
Speaker Change: And then looking also into our early phase portfolio. We saw that we had in several countries not the route to profitable projects and that's why we stop those projects as well.
Speaker Change: As well before we went into the to the to the bidding process a little bit similar one on low carbon solutions as I said in my speech different technologies moves at a different pace.
Speaker Change: And particularly on hydrogen we see that customers are coming later to the table to commit to long term contracts and then kind of we are facing.
Speaker Change: Projects when it comes to the balance sheet.
Speaker Change: We had anticipated and a positive territory.
Speaker Change: And by year end, and we said, we add added 5% to the Earth's stead transactions. We have also used the <unk>.
Speaker Change: M. P have used the time, well lately to kind of do value creation in using the balance sheet and that's why you see it's a little bit higher.
Speaker Change: In our in the in the year and we expect it to be a little bit lower end of first quarter, and then coming to the walk towards the end of the year, we'll will be.
Speaker Change: You know around the lower level of the guided range.
Speaker Change: Thank you and the next one or Melissa this barrage portfolio from RBC.
Speaker Change: Hi, Thanks for taking my question.
Speaker Change: So first one is Basel, sverdrup, which I'm sure you're happy to talk about.
Speaker Change: You previously talked about the declines coming through so in and around year end or early 'twenty five.
Speaker Change: You put eight wells on stream I think last year, the move today to sort of extending the plateau.
Speaker Change: As a result of the performance of the latest wells or something kind of fundamentally changed in your understanding of the reservoir. There just some color on that would be helpful.
Speaker Change: And the second question is on sort of major investments you have you've got two different projects arrows bank in the U K Empire wind in the U S. You've taken on quite a lot of policy risk in different ways in the UK, obviously, the right to predict produces a question Mark and Empire wind it it seems like.
Speaker Change: Based on the headlines that $2 billion of tax credits could be at risk. So could you just talk a bit about why you continue to push ahead with both of those.
Speaker Change: Whether it was possible to pause given the uncertainty in how youre thinking about the upside downside risks.
Speaker Change: Thank you on the on this file the and <unk>.
Speaker Change: Cathy will give a much deeper detail into this also in the in the breakout but this is really good work.
Speaker Change: By all people onshore and offshore.
Speaker Change: This router Phil is about delivering this wealth and while drilling and are seeing potential to kind of change to track trajectory and kind of have long or pesos, enabling higher production from the wells that we actually are drilling and going forward. We will also do retrofitting through into kind of more.
Collateral and so on so this is one or so the reason why we are able to keep up that the high production.
Speaker Change: We are producing water on the field, but the team has worked really hard to see how can you really separate oil and water at high speed such that you can kind of maintain.
Speaker Change: Hi oil production, while you're also able to remove the water. This is about the separation process and so on so it's a combination of many many actions both on the platforms on the rest of our understanding and also drilling the wells and getting very good results from from these wells.
Speaker Change: Then.
Speaker Change: ROE Spank and Empire, yes of the political landscape is changing in many many countries we.
Speaker Change: We see a much more poor life views on energies and its shifting as elections take place.
Speaker Change: Place right.
Speaker Change: We welcome the latest verdict on the routes a ruling on the on the Rosemont because this enable us to continue doing the projects while.
Speaker Change: While this is up for a new <unk>.
Speaker Change: New requirements for.
For the M&A environment impacts us.
Speaker Change: As our assessment.
Speaker Change: We think we have a good project.
Speaker Change: <unk> is progressing well.
Speaker Change: And this is also a project that provides growth in <unk> in in in U K, but we see the paralyzed debate around it.
Speaker Change: So it is a political risk, but we are confident that this project will move forward on Empire.
Speaker Change: Just to kind of go from not having too long a surrogate will go to the tax credit.
Speaker Change: When we took investments.
Speaker Change: Decisions on this the tax credits were already in place. This was put in place in a previous a Trump administration.
Speaker Change: To make those changes it require Congress approval. So we are we don't think this will be up for change very rapidly but of course anything changing political landscape is a political risk and that's why I said in my speech is so important that we constantly improve our project having a robust.
Speaker Change: Alan sheet too to ensure that we are robust as a company while.
Speaker Change: Energy policies might change during investment period, we advocate I have to add this we advocate to all governments that we talk to that that predictability and stability in regulatory Franck framework, it's important or otherwise energy companies like us and others will can.
Speaker Change: Invest in those countries. So that is the key message, we're sending to our politicians in different countries.
Speaker Change: Thank you on this the next one on my list is a turbo to swear Nelson from spud of bunker markets don't that tremor.
Speaker Change: Thank you for your questions.
First on your target to grow production to 2.2 million barrels per day by the 20th area definitely positive move can you just take us through where you expect that growth will come from how much is organic growth and how much is in the organic growth.
Speaker Change: Second question that is all on Empire yearly steroid actually changed your guidance for our return requirements for renewable through 10% nominal equity return.
Speaker Change:
Speaker Change: How does the Empire project shipped compared to that guidance.
Speaker Change: I'll also land pie would you see a positive NPV, although you assume that tax credits will be counseled industrial Lora.
Speaker Change: So let's divide the questions I'll talk.
Speaker Change: So I'll give him that.
Speaker Change: We'd have to point to.
Speaker Change: <unk> million barrels per day, where the girl growth is coming from.
Speaker Change: It's a of course now the growth that we have talked about before the backlog project ARIA project. There as part of project that will come on a stream in this in this period. In addition to that we have added 80000.
Speaker Change: Barrels oil equivalent from the transactions, we did in the U S onshore and also the Iga V for the U K.
Speaker Change: We'll increase our production with 35.
Speaker Change: Two to 40000 barrels onto a day on average towards 2030.
Speaker Change: And then the fantastic work that is being done on the Norwegian Continental shelf you know keeping the production. We would also add to such that we have a consistent and a growing production.
Speaker Change: Two point to compare to the outlook 2.0 that we had.
Speaker Change: Last.
Speaker Change: Last year, and then maybe a little bit on Empire and returns.
Speaker Change: Thank you very much understand and until the world.
Speaker Change: Just to build on what you say on this you know the plan doesn't assume any inorganic activity. So that is based on sort of an organic development of the company I would say, it's actually a very firm and good plan and compared to last year, we had where we actually had assumed some dive.
Speaker Change: Divestments in the portfolio there were no divestments assumed to drive sort of the free cash flow and all of that so this is.
Speaker Change: Truly.
Speaker Change: And organic organic plan.
Speaker Change: On the on Empire wind.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: So if you talk about life cycle return on that project.
Speaker Change: That is.
Speaker Change: Close to 10% nominal equity returns and created a couple of things that many 222 to remember here. One is that it takes into account the farm down that we did with DP.
Speaker Change: And we also need to remember that deep. He actually has covered you know half of the development cost in the period here.
Speaker Change: And thirdly, you know the project has been significantly derisked during the year, we had sort of a 30% higher price.
Speaker Change: Financed at competitive terms.
Speaker Change: Search and the you know this altogether a 7 billion dollar investment into these projects 2 billion has been sort of invested and the remaining five will be covered by project financing and the ITC. The tax credits. So so so I mean, it's a sort of that sort.
Speaker Change: With ammonia conference so when we sort of make our decisions on what to do with this protease. Okay. So that is sort of the way forward and then of course, we need to think about okay. So what is the alternative.
Speaker Change: And you know if we should sort of do something with it it would trigger a significant cancellation costs. So it is.
Speaker Change: As we see it for or owners that we actually bring this project to so he is a derisk project is progressing well and of course, there are remaining uncertainties or search on your specific questions on sort of hold in the NPV would look like without the ITC.
Speaker Change: There are two levels of ITC is sort of a 30% which is sort of has been therefore for a long time and then there's a 10% related to local content in the U S.
Speaker Change: Which you know has been decided by Congress and all of that and there is a very long and strong.
Speaker Change: History, and the use of grandfathering projects, if they're going to be changes footings going forward. So we feel feel feel.
Speaker Change: No.
Speaker Change: That is sort of the best assumption here that he said you know there is remaining uncertainty in the project, we need to understand that and altogether. It is has been a challenging project, but you know close to 10% equity returns. So this is not great. It.
Speaker Change: It is okay.
Speaker Change: And when it comes to project execution. So far is progressing well we have all the contracts in place we have all the suppliers.
Speaker Change: In a place and we have a great team in.
Speaker Change: In place in a in New York running this.
Speaker Change: For our project, but as you said.
Speaker Change: So uncertainty going forward.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The linear input from Barclays Melissa appears in the room.
Speaker Change: Thank you and good morning.
Speaker Change: And of the Ethernet is a picture of the longevity of cash flow and probably further out than anybody else that we've seen and part of that is actually keeping the cost base flat with growing production and can you just talk how you do that.
Speaker Change: Very impressive progress on cost.
Speaker Change: And then the second one is just on Haynesville.
Speaker Change: The number of times about it being competitive distribution.
Speaker Change: What do you actually mean by that everything about dividend yields that he does it.
Speaker Change: Paying out essentially a cashless and thought that I guess it then if you have a choice between buying back your own shares versus three Morgan inches or Shadow Ted 19, She said how to think about that just so that capital allocation standpoint.
Thank you.
Speaker Change: When it comes to cost first of all I would say going over its very encouraging to see that the cost development year on year on the fourth quarter.
Speaker Change: It was very good there and there was a flat underlying cost with some reduction due to one off.
Speaker Change: And this is because we have worked on cost for a while and particularly.
Speaker Change: Particularly when we talk about the Norwegian Continental shelf for instance is is our scale our scale of operations that we're able to kind of add more air volumes new projects into the same operating model, we are able to scale up the technologies and if all improvements it goes to many of these.
Speaker Change: The air platforms and operations on the international business has been.
Speaker Change: Focusing on the the reduced cost that we would see now from the ITV but also moving from operated Utica to the known offered Marcellus wishes a much more cost efficient play.
Speaker Change: Place two to produce oil and gas due to <unk>.
Speaker Change: Scale effects from expand energy.
Speaker Change: When it comes to renewables and low carbon solutions as I mentioned earlier is about the early phase projects.
Speaker Change: High grading all the early phase project to ensure that we are able to only move forward with those that we think.
Speaker Change: Have a possible way to make the necessary return, but at the same time not removing so many that we don't have optionality for the future. So its a balancing act there about creating optionality at the same time, reducing the cost.
Speaker Change: When it comes to in your question is really about capital allocation.
Speaker Change: And as I said.
Speaker Change: Our first priority is the cash dividend and grow the cash dividend in line with the long term underlying earnings that is that is the first priority. When we look at capital allocation and you should kind.
Speaker Change: Kind of.
Speaker Change: I expect us to continue doing that going.
Speaker Change: Forward.
Speaker Change: Then we have said, we want to be competitive and target them as I mentioned in his speech, but we are aware of.
Speaker Change: Our competitors and but we don't want to use a percentage of cash flow from operations.
Speaker Change: Directly because you know with the tax lags on the Norwegian Continental shelf that will be a very volatile.
Speaker Change: Cash distribution, our or capital distribution, so as to be able to have a more stable and predictable we focusing on how can we maximize and increased free cash flow, creating the necessary capital capital distribution capacity and then I think you have.
Speaker Change: <unk> seen over the last years that we have been competitive.
Speaker Change: In this respect.
Speaker Change: Okay.
Speaker Change: If they can kind of build build build on that one on the you know in related to M&A activity.
Speaker Change: Because.
Speaker Change: I mean, we are pretty active minicom seminar you have seen that last year.
Speaker Change: Divesting, some and acquiring something and leader you should expect that to continue in a way. So that is about high grading the portfolio and as you have seen what we have done improved free cash flow and it actually improves.
Speaker Change:
Speaker Change: Kept the distribution capacity and that has been very important for us when we sort of shape. The portfolio. So going forward M&A, we'll be very very much focused on value creation and ensure also ensuring that we can serve our investors with a competitive capital distribution I think is very very important for us to tell.
Speaker Change: So to say that.
Speaker Change: And when it comes to as I said you know.
You know that.
Speaker Change: We had 110% I mean, there's there's not much more to say about that but it is it is.
Speaker Change:
Speaker Change: It is also important to say that sort of we will run with a very solid balance sheet and we will have no problem running below 15% to 30% net debt that range was put in place when we were above to get down to it I mean super happy it around and visit with us with a conservative balance sheet, ensuring capital distribution capacity.
<unk>, ensuring capacity to do do value creative M&A, if that should be something that we would have liked it. So just to so we have that crystal clear that this is not either or.
Speaker Change: Thank you we will go with you onshore Anton from.
Speaker Change: Bernstein, There and then we will take one more call from a from the line.
Speaker Change: Thank you so we'd like to ask a question about your capital distribution I believe and correct me if I'm wrong, but the first time that we know is offering buybacks that will exceed dividend this year.
Our important disease in addressing the needs for your distribution to be competitive having buyback exceeding dividend and on the same points what of what sort of commodity price environment. We need next year. So in 2026 for you to continue to offer this buy.
Speaker Change: Bank exceeding dividend going forward.
Speaker Change: So last year, we provided with our two year guidance for our capital distribution.
Speaker Change: Because we were.
Speaker Change: Coming back.
Speaker Change: <unk>, a very high commodity environment with a lot of excess cash that we have a.
Speaker Change: Returned back to our shareholder.
Speaker Change: But approaching a normalization where.
Speaker Change: Capital distribution, we will have to be.
Speaker Change: Ah sourced from our free cash flow.
Speaker Change: And the distribution capacity capacity, that's why we guided on our share buyback between four to six and we are now providing five which is as you said a higher level than the cash flow we don't have.
Speaker Change: The cash dividend, we don't have.
Speaker Change: Kind of a rule of the of this are these the cash dividend is about 4 billion and the next year, we will source.
Speaker Change: The share buyback to be competitive from our free free.
Speaker Change: Free cash flow that we have provided.
Speaker Change: 2222 today, so no kind of a.
Speaker Change: Percentage that treat gains share buybacks need to be higher or lower it's about you'll see you should see this as a total framework for being a competitive.
Speaker Change: Distribution, the growing cash dividend and share buybacks to ensure that we are competitive.
Speaker Change: Thank you we will.
Speaker Change: And the commodity.
Speaker Change: In an environment.
Speaker Change: You have seen.
Speaker Change: We will focus in any commodity environment to have a sufficient trick free cash flow to be competitive.
Speaker Change: 222 to distribute.
Speaker Change:
Speaker Change: Shareholder distributions.
Speaker Change: Yeah.
Speaker Change: Thank you we will take our core London.
Speaker Change: And revert back to this room. So please open the line.
Speaker Change: John Allison a beachy AVG. Please go ahead.
Speaker Change: Thanks for taking my question, ladies and gentlemen, I wonder.
Speaker Change: Two questions. If I may very quickly if guidance impacted by the U K.
Speaker Change: Jamie joint venture with shell shell in the U K or are you assuming capex.
Speaker Change: The investments Capex and production like proportional to your stake in the joint venture. That's my first question and the second question is regarding exploration.
Speaker Change: Is that.
Speaker Change: No.
Speaker Change: Now, saying 25 30 wells.
Speaker Change: Sorry, 175 wells.
Speaker Change: Between now and 2013 and Norway.
Speaker Change: We're closer to 30 wells per year compared to previous guidance of 20 to 30 I just wonder is that a correct observation and secondly, the exploration spending between now and 2030, how does it look in dollar term inclination is included in the Capex guidance.
Great question.
Speaker Change: The question was about the so let.
Speaker Change: Let me say a little bit about the exploration because your observation is right now I think we're in 2021.
Speaker Change: We said that we will incur.
Speaker Change: Increased the exploration activity on the Norwegian Continental shelf will be built around 20 to 30, well well that the chattel a whole when his team really worked on how are we able to to move this more towards 30.
Speaker Change: Dan a 22222 20, so we have.
A lot of our prospect to drill them and we have the Hungary capacity to work on this going forward.
Speaker Change: Logan.
Speaker Change: Capex.
Speaker Change: Thank you very much.
Speaker Change: On sort of the exploration ended whether that is taken taken into halden kopecks that is based on assumption of capitalization of that exploration with links to sort of expectation to deliveries and and on the NCS, 80% of that probe program is related to close to infrastructure exploration, meaning.
Speaker Change: A very high.
Speaker Change: Degree of capitalization. So most of that is taken care of into sort of the investment program. You had a question on the <unk>.
Speaker Change: And then perfectly get the jamba, but a few words.
Speaker Change: <unk>.
Speaker Change: It is a 50 50 joint venture.
Speaker Change: So we will sort of as an owner tape.
Speaker Change: Take part in that but this will be de consolidated.
Speaker Change: And from a balance sheet. So we will not report capex.
Speaker Change: Related to it whoever we will receive dividends coming out of this and clearly there there than what we have agreed with shell is that that will have a priority as sort of we sit up and build the new company research. So this is clearly improving or free cash flow.
Speaker Change: And it is also improving productions.
Speaker Change: So this is very good for our cash flow over the next the next few years.
Speaker Change: Okay, We will take your question.
Speaker Change: In the room I have mackellar della Vigna from Goldman Sachs.
Speaker Change: You've got the microphone.
Speaker Change: Thank you very much.
Speaker Change: And congratulations on a very strong pipeline of startups for the next three or four years.
Speaker Change: As we look beyond it as you start to plan for growth in 2030, and beyond especially if I look at international projects Theres, not a huge amount of projects.
Speaker Change: Project Theres Bay Du Nord I'm wondering after such a successful restructuring of your international portfolio. If perhaps it's the time again to look for more countries and more entry opportunity and if you see this is the right time to do it or perhaps better to wait for the next downturn and then if I may.
Speaker Change: And go back to Empire wind I know there had been a lot of questions, but one of the risks that could potentially come through is for tariffs on equipment that is largely imported from Europe I'm. Just wondering if if you see that as a potential risk or if perhaps you are already largely done with the <unk>.
First in all that equipment. Thank you.
Speaker Change: Thank you very much yes, we have worked really hard over the last years to optimizing the upi portfolio and restructuring by.
Speaker Change: Don't vote doing acquisitions on that.
Speaker Change: Divestments and Phillipe.
Speaker Change: Is working really hard I.
Speaker Change: Also to see what is the next step between before from 2030 and beyond in this pork pork portfolio.
Speaker Change: We do have exploration, particularly in Angola, where where we see kind of we can add similar type of IOR techniques and kind of infra infrastructure led exploration. So so that is something and then we will always kind of be there to see kind of similar.
Speaker Change: Back to your questions about M&A, but you know if we can see you know really value, creating free cash flow deals kind of adding to longevity, we will look into it of course.
Speaker Change: As we always.
Speaker Change: So we have quite a lot of focus over the next years to work with longevity in the epi, but it needs to create long term value in not only a kind of a lot of capex coming very early.
Speaker Change: Good questions around tax tariff tariffs.
Speaker Change: Kind of we've followed the news flow.
Speaker Change: Is a is a fluent a kind of a market in terms of tariffs coming and not coming.
Speaker Change: But.
Speaker Change: For the Empire wind.
Speaker Change: We have.
Speaker Change: A lot of supply chain in the U S.
Speaker Change: And several of those that the equipment is already made for instance, the cable and so on but also substantial part coming from from Europe for instance, the V. Tvs that we've reproduced in in in Europe.
Speaker Change: Hi.
Speaker Change: By Vestas. So clearly this is on all of our all of our radar, but it's too early to say gunnoe any potential impacts.
Speaker Change: Thank you to them they have Peter low from Redburn here are in the middle of the room, Peter referred rested hundreds here with Mike.
Speaker Change: Yes.
Speaker Change: Hi, yes, thanks for taking the question. The first was on the operating cash flow guidance. I think you did 18 billion in 2024 and that was at $81 a barrel.
Speaker Change: I think in 2025, youre guiding to $20 billion at $70 a barrel assumption can you, perhaps just walk through kind of where that improvement comes from year over year.
Speaker Change: And then the second question was perhaps just to get some perspectives on the European gas market.
Speaker Change: We started the year with pretty high, placing a pretty tight environment and kind of how do you see that unfolding as we kind of move through 2025 and beyond thanks.
Speaker Change: Yeah. Thank you. So Ah now I won't won't you told him to take the first question and then I would like to draw. So my excellent team. So.
Speaker Change: If you would add and I could say a little bit more about our gas outlook short term another medium term.
Speaker Change: Thanks, Peter so.
Speaker Change: So the cash flow from operations in 24 was $17.9 billion and ever sort of realized oil price you know around 80 as you say in the European gas price of 11th so there are assumptions that we use for 2025 is $70 oil.
Speaker Change: But served in certain dollar.
Speaker Change: Gas in a way sort of price impacts between those years are sort of equaling out in reality terms. So so I mean that the price impact between those numbers is very limited.
Speaker Change: However, you know, but it will move from $17 nine to around 20. This.
Speaker Change: And that is driven by.
Speaker Change: The production growth.
Speaker Change: It is driven by.
Speaker Change: Cost improvements.
Speaker Change: As you as you have seen and then on the Capex side.
Speaker Change:
Speaker Change: You have seen that we are taking down investments in renewables significantly.
And also there is an element of project financing sort of.
Speaker Change: For 2025, taking down.
Speaker Change: Or coffee spending from Turkey into 11 billion in sort of for 2025, so that sort of gives you sort of the mechanics. When it comes to pre cash flow movement of cash from operations is very much driven by by production growth and cost improvements and better underlying operations.
Speaker Change: Irina.
Speaker Change: Well a few words on the gas prices.
Speaker Change: We've seen them rise quite rapidly.
Speaker Change: Sydney.
Speaker Change:
Speaker Change: And Ukraine handsets.
Speaker Change: And also maybe more importantly, there were numerous I guess are indications that.
Speaker Change: Germany in particular and forced storage filling in the summer. So I think we're up for an exciting year.
Speaker Change: We can easily see significant price spikes I guess when you get into the summer there is high demand in Asia, where theyre, coinciding with the regulator storage spending.
Speaker Change: Think we're wrapped fashion excitement.
Speaker Change: Beyond that time, you have to get into 'twenty six 'twenty seven I guess before you see significantly new supply. So it's going to be tight until then then the big question is of course, when Asian demand across keep pace with new supply and the bank unknown is what's going to happen.
Speaker Change: So that Russian volumes, if there is some kind of settlement between Ukraine and.
Speaker Change: And Russia.
Speaker Change: The latter is probably a better over estimate it.
Speaker Change: And we the way we see it time.
Speaker Change: Gonna be a PCM, Jerry Norcia, I'm kidding, Tien one permanently destroyed.
Speaker Change: And expect volumes to countries Poland.
Speaker Change: T X back to Ukraine.
Speaker Change: They're bringing other yeah.
Speaker Change: 28.
Speaker Change: So maybe an additional Russian volume potential F 35, and if you contrast that to the LNG import.
Speaker Change: Last year and into Europe.
Speaker Change: 125, it's not really that significant so am I think.
Speaker Change: Strong markets and next couple of years and then some more uncertainty.
Speaker Change: It come to the Q&A at the breakout.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: Thank you and that is just one number I found very striking when we when we're looking into the gas the gas market because the storage level coming out of this winter will be around 42% and if you kind of have done you want to go back to 90.
Speaker Change: Percent of storage level actually Europe needs to attract 230, more LNG cargos than last year, which represent around 20% increase.
Speaker Change: And I kind of think that's kind of demonstrate a little bit the competition for LNG, we will see between Europe and Asia over the summer.
Speaker Change: Okay, we will try to cover a few more I ask you to limit it.
Speaker Change: Two one question is so that we can capture as many as possible I'll have hungry protocol.
Speaker Change: From UBS first and then Chris Coupland from Bank of America.
Chris Coupland: Thank you and just one follow up on the financial framework I think you're targeting you said that youre going forward.
The free cash flow is what would be use excess free cash will be used for shareholder returns are shrinking debt with the net debt back within your gearing range, probably by the end of this year, you would no longer used or the balance sheet to pay extra shelf returns to stay competitive you'd only be from pre cash is that the right way to think about it or would you let.
Chris Coupland: Net debt gearing.
Chris Coupland: A bit higher within the range.
Chris Coupland: Thanks Andrea.
Chris Coupland: It is this year is all of them the last year, we sort of extra ordinary.
Speaker Change: Elements from the POS anyway. So it was though it has taken a little business I'm too to share you know those magnificant results with our shareholders. So going forward. It will be on an on going business type of considerations related to two capital distributions. So I mean excess casualty surplus cashless with.
Chris Coupland: <unk> is clearly a number that you should.
Speaker Change: Have a look at our sort of the framework for the way, we think about capital distribution. Whoever. This is not mathematically you know plus minus one it is just providing us with sufficient capacity to be competitive and then of course, you know the balance sheet is always there.
Chris Coupland: But that's sort of.
Chris Coupland: It is in a place now where we think is sort of right to operate and we are not in our immediate have no plans to to re lever more than they are currently in a way. So this is actually a business that from now on will sort of be in an ongoing business and the capital distribution capacity overtime needs.
Chris Coupland: To come out of the way that we run our business. When does he said you know and as you.
Speaker Change: He institute there might be periods with the price spikes again.
Kelly: And Kelly.
Kelly: We will see to that we are you know to two that we are competitive in our capital distributions in those type of price environments as well.
Kelly: But there's a second.
Kelly: And on target.
Kelly: With this Ghana, which is clearly tell you how we will stay at the company going forward in terms of providing sufficient distribution capacity of true free cash flow.
Chris Coupland: Chris Coupland from Bank of America. Thank you.
Chris Coupland: I'd like to focus on inorganic and you mentioned there are no.
Chris Coupland: Organic capex numbers in your slide pack and also no disposals does that mean you feel happy.
Speaker Change: You're not going to repeat what you did.
Speaker Change: Just recently and use your balance sheet for more M&A.
Speaker Change: Does it mean that M&A needs to be if you like self funded so any inorganic.
Speaker Change: Gross needs to be at least near term funded with inorganic I E with disposals.
Speaker Change: And if you could.
Give us a little bit of an insight into the hurdle rates youre using.
Speaker Change: Feel free to use the latest acquisition that you made how that 10% acquisition.
Speaker Change: Is giving you a comparable competitive return.
Speaker Change: You mentioned, 10% for Empire wind. Thank you yeah.
Speaker Change: Talking about alluded a little bit earlier to how we think around inorganic.
Speaker Change: And the investments.
Speaker Change: You can think about the hurdle rate in between.
Speaker Change: But.
Speaker Change: I think you should look at what we have done.
Speaker Change: Ah recently and are both being in it in divestment and in a in an acquisition and really looking at how we constantly improve our business by doing both both of those elements.
Speaker Change: And I think it's the kind of the balance over time.
Speaker Change: You are you need to take a look at.
Speaker Change: If you Couldnt have one way of looking at is that you know we have divested in Azerbaijan in Nigeria.
Speaker Change: And then reinvest it in U S onshore gas high grading the portfolio, creating more longevity and creating kind of free cash flow in that respect. So it's not only one single.
Speaker Change: Acquisitions are or.
Speaker Change: The disposals as is the totality over time, you will have to look at kind of two ala evaluate in how we then actually kind of are improving our business by doing so okay.
Speaker Change: Okay.
Speaker Change: Thanks, Chris when it comes to sort of hurdle rates and the way we think about run rate is that we use the same approach within M&A as we used on Johan Sverdrup and other places I mean, they need to to get to two to two two clearly provide an additional return to or cost of capital so that as the starting point when it comes to.
Speaker Change: M&A.
Speaker Change:
Speaker Change: You know it is very I mean, clearly we do a lot of fundamental analysis as companies do.
Speaker Change: And see to where it has an underlying value in the company or assets that is sort of higher than what they are willing to pay but then of course. It's also important that you that we take into account that we have.
Speaker Change: A sufficiently good timing on acquisition and Divesture and I would argue that in impulse, we have a pretty good track record for actually.
Speaker Change: We're working counter cyclical when it comes to understand you know.
Speaker Change: The 10% that we acquired.
Speaker Change: Clearly.
Speaker Change: You know justify is well justified when you compare it to the underlying values and then of course the share price has a has calmed down. Since then we are very well aware of that but we are a long term investor in the in the company and that company is.
Speaker Change: As you know typically a $4 billion EBITDA company in a way it has.
Speaker Change: Good return on capital employed so the underlying.
Speaker Change: Delivery of the company.
Speaker Change: Is good.
Speaker Change: And that is sort of where we we sort of do or evaluations on all of that and then of course.
Speaker Change: You know, we need to be patient and we assure that.
Speaker Change: When.
Speaker Change: Sort of the offshore wind industry sort of comes through this troubling time.
Speaker Change: It.
Speaker Change: Is a good and competitive company a company that that we would like to to do be partly owner of.
Speaker Change: Thank you I'll listen to them and thank you for everybody asking questions. We did not manage to get to the bottom of the list, but we are on overtime on nurse and told him.
Speaker Change: We'll be in breakout sessions as well so.
Speaker Change: There will be opportunities to discuss further ask additional question.
Speaker Change: Questions.
Speaker Change: The breakout will start immediately after this so you have time to fill your cup and then move through your rooms. Those of you who have signed up for.
Speaker Change: The breakout you have left on your maiden tagged a b or C lots, an indication of which room you should go through and then there will be three groups of CEOC members.
Speaker Change: That will rotate between the rooms, so that you all get to talk to all of them. It's a session.
Speaker Change: It'll be around half an hour so a good opportunity to discuss when we blend also the breakout sessions at 12 30 and serve some lunch outside of this so that the owners I leave it to to close this session. Yeah. Thank you very much.
Speaker Change: And as always thank you for the good and challenging questions.
Speaker Change: As I said, we are on track to deliver leading our industry leading returns we are doubling the production growth and free cash flow increases.
Speaker Change: And our competitive capital distribution firms strategy, but taken clear actions to improve the value for our shareholders. So thank you very much looking forward to the breakout session.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: <unk>.