Earnings Call: Q3 2020

Oct 29, 2020

Ladies and gentlemen, thank you, Evelyn. Welcome to the Q3 2020 Equinor results call on what I know is an especially busy day. Lars Christian Bakker, CFO, will run through the results and then open up for questions. Also on the line, we have Seinshire, Head of Performance and from the 1st November, Acting CFO Ojan Kjellwane, Head of Accounting and Mads Holm, Head of Finance. The operator will run through the mechanics of the polling for a question, But I would also note that given the timing of the call and along with others reporting today, we request that people keep to one question with a maximum of 2 parts and those parts should be connected. So this allows us to get through the call fairly and effectively. So with that, I am very pleased to pass the word through to Lars Christian. Thanks very much. Thank you, Peter, and good morning, everybody. I hope you are all doing well, and thank you for joining the call. Equinor delivered solid overall operational performance in the quarter. Prices have recovered somewhat from the very low levels in the second quarter, and we have seen less volatility, but concerns of a second COVID wave in many countries have muted further demand and corresponding price optics. Despite this challenging price environment, Equinor delivered a positive cash flow in the quarter. We acted early and forcefully to the effects of the pandemic and its impact on commodity prices. Now 6 months later, we see the benefits. We have materially reduced our costs, and we have maintained strong financial flexibility. We were significantly helped by the strong measures taken over the last years to improve our competitiveness. This has made us more robust and equipped to handle this situation. CapEx spending has been tightly controlled and strictly prioritized. Costs are significantly down with adjusted OpEx and SG and A per barrel for the Upstream segments, down 20% since Q3 2019. And we are on track on our plan to save $700,000,000 in 2020. In the quarter, we have demonstrated that we are able to create value and our renewables business. We formed a strategic offshore wind partnership with BP in the U. S. And divested 50% of our East Coast offshore wind projects, Beacon Wind and Empire Wind. Equinor continues as the operator of both projects and will now benefit from complementary competencies, experience and skill sets. This is fully in line with our strategy to secure our mature renewable projects for large scale development and to capture the value creation by taking in strong partners when the timing is right. A net capital gain of around $1,000,000,000 is expected to be booked early next year. We use a similar model for the Akona project in Germany, where we booked a gain of more than $200,000,000 in 2019. Equinorid is making good progress in our low carbon projects, which will contribute towards the development of full value chains for capturing, transporting and storing CO2. This includes H2H Salton in the UK, a project for large scale hydrogen production with carbon capture. In addition, the Nordenlights project in Norway will contribute to the transport and storage of CO2 from industrial discharge points in Europe. We continue to develop our competitive oil and gas portfolio. And in September, we submitted a PDO for the Breydaberg field in Norway. This is one of the largest undeveloped discoveries on the NCS, and it will be developed as a subsea tieback to the Grainne field with 23 wells from 4 subsea templates. Breederbraek is one of several projects that will benefit from the temporary changes to the tax regime on NCS, with an average reduction in breakeven of $10 per barrel. We have discovered hydrocarbons in the Capahaden and Cambria prospects off the East Coast of Canada, and they are currently being evaluated. Continued technology development and digitalization provides opportunities for increased value creation and risk reduction. At Johan Sverdrup, which just celebrated its 1st year anniversary, digital solutions have yielded more than NOK 2,000,000,000 in additional earnings, and the field has achieved a unit production cost below $1 in the quarter a UPC below $1 in the quarter. This quarter, after growing insight and maturing our market view through a deep analysis, we have reduced both our short and long term price assumptions. Our focus has been, as always, on the long term and fundamental trends, not on short term volatility and market reactions. Based on our analysis, including supply as well as demand impacts, we expect average oil prices to gradually increase to $65 per barrel in 2025 with a continued modest uptick towards 2,030. After 2,030, we expect a gradual decline to $64 in $2,040 and below $60 in 2,050. Clearly, oil price estimates that far out in time are associated with great uncertainty. But remember, we require sanctioned projects to be robust at much lower prices than these long term levels. At our Capital Markets update in February, we presented our project portfolio on new fields to be put in production by 2026, representing around 6,000,000,000 barrels of oil equivalent net to Equinor, with an average breakeven oil price below $35 per barrel. Since February, this has been improved further. In April, with unprecedented market conditions, we said when deciding on future dividend payments, the Board of Directors will take into considerations factors such as expected cash flow, capital expenditure plans, financing requirements and financial flexibility. We have seen some signals of recovery in the commodity market. We have also demonstrated an ability to react swiftly and effectively during the difficult conditions, and this gives the Board confidence to raise the dividend to €0.09 for 3rd quarter. This confirms the statement made in April that the cut was a reaction to extraordinary conditions and that the dividend policy was unchanged. Now on to the results, and let me start with our safety performance in the quarter. The safety of our people and conducting safe operations is the bedrock of what we do. The recent fire at our LNG plant at Melkoye was serious, but most importantly, it was without any personnel injuries. The plant is expected to be shut in for up to 12 months for repairs. For the last 12 months, we reported a serious incident frequency of 0.6 and a total recordable incident frequency of 2.3 per 1000000 hours worked. Year to date, 19. And now to the financial results, which again were impacted by lower prices. Our realized liquids price in the quarter was $38.3 per barrel, down 27% from the period from the same period last year. Average invoice gas prices of $2.72 per 1,000,000 BTU for Europe and $1.53 for North America are down 48% 23%, respectively. The IFRS result is negative CAD 2,000,000,000 while adjusted earnings in the quarter is positive CAD 780,000,000 down from CAD 2,600,000,000 in the same period last year. We have further reduced our costs this quarter, and the unit production cost has been reduced by more than 20% year on year. We are also well on track to reduce our operating costs by $700,000,000 as announced as part of our action plan in March. Lower price assumptions and reduced reserve estimates for some fields result in a net impairment this quarter of $2,900,000,000 Most of the net impairments are related to the U. S. Onshore field, Bakken, and the Mariner field offshore, UK. In Norway, total net impairments are $360,000,000 on producing fields. The group tax rate in the quarter was 65%. A lower tax rate in Norway was offset by higher than guided rates in E and P International and MMP due to the earnings composition. Then some comments to each of the reporting segments. E and P Norway delivered adjusted earnings before tax of CAD 773,000,000 underlying OpEx and SG and A was reduced by more than 25% per barrel year on year in Norwegian kroner through increased production from new fields with very low cost and further efficiencies on mature fields. Our new organizational unit focusing on improved value creation on late life fields on the NCS is off to a strong start with visible cost improvements already. The tax rate in the quarter is lower than previously due to the temporary changes in the NCS petroleum tax regime. E and P International delivered adjusted earnings before tax of negative one off $4,000,000 The result is impacted by the low prices and reduced production from the Peregrino field in Brazil. Peregrino is temporarily shut in for repairs and is expected to start production in the Q1 of 2021. We see strong progress on cost reductions in the segment with OpEx and SG and A down 19% year on year. Cash flow from operations is $381,000,000 for the quarter. The tax rate of 84% is higher than normal guidance, mainly due to uplift on carryforward losses in the UK. E and P USA 3rd quarter results are, of course, also impacted by the weak prices. Costs have been forcefully reduced, and we have stopped drilling onshore due to the current price environment. Adjusted earnings before tax came in at negative CAD193 million Cash flow from operations was $276,000,000 with a positive contribution from our onshore business. Our U. S. Business delivers a positive cash flow also after investments in the quarter. Our M and P segment was impacted by weak refinery margins, offset by strong contribution from European gas sales and trading. MMP delivered adjusted earnings before tax of $262,000,000 In our Other segment, we also report activity in our new Energy Solutions business area, and we had good availability across our offshore wind portfolio in the quarter. Our equity accounted investments delivered a net income of CAD 60,000,000 in the quarter, and the NES Business segment as a whole delivered a positive contribution. We delivered stable field operations in the quarter without any negative COVID-nineteen effects. Equinor's total oil and gas equity production in the quarter was 1,000,000 994,000 barrels per day. Compared to Q3 last year, we grew our group equity production by 9% when allowing for portfolio changes and production curtailments. We adhere to the production curtailments imposed by Norwegian authorities on Jens S, but we use this opportunity to perform modifications and upgrades without further production impact. New fields and new wells put on stream contribute to the production growth. We also took the opportunity to increase our NCS gas production as the European gas prices recovered through out the Q3. In the quarter, exploration activities resulted in 7 commercial discoveries, but 2 wells results are still being evaluated. Year to date, we have delivered 13 value creating discoveries globally. This is a strong 50% success rate. Our Renewable Electricity production in the quarter has been in line with expectations. In the 3rd quarter, we delivered a net positive cash flow of $216,000,000 This is after capital distribution, which in 3rd quarter included a payment of around $1,000,000,000 for the Norwegian States portion of the share buyback program. We received a tax payment of CAD160 1,000,000 in the quarter, reflecting the temporary changes in the NCS tax regime, in addition to the low prices assumed. And the tax installments for 2020 were first estimated in June. Based on increased prices for the second half, we expect taxes payable in the second half of twenty twenty at around NOK 2,000,000,000. Year to date, we have had organic investments of almost NOK 6,000,000,000 and we are on track to deliver on the full year CAD 8,500,000,000 organic CapEx guiding for 2020. The net debt ratio at the end of the quarter was 31.6%, up from 29.3%. 1.3 percentage points is due to the impairments, while 1.5 percentage points is due to the share buyback program payment to the Norwegian state. Without these, the net debt ratio would have been slightly reduced in the quarter. So let me conclude with our guiding. For 2020, we expect a production growth between 1.5% 2%. This outlook depends on how European gas market develops, where we use our gas production flexibility to boost value creation. The production impact from the strike on the NCS was marginal, and we expect a full recovery of the volumes by year end. The impact from maintenance in 2020 is expected to be around 30,000 barrels per day. We expect around 3% compound annual growth rate in equity production from 2019 to 2026. We also maintain our expected exploration expenditure level for the year of around $1,100,000,000 The guided organic CapEx levels for 20202021 are unchanged at around $8,500,000,000 and 10 billion respectively. And then to the closing. As you are aware, this will be my last analyst call as CFO of Equinor, and I would like to pass on my thanks to all of you for the engagement and the dialogue you have had over the last few years. It has always been a pleasure, and I know you will be in very safe hands when Svein takes on the role as acting CFO. And by that, Peter, I pass the word back to you as you open up for questions. Thank you very much. Thank you, Lars Christian. I also sort of pass the thanks that I've had from a number of people through to you as well taking this opportunity to do that. Many thanks. And with that, can I pass the word through to Evelina, the operator, to run you through how you may poll for questions? Thank We have a question from Oswald Clint from Bernstein. Please go ahead. Your line is open. Thank you very much, everyone. Good morning. And yes, so thank you very much, Lars Christian, as well for all your help. Just to keep it to one question and one follow-up. Gas business, the European gas business, price is down substantially, but the natural gas Europe result was particularly strong. And I the volumes were up. And I actually see that Oseberg was pretty much pumping at winter levels even in the Q3 when it's normally the lowest level each year. So and I know you have quotas around that particular field. So I just wonder if gas prices stay high here in the Q4, can you still take advantage of those? Or are there could there be some restrictions against that? And then my follow small related follow-up is, do you have any business interruption insurance for the Hammerfest issues? Thank you. To the last part of your question, the answer is yes. And to the first part of your question, the answer is yes. If the prices gas prices in the 4th quarter is good and hopefully even better, then we have capacity both from a production point of view, but also from a quota point of view to take advantage of that situation to create superior value. And then just sort of an additional remark from me, and that is that it comes to production curtailments, those quotas have been imposed for the liquid rich assets and not gas producing fields like the trough, for example. Okay, got it. Our next question comes from the line of Alwyn Thomas from Exane BNP Paribas. Please go ahead. Your line is open. Hi, Lars. And yes, sorry to see you leaving Equinor. Just a one main question for me then. On the dividend and the increase at this point, I was just going to ask really what gives you the confidence to increase it at this time given what is a pretty uncertain macro outlook at the moment? Is this partly due to the tax incentives in Norway that will help? And perhaps if I could sort of follow on the question, say, what should we infer from this for the company's free cash flow generation going forward? And does it indicate that you think gearing has potentially peaked at the end of that quarter? Thank you. Thank you for that question. I think the best way to answer your first part is actually to go back then to March, April when we were really impacted by the drop in the commodity prices. Huge uncertainty in many dimensions, one being, of course, we the world didn't really know whether we were able to secure flow assurance, meaning that we were able to sell the products. We were not alone in that. A lot of companies had that challenge. We took some extra positions to secure transportation capacity and storage capacity to weather that off. We have benefited from that since then. We have also taken many measures to reduce our spending and secure sort of the cash flow generation capacity. And we have good progress on the SEK 3,000,000,000 program, of which SEK 700,000,000 is in the area of expenses, costs that is. So that adds to it. And then with a positive cash flow in the quarter of 260,000,000 dollars after tax, after capital spending and after a capital distribution of $1,300,000,000 We feel that the discussion in the board was such that now we have more visibility and confidence on a forward going basis. So that's why we increased the dividend by SEK 0.02 per share. So yes. And the second part of that question was? Cash flow. Sorry, yes. I just sort of followed up. On the cash flow. Yes, that's it. And gearing. Yes. On the cash flow, I mean, the gearing for this quarter, if you adjust for the impairments and the SEK 1,000,000,000 in share buyback, then the gearing would have been slightly down. And I think as a CFO, and this is my last call and looking at what we've been able to deliver and me contributing then together with the rest of the organization over the last 2 odd years. I think that cash flow positive number for this quarter, given sort of the commodity prices, given everything, I feel that is a strong sort of position to be in, quite resilient. And also, if you look at the unit production cost level, the reduction of 20% and so on, that's why we are quite sort of confident that this increase in the dividend is okay without me guiding on what the cash flow will be for coming quarters. But I think that's how far I'm willing to push it. So and I'm going to warn you guys too, because I said to both, Jan, Nat and Svein that since this is my last analyst call, I'm going to hand more questions to them than I normally do. So yes, but so far, yes, I'm hanging in there. Okay. Thanks Lars and all back to the future. Thank you. Our next question comes from the line of Lydia Rayforth from Barclays. Please go ahead. Your line is open. Thanks and good morning. So I was just thinking about sort of the you talked about ExxonMobil being very resilient and yet there have been things that operationally haven't seemed to have worked quite well. So things like the snorke bit higher or Peregrine being down on Castberg site. So just as you think about sort of leaving Equinor and sort of where do you think you're leaving in terms of operational performance? So how much more is there really to go for in terms of getting the operational side completely right? And partly linked to that, I'm sorry, please. On the New Energy business, you talked about Dogger Bank and in the press release about a reversal of losses there helping to the earning countries. I'm just wondering sort of what that's related to? Thanks. Could you repeat that, ask part of the question, please, about the Dogger Bank, Lydia? So I think just in the press release, you did talk about Dogger Bank, the part of the earnings performance in the New Energy is related to Dogger Bank or reversal of losses at Dogger Bank. And I was just wondering what that related to just from an operational perspective. Yes, okay, very good. Now on the operational side of it, I mean, Pergino, the change of the risers replacing them is taking way longer time than what we expected, and that is due to the COVID corona situation in Brazil. Brazil is a country that is being more severely hit than many others. So that is why that is dragging out. On the Smerbit, that fire, we are investigating it together with Norwegian Safety Authority and the Norwegian Police. So there are 3 investigations ongoing on this one. So I'm sure we're going to jointly get a good really good picture on what happened and what have you to avoid this from happening again. And the reason for this to be put out for up to 12 months. And the reason why we're kind of a little bit soft on and not very firm on how long is that we used saltwater to both pull out the fire put out the fire and also cool down their adjacent equipment. So we use the standby vessels actually to do this. And of course, saltwater into a plant like this and all the electrical wiring and such takes time to get a good overview of what needs to be done and what needs to be replaced. Other than that, I would argue that we have very good operational performance in the quarter. And I'm a strong believer in continuous improvement with all the small ideas. And in this case, I would like to address more the I mentioned the smaller sort of incremental improvements because that's where we really can get sort of the further improvement in this area. It's so wide set of ideas that comes up from the organization. It's just after 30 years and working offshore 7 of them. I'm still immensely impressed by the ideas that comes up. Everything related to sort of digitalization and operating from onshore centers, all that contributes to on top of this. So I'm a strong believer that there is still more to come, some incrementals and some more of a step up. On the Dogger question, this current quarter result was materially impacted by the revenues of losses in the Dogo Man projects. This was partially offset by lower income from other equity accounted investments than including the effect of reduced ownership share in our Kona wind farm compared to the 2019. I'm not sure, if you want to add to this or I can add a couple of comments to that. So we have provided a loan to Dogger Bank in the early phase, and that is treated as part of the net investment. But when we then move on and we have another setup, then we reverse the kind of the cost booked towards this net investment. So it's fairly technical. This is part of the SEK 60,000,000 from the equity accounted investment in the New Energy Solution. Our next question comes from the line of Johan Charrington from Societe Generale. Please go ahead. Your line is open. First, thanks a lot, Christian, for your engagement with the sell side. And second, if I may, turning back to dividend. Also, the company delivered free cash flow in the 3rd quarter. This morning, it is an hike, a turn regardless of the renewed COVID-nineteen stress. And so while you indicated the four factors that are taken into account by the board to decide on dividend levels, where does the board play the line of sight? That's the key question mark. And I will add in relation to this, how much of the renewed COVID-nineteen stress fed into the 3Q decision for dividend? Yes. Thank you for the questions on the dividend. Now as Lars Christian said in his introduction and his response as well, it's about that what we said when we cut the dividend here in the first half, we said that we did that based on the extraordinary market conditions that we were in at that point in time as there were issues then related then to potential flow assurance. It was extremely low prices that we saw, both for the liquids as well as for the gas for that period. What we now have seen, we have seen that there is some positive recovery that we have seen, especially the gas prices currently quite a lot higher than we have seen in the beginning of the year or the beginning of the crisis. So in totality, the board has then taken all this into consideration, also looking into all the improvements that we are doing. We are well on our way with the improvement program and the action plans that we communicated. So that was the basis then for then coming up with the dividend and setting that at SEK0.11 per share. So this is not only to do with the quarterly results. This is also about visibility and confidence in the long term earnings that we expect. Yes? Thank you. Thank you. Thank you. You're welcome. And a question comes from the line of Michele Delavigna from Goldman Sachs. Please go ahead. Your line is open. Thank you. Thank you so much, Lars Christian, for your help over the years and all the best for the future. One question from me. When I look at your tax paid, you're saying that in the second half, you have DKK 2,000,000,000. You received a refund of DKK 1.6 $6,000,000 in Q3. So am I correct that I should expect the payment of $400,000,000 in the 4th quarter? And then secondly, could you please help me antique the impact of the temporary tax regime on the Q3 cash flow? Thank you. Yes. Introductory remarks by me and then Sven can fill in. We got SEK 1,500,000,000 in refund from the Norwegian state, and that was partly as a consequence of the changes in the fiscal regime, the tax changes, but also what we looked at as commodity prices then for the second half. And then we have had an uptake in the prices. So we expect actually net then for the total second half, 3rd and 4th quarter a tax payment from us to the government of NOK 2,000,000,000. So I'm not sure, Svein, if you want to add to this. No, I think you explained most of it. As we communicated in connection with the Q2, we then received the SEK1.5 billion in payments for 1st August, but also then being clear on that we are doing recalculations for the 2nd installment that we are doing the 1st October. So based on what we are now seeing on the totality, including the prices and those things, we see that we are in a position that for totality, we will pay them NOK 2,000,000,000. So we paid more in October and then we will have a refund also in the December payments. That's the technicality of how the Norwegian tax system is working. And of course, this has helped and being positive then to our earnings. But also the things that we're doing by ourselves by improving the OpEx side and the privatizations that we are doing is also, of course, supporting the cash flow for the quarter. Thank you. Our comes from the line of Thomas Adolff from Credit Suisse. Please go ahead. Your line is open. Good morning and thanks for taking my question and all the best. Two questions for me, please. Just on shareholder distributions. And obviously, gearing is now slightly above 30% ex leases. And in the past, you mentioned that 30% is your potentially strong free cash flow generation assuming the oil price doesn't collapse. I'm just wondering if there's a willingness or rather a discussion internally that once you come out of the uncertain winter corona season, whether you could launch or relaunch Phase 2 of the buyback? And then secondly, just looking at your production forecast for 2020. And if we look at the second half of this year at the time of the 2Q results, is it fair to say that nothing since has changed because of the flexibility you have in your portfolio? For example, Snobit may be out for a while, but this can be fully offset by Schallen Boseberg producing more than originally planned? Thank you. Yes. So on the gearing of 15% to 30%, it's kind of the guiding range, but we are comfortable by being lower than 15% but also higher than 30%. And then there's a disclaimer, you can't interpret what I'm now about to say in one direction or the other, whether we are going to do it or not going to do it. But we have said that when it comes to the share buyback program that, that is temporarily paused. We are committed to go through with the full $5,000,000,000 program eventually. And then it's just a question of when and how much in the different installments going forward. And what we now have done on the dividend side is the first change compared to what we landed on after we cut the dividend by 2 thirds. And we have also said that we are going to have competitive sort of shareholder value creation. So we will also honor that we will increase the capital distribution to the shareholders via 1 and or the other on a forward going basis. But I can't tell you what that looks like. 1, I'm not going to be around the next quarter, but and second, we don't guide on that. But yes, and then Svein, any comments from you? Just on the production question that you had for the full year. As we said in the remarks and last question said is that expected 1.5% to 2% range. Of course, it will depend on the gas prices and the outlook there And we are utilizing the flexibility. Currently, the outlook for gas around more than $5 in Europe, so on the NBP, which has recovered quite a lot since the summertime. Then just a reminder also on the Q4 is that we have moved quite a bit of the turnarounds from 2nd and third quarter where we normally do it on the NCS. We have moved turnarounds out in time, but we will also then do more turnarounds in Q4 on the NCS than what we normally do. So that is also taking into consideration when we do the outlook for the full year. Can I just quickly ask you on dividend versus buyback? Obviously, your plan is to get the dividend back to pre COVID levels eventually. But the buyback doesn't have to wait for that, right? I mean you can be quite dynamic and opportunistic depending on the environment. And sometimes when prices share price and buyback makes more sense, right? We are not allowed to think like that. For us, share buyback is all about capital distribution. But you are correct that share buyback might be a more of a flexible tool compared to kind of a steady dividend unless you want to sort of pull out of the toolbox extraordinary dividend. But for us, share buybacks makes more sense than extraordinary dividend because it secures sort of future value creation and shareholder distribution by reducing the number of shares and increasing the value per share in the company. Thank you. Our next question comes from the line of Jon Rigby from UBS. Please go ahead. Your line is open. Thank you. Hi, Lars. Can I ask a question sort of linked to the report about North America Investments? And obviously, there's some further impairment charges coming through this quarter. I'm obviously, hindsight tends to be 2020. And so we're all experts looking backwards. But is there some lessons to be learned here looking forward? Because it seems to me that analogous to, let's say, North American shale is the movement by the industry into investing into renewables and particularly wind. So I just wondered whether you're able to just sort of walk me through the rigor that you apply to thinking about investments into wind. I particularly say that because it does feel to me that it's starting to get that flavor of a sort of gold rush where everybody wants to invest in the same thing at the same time? Thanks. Yes, another really good question. On the impairments, the majority of it is related to 2 assets that we have mentioned, Bakken and Mariner. Bakken more on the pricing and Mariner price, but also on the reserves. But another way to slice this is actually to say that the majority of the impairments for this quarter has to do with assets that we either acquired or sanctioned way back in time. And whatever we have sanctioned since then is much, much more robust. And that should not come as a surprise to you. You have seen year in, year out, we report on the improvement of the sanctioned portfolio of projects when it comes to breakevens and such. But I think that is something just to be mindful of that it's a lot of sort of history here that as long as those assets are part of your portfolio, this is what we are facing. But we are also quite proud, and I must say, I'm very proud of the job that the U. S. Onshore organization will support from technical based organization here in Norway. The huge improvements they have been able to deliver on not only on the HSE side of it and flaring is top notch in many ways compared to the industry, but also on the operational performance and the costs, whether that is operations or drilling. So huge improvements that have helped us to make it more robust, but still challenging in the current price environment. But as we said, in the quarter, positive free cash flow also from the onshore business. So that is also important to just bear in mind. Then to the really core of your question, onshore being something that I think in the beginning was partly a game for flipping assets. It was more of a real estate game than necessarily oil and gas business. You bought land, you improved up the increased the value by drilling and improving up oil and gas and then you hope that someone will come and buy your land in many ways. We have seen that behavior that you're describing in the renewable side for a while. I think it's going to be fueled even more going forward. And that is why we have been very, very cautious on what we have been willing to bid for. That is why we have been very restrictive also when we have first put in a bid that is not going to bid away all the value creation, because this we do this because we want to build a business. We do this because we want to create value. And of course, this is if you're an NGO and think of this as saving the planet and reducing CO2 emissions, of course this is part of the toolbox that the world in totality needs to turn to make that happen. But as a commercial company with responsibility in many dimensions among our one being the shareholders, we need to create value. And that's why we do this, but only then enter into assets where we can believe we can create value. I think we said this in a couple of investor calls some weeks back, months back. Going forward, I think it's going to be buyers market in the oil and gas segment and sellers market in the renewable segment. If walking out of the door now on walking out of the door now on tomorrow afternoon, my last day in the office, is that we have a 3% compound annual growth rate in the oil and gas business towards 2026. That's a healthy good growth just based on what we have. And we have a 30% annual growth in the Renewables segment in that time frame annual growth just based on what we have. So we are in a very good position to take the time to make this right and not jeopardize value or erode value or do some moves that in hindsight resembles what we now see for in many cases for many companies and many assets when it comes to the unconventionals. So I'm not sure, Svein, do you have any additional comments? Or it was perhaps a long answer. I agree with you. It's about as we also said that the CMU, it's about value driven growth. It's about creating value and creating profitability in the Nest business as we're moving along, and that's what we have based on our strategy on. And I guess we have also been able to demonstrate a good value creation also lately with the divestments that we did. And as last question said, expect to book again in 2021 of around SEK 1,000,000,000 on that transaction. So value over volume. Thank you for that. Appreciate it. Our next question comes from the line of Biraj Borkhataria from RBC. Please go ahead. Your line is open. Hi. Thanks for taking my questions. I just had a couple of follow ups. Just on the renewables business, you are starting to build the track record of securing assets, starting to develop them and then monitoring them. And I suspect the capital employed of that business is now quite small on a net basis. Could you just clarify what is the current capital employed of new energies? And then the second question, going back to the dividend, you mentioned as part of the initial commentary, you have good visibility on cash flow. Can you just are you able to provide any color around expected cash tax payments for 2021 or at least the first half of twenty 21? Any color on that would be helpful. Thank you. I'm sure, Eliane or Sven? I can go on the start with the latest one is for the first half of the quarter and then the cash taxes on LCS. It's how we are now seeing it is then related then to the tax payment on the Norwegian continental draft. You pay half of the taxes in the year it happens and half of the tax in the year after. So in a way that means that what we have said now is that we are then going to have NOK 2,000,000,000 in payments then for the second half and everything else equal. If the prices are as we projected and as we worked with it, then we should expect that we get the same then then for the first half of twenty twenty one. So that's the way it works. If prices are lower and higher and those things, then there will be an adjustment when we do the final calculations based on the results that we are generating also in Q4. Could you take the Yes. So what we have on our books, of course, this is equity accounted investments. So you need to put that into account. So approximately between USD 1,200,000,000 and USD 1,500,000,000 in our books right now. Equity, sorry, answers. Equity, First, congratulate, Lars Hissam, on a very well handled tenure. And I'm sure that both of you and all are happy when it comes to the share price, especially during your performance, it appears so far this year. So job well done. Thank you for that. And also my question is I'm going to click on actually this type around. Now previously, I heard from Equinor that you have at least after the summer, you were in process of securing the project financing of Degrogybank. And by that, I got the impression that the debt facility at Deutsche Bank was not going to be placed by Equinor Azar, but more in terms of straightforward project financing. So I'm just curious to know if you have an update on the actual financing of Stordi Baik and if it's still looking to be project financed or if you will write that through Equinor Assa and fund it through, yes, the parent company as you have in the past? Thank you. Yes, perhaps, Mats, you want to give it a go on this one? Yes. Thank you very much. Last question. Very good question. So the way we do things here is that we always look from a totality where we look on how we finance things and we are searching towards what makes most sense from a liquidity and a price perspective. We will consider project financing together with BP once they are fully on board on the project. So I think that's I'll leave it with there. Just Mats, it was related then to the Dogger Bank. And in the Dogger Bank, we are in the process then for working with project financing on that asset together with our partner SSE. Our next question comes from the line of Alastair Syme from Citi. Please go ahead. Your line is open. Hi. Thanks for taking the question. Last question, I remember this call quite vividly last year and I remember because you ended up having to defend the oil price reset and people sort of criticized you for being too aggressive. I think you've now covered it again and I don't really want to get into discussion what the right price is, but I'm intrigued about what stops you from simply using the forward curve for an increment analysis. Is it simply that doing so will too much pressure on the balance sheet? I get it that you're not sanctioning projects on this basis, but my observation is that in a way you're creating an impression for investors that they're being asked to back a view that oil prices go back up. Yes. And we believe the oil prices will go up again. This is a reoccurring topic and I talk to a lot of different sort of communities, whether that is investors, analysts, journalists or peers or what have you. And what I see is, it's that discussion is somewhat skewed towards a huge focus on the demand side and the weak demand, which we see now in the market, but that's for more of the short term, but very little focus on the supply side and what has been taken out of new capacity over the last year by projects being not sanctioned or postponed or stopped even in halfway into the project sort of development in a few cases. So for us, this is a huge and very thorough analysis, everything from population growth to GDP growth in different countries. We have supply demand for not only oil and gas, but for other energy sources and what have you. And then you do the interactions and simulations and ended up with a revised set of prices, taking them down $13 for the 20.20 prices, for example. And that's why we I tend to use the word that it's growing insight because whatever we saw in March, April in the drop in the commodity prices, including the forward prices that you referred to, that there was not any fundamentals behind it. It was just sort of the market reaction there and then and the assessment around that. But one really sort of fundamental factor impacting the medium, long term supply demand factors would be if you have a breakthrough technology to more of that green or blue hydrogen works and it's profitable and can compete with whatever and we have CCS on top of it. That would be sort of a really game changer that will impact the medium, long term prices. And I also get this question about is this in line with well below 2 degrees in Paris and all that. And who knows what the price is for well below 2 degree scenarios in 20, 30, 40, 50 will be like. Low oil and gas prices stimulates to increase demand. High prices stimulates to a drive in the direction of other sources. So what is what's the truth? And no one knows until we are there out there out in time. But what we are what is acquired of us from the regulator and auditor and is that we have a personal view on what prices should be like out in time. This is our best assessment and this is what we believe in to be the most likely scenario. And the prices we will have until we deem them to be different. And that's the technicality part of it. The way that we then run the business when it comes to sanctioning projects is that we have a much tighter set of criteria. Internally, I have this 6 pack of KPIs that all my colleagues in the CEC have to sort of adhere to and deliver on when it comes to sort of sanctioning and exploring and buying and driving the business forward. So yeah, that's the short answer to your question. Thank you and I wish you all the best. What the world brings you next. Thank you. I guess I would know my market value hopefully in a couple of months' time. Yes, I don't know. Our next question comes from the line of Christian Malek from JPMorgan. Please go ahead. Hi, Lasse. Well, first of all, I wanted to say good luck and well done for an amazing tenure in terms of managing CapEx efficiencies. And I think what you've done has been quite extraordinary on the CapEx efficiency. But just coming back to the point around the oil price in your view, what strikes me is I'm quite perplexed as to how you have managed your dividend through the last 6 to 12 months because I remember 6 months ago you're saying that the reason for the cut was to prioritize project investment. And since then, we've seen project delays and yet you still have the positive yield price. So does this strike me as so you can't see it, but why aren't you buying back stock and raising your CapEx given you've got such a great portfolio, particularly in Brazil? So I just want to sort of square out your constructive view versus capital allocation and priority of that allocation. While I walk in a dividend, I'm just not quite clear as to the sort of the logic in terms of how it's being prioritized for the capital frame. Thank you. Yes. This is another sort of big question, but very sort of very much to the core of what an executive committee needs to relate to and factor in when they make decisions and privatizations. The given the growth that I just mentioned both in renewables and in oil and gas portfolio, And this is then value of volume, but still you need to sometimes talk about the volumes because there will be no value without volumes. So this is about growth in oil and gas and growth in the renewable side. Profitable. And one of the learnings is never run a business just based on one KPI because that will drive the business in a direction you don't want to. So you need a balancing act. But you don't in our case, you don't want to either get the cost inflation back into our company. And the best way to get cost inflation back into your business is to start running. And we don't want to do that, because one of the key learnings has been to just work the assets and the project diligently, walk one day to the next and make it work. And this is also about our capacity. Of course, we could have we have a huge sort of list of projects that we can tap into and speed up even more in the short term. But that would stretch the organizational capacity that we are having. And I'm afraid it will lead to more cost inefficiencies being brought in. So then you start eroding value again, and then that erosion leads to that you're not as robust as you would alternatively have been. So then on this question then on prioritizing capital distribution versus CapEx. I mean, it's kind of a balancing act. We would like share holders and the market to see that this is a growth share price and also a dividend sort of share buyback sort of yield sort of share that you're buying into. And that's what you're trying to balance in this. And then you need to safeguard also your balance sheet, of course, from a gearing point of view and make this robust. The more than SEK 8,500,000,000 that we took on, on debt earlier this year was also at that point of time, we didn't know what the financial market would look like and response and the pricing and robustness given the early days of the COVID-nineteen or coronavirus situation. Now we know more. But at the same time, we're taking them on with a very low interest rate compared to the average that we have had. So yes, I'm quite proud of the balancing act that we've been able to deliver on. Just a quick follow-up. Should we make any major change in terms of following your sort of transition? Or should we assume that this capital frame sort of is broadly consistent? What just sort of measure our expectations in terms of the new management team? Well, then you need to ask the new management team, I guess. I don't want to, Ger, to go into that if this is a forward looking one, yes. Thank you. Our next question comes from the line of Jason Kenney from Santander. Please go ahead. Your line is open. Thanks. Maybe just ask a question about the renewables ambitions in a slightly different way. So if I'm modeling oil, gas and renewables on a total energy basis, I'm thinking Equinor will be around 6% renewable energy supply by 2,030 5, which doesn't sound a great deal when you compare that to the European peer group, which could be 15% renewable energy by 2,035. And even a couple of peers are targeting 22%, 25% renewable energy. So I'm adding up all of your renewable power, adding it on top of your hydrocarbons. So I suppose the question really is, is that 12 to 16 gigawatt of renewable power ambitious enough to truly kind of say that you are going to be a renewable driven energy entity within the next decade? On this one, I think what at least we are able to show you is a visible path towards that number out in 2,035 based on existing projects, which I think is good. Then on what you have on ambitions on top of it, I mean, we could have that V2. But I think what really makes sense for us is that path, back it with concrete projects, specific projects. And then it's at balancing act 2. We don't know what the future of renewables will look like, neither from a composition point of view or from a revenue sort of income point of view. So where do you place your bets in this? It's back to John's question of is it sort of a bubble in the making. He didn't use that word, but that's what implicit in this question. And if so, you want to tiptoe and walk this with cautiousness but also robust portfolio and quality assets. So that's the balancing act we want to take, because we want to create a business, we want to create value creation for you guys and then safeguard the company. Yes. Then we are off to the is it the last question? Okay. Yes, thanks for that. Cheers. Our final question comes from the line of Martin Ratz from Morgan Stanley. Please go ahead. Yes. Hi. Hello. I have a very short and practical one. So the CapEx guidance for this year, I just wanted to check the math. It seems to imply given the 9 month sort of total so far year to date that it implies $2,500,000,000 of CapEx in the 4th quarter. But then looking at the CapEx guidance for next year also implies $2,500,000,000 a quarter. I just wanted to check that this is the correct interpretation. Are we now just looking at $2,500,000,000 of per quarter? Is that basically what it is? Svein? Yes. Thank you for the question. What we have now said is that for this year, we stick to our CapEx guiding of around $8,500,000,000 We are now just, yes, almost SEK 6 1,000,000,000 in organic CapEx so far. So that's the math. And for next year, we have also then said that our guiding is then around SEK 10,000,000,000 for 2021 in organic CapEx. So that's the outlook. Thank you, Svein. And then if I could have some closing remarks from me since this is my last analyst call as CFO of this great company, a company that I worked for close to 30 years. And I have been privileged with all the tasks that and challenges that have been thrown at me in many ways of opportunities, but even more so I'm really humble, but also appreciative of all the trust that my fellow co workers have put in me. And then to you guys that have called in, and by guys, I'm meaning both boys and girls. I really appreciate the time that I've had with you guys too. All your questions, We learn a lot from you, perhaps more than you think of sometimes. I understand that some of the questions are specifically related to us. And sometimes the questions are you want to hear our answer because you want to compare with someone else. So I learn what you ask other companies by the questions you ask us too. And you are helping us to improve and become gradually a stronger and stronger company. So by that, I wish also you all the best in your endeavors and whatever you have our jobs now and the future holds for you. And then I would just encourage you to be cautious and remember to stay safe. Thank you. This now concludes our conference call. Thank you all very much for attending. You may now disconnect your lines.