Good day, and welcome to the Equinor Analyst Call, First Quarter 2023 Results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by one on your telephone keypad. If you would like to withdraw your question, please press star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants this call is being recorded. Thank you. I'd now like to welcome Bård Pedersen to begin the conference. Bård, over to you.
Thank you, Gavin, good morning ladies and gentlemen. It's a pleasure to welcome you all to Equinor's Analyst Call for our First Quarter Results for 2023. As it was said, my name is Bård Glad Pedersen, I am Head of Investor Relations. As usual, our CFO, Torgrim Reitan, will present the results before we open for questions. We know it's a busy day, so we will aim to keep this session within an hour. Also on the call today, we have Svein Skeie , our SVP for Performance Management, and we have Ørjan Kvelvane , our SVP for Accounting. With that, I hand it over to you, Torgrim, to present our results.
Okay. Thank you very much, Bård, and good morning, everyone, and thank you for joining us today. This quarter we are delivering strong results across the business, you know, but with lower prices than the historic height we saw last year. A mild winter in Europe has helped bring energy prices down, and this is good for Europe, and we continue to be a reliable supplier. The gas market is still vulnerable. Looking ahead to next winter, storage levels will again depend on weather, demand across Europe and China, and LNG capacity. These factors can easily put pressure on prices in a tight market, and small changes can lead to significant fluctuations.
We continue to be a stable supplier of energy to Europe and the world. Therefore, I'm happy to see solid operational performance, and we are on track to deliver 3% production growth in 2023. We are still in uncertain times, we need to ensure that we steer safely through volatility. Our strategy remains firm, and we aim to be a leading company in the energy transition while offering energy security and delivering strong cash flow, creating value for our shareholders as we change. Our balance sheet is very strong, and our cash flow expectations continues to be high, positioning us well to transition in an investor-friendly way. Let me take you through the results.
For the first quarter, we have strong earnings and cash flow across the business with very high value creation from our marketing and midstream segment. We have seen solid operational performance with production growth driven by ramp-up of new fields and resumed operations. We continue to have high gas production from the Norwegian Continental Shelf to Europe with no deferral of gas volumes this quarter. We experience cost pressure as an industry, you know, as any industry or consumer, and therefore, we are carefully prioritizing our activities and driving cost control.
At our capital markets update in February, we announced a step-up in capital distribution based on strong outlook and results, and we are committed to deliver a competitive capital distribution. It is our clear intention to deliver in total $17 billion in 2023, which results in an industry-leading yield of around 20%. For the first quarter, the board has approved a regular cash dividend of $0.30 per share, which was a 50% step-up last quarter, and in addition, an extraordinary cash dividend of $0.60 per share, making the total cash dividend $0.90. We continue to execute a $6 billion share buyback program for this year.
Subject to approval of our annual general meeting next week, we will start a second tranche of $1.67 billion, which we will start on the 11th of May . This reflects our clear intention to continue with this level for 2023. Also going forward beyond 2023, we will continue to use capital distribution as one of our tools to achieve a more efficient capital structure. Safety. The trend for our safety performance is positive in several areas. The 12-month serious incident frequency is 0.4, but we see an increase in the 12-month average when it comes to total recordable injury frequency, which is 2.7 per million hours worked.
We investigate every single injury to learn and prevent it from happening again. Production. We are on track to deliver 3% production growth for 2023. In this quarter, we deliver high production of oil and gas with 2,130,000 bpd , which is 1% up from a strong first quarter last year. In that quarter, was the last quarter we had production in Russia. Since then, we have also divested our share in Ekofisk and reduced our interest in Martin Linge. These all contributed to a high production in the same quarter last year.
This quarter, production growth is driven by Johan Sverdrup Phase 2 and Peregrino coming on stream, and Snøhvit and Caesar Tonga coming back in operations. In the U.S. Gulf of Mexico, the Shell operated Vito field was put on stream and will contribute to future production growth. We saw high deliveries of natural gas to Europe, with gas up almost 2% from last quarter and Kårstø and Kollsnes, you know our processing plants, delivering 99% production efficiency. We had some short-term operational issues on Johan Sverdrup in the beginning of the year. These were quickly resolved, but they impacted production growth in the quarter.
Expected turnarounds for next quarter will impact production by 80,000 bpd . With this, we maintain our guidance for maintenance impact on production of 45,000 bpd . We made three commercial discoveries in the quarter, with two of them in the Troll-Fram area. We have also increased our ownership share in five discoveries in this area, strengthening our positions in one of our core areas on the Norwegian Continental Shelf. Power production for the quarter was 1.2 TWh . 0.5 TWh of this production is from our renewable assets, slightly higher than last year due to good wind and regularity and Hywind Tampen in production.
We also had strong gas to power contribution from the Triton power plant in the U.K. Turning to our financial results. We have a net income of $5 billion and net operating income of $12.5 billion . Adjusted earnings came in at $12 billion and $3.5 billion after tax. These results are driven by solid operations across the business while impacted by reduced prices. Costs increased compared to first quarter last year due to inflation, increased transportation costs and higher CO2 costs, in addition to high activity levels. For our operations in Norway, reported costs are impacted by the further weakening of Norwegian kroner.
This quarter, our unit production cost was $6 per barrel, which is in line with our expectations and what we discussed at our capital markets update. We continue to work strategically with our suppliers and across our business units to manage costs. The tax rate on adjusted earnings was 70.6%. Moving to the segments. Within our upstream segments, we see strong earnings and good cash flow driven by increased production and solid operational performance. Within our international business, we acquired Suncor Energy UK, you know, with ownership shares in Rosebank and the Buzzard field.
In line with our strategy to optimize our oil and gas portfolio and building on our long-standing position as a broad energy partner to the U.K. For the U.S. upstream business, the tax rate on adjusted earnings was 23.4% in the quarter, you know, within the new guided range. Remember, this will be credited against the tax asset we recognized in fourth quarter last year. The cash flow effect is lower at around $27 million, including the federal alternative minimum tax and state taxes. The midstream and marketing segment delivered very strong results with $1.3 billion in adjusted earnings. This is well above the new and increased guiding range for the segment.
This is driven by strong results from trading of crude oil and refined products, while results from, you know, pipeline gas and power trading are down this quarter from, you know, an extraordinary level last year. From this quarter, we have made some changes to our MMP reporting methodology. We have removed the mark-to-market timing effects of price hedging mechanisms to defer these to the time of physical delivery. The fact is that adjusted earnings are more than $800 million lower in the quarter than it would have been with the methodology we used before. In the report, we have included restatements of previous quarters to enable you to compare results over time.
When it comes to mark-to-market effects on derivatives related to geographical optimization, we have concluded to continue to report this within the adjusted earnings. We believe that after the totality of changes made, adjusted earnings will better reflect MMP's underlying performance. Our renewable business delivered $29 million from assets in operation. As we continue to build this business and the high level of project activity and business development will result in negative adjusted earnings. We expect results at this level also for the next quarters before it will improve following the start of the Dogger Bank projects. Over to cash flow.
At our capital markets update, we presented an ambition to deliver average annual cash flow from operations of $20 billion after tax through this decade. This quarter, we deliver cash flow from operations of $9.7 billion after tax. This is strong, and it is a good start. Remember that this cash flow is impacted by only one tax installment in Norway of $5.4 billion. Next quarter, we will pay two similar tax installments. In the quarter, we paid $3.3 billion in cash dividends and share buybacks, a smaller cash flow impact than we will see in the next quarter.
In June, we will pay the state's share of buybacks covering the last four tranches from the second tranche last year up to and including the 1st tranche this year, a total of around $3.7 billion. With two tax installments in Norway, total cash dividends of $0.90 per share payment of state share of buybacks, and start up of the second tranche of the share buyback in the market, we expect a total cash flow impact related to tax and capital distribution to be around $17 billion in the next quarter. Our solid balance sheet is the basis for good risk management, and our strong cash flow makes us resilient.
Our net debt is further reduced to - 52%, driven by the strong cash flow shown on this slide, and in addition, lower working capital, which has been reduced by around $5 billion. Also lower collaterals due to lower gas prices. When the net debt is in, you know, the negative territory at this level, this ratio is very sensitive to even small changes, and therefore, we see larger than normal fluctuations in the net debt ratio. With current forward prices, and tax and capital distribution payouts coming, we expect negative net cash flow in the second quarter and our net debt ratio to increase.
At our Capital Markets Day in February, we presented our balanced approach to the energy transition, highlighting our ambitions and portfolio. Our direction remains firm, and we maintain our guidance for production growth and organic CapEx. Thank you very much for your attention, and I look forward to your questions and comments. Thanks.
At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes to the line of Oswald Clint of Bernstein. Your line is open.
Good morning, board and Torgrim. Torgrim, thank you. Two questions. In the first one, in the context of being a reliable supplier, the very strong gas output once again around about 810,000 BOE in Norway. I think that's the second time it's reaching that very high level. I just wanted to ask around sustainability of that volume, you know, really through the next the year and obviously the years ahead and just how the reservoirs and facilities are kind of responding to that level of output. I know you mentioned one facility doing 99%, which is pretty high and unlikely to be sustainable over the long term. That's the first question.
Secondly and kind of linked to gas, but within MMP, you called out the trading of liquids this time, but there was some comments around LNG diversions, which just not something I've, you know, seen Equinor doing an awful lot of over time. If you could speak about the Snøhvit cargos and what exactly you're up to there with LNG cargo diversions, that would be interesting. Thank you.
Okay, thank you very much, Oswald. First on gas production going forward. You know, a high gas production in the quarter, we had no commercial hold back, so we produced, you know, at sort of, at as much as we could during the quarter. And that gas has been needed in Europe. Going forward, we have, you know, increased production permits from the Norwegian state. We will produce more as long as we have those in place and we do expect that to continue for quite a while. Also we see that, you know, the facilities and the transportation system is working very well and we're able to maintain a good and stable production.
For the next few quarters, I mean, when it comes to profiling of the gas, that will typically be steered by the forward curves. If there are big changes in the outlook for gas, it gives an incentives for us to optimize the production profile. As you have seen, the forward curve is rather flat, so there is fairly limited signals now to make commercial hold back over the next few months. In the longer term, our gas production is. We expect that to remain strong, and assets to perform very well.
I think it's fair to say that, you know, we expect turnarounds coming, which will impact, you know, both gas and oil production for the next for the year. I mean, we have on Troll, we have on Aasta Hansteen, and Ormen Lange maintenance, which are all large gas producers. On your second question when it comes to LNG diversions, we have, you know, quite a bit of flexibility related to our Snøhvit cargos, and clearly we steer them to the best-paying markets. The MMP margin this quarter is, you know, related to that we divert cargos to Europe compared to sort of their original landing point.
There are sort of LNG premium also in the MMP results. When we see large geographical differences between Asia, Europe, and U.S., that typically generates, you know, trading opportunities within MMP related to LNG.
That's great, Torgrim. Thank you.
Your next question comes to line of Biraj Borkhataria of Royal Bank of Canada. Your line is open.
Hi. Just a couple point. Since last year, you were reinjecting less gas in order to obviously supply more gas to Europe, and that was much needed. Obviously the market looks much better in terms of supply, demand relative to what we expected maybe a few months ago, and price have come down quite a bit. I'm just trying to understand, are we close to the point where you look to switch back and start reinjecting more gas to support liquids production? Related to that, is that something you need to consult with— consult the government with, or is that purely a commercial decision? The second question is on working capital. You know, quite a big benefit this quarter.
Looks like working capital is around $9 billion. If I'm looking at your accounts over the long term, it looks like something like $5 billion-$7 billion is the long-term average, but maybe that prior average is not relevant. I'm just trying to get a sense of, you know, what is the kind of normal structural amount of working capital you carry for your business and whether we should see some of that reverse out over time. Thank you.
Thank you very much, Biraj. On your first question related to injection of gas, we have no plan to switch back to injection. This is something that is relevant for Gina Krog in particular, but also a series of other fields on the NCS. We have flexibility that we will use. I think it's important to keep in mind that even if the sort of gas prices in Europe, you know, has dropped significantly, we are still at a very high level of gas prices. We do expect, of course, you know, a rather tight market in Europe during the year. Actually quite small changes can actually make significant impact in the prices.
As we know, we're coming into out of winter and then sort of the spring and summer seasons, we clearly need to follow that situation closely. We are prepared for a lot of volatility, also on the gas side. These are decisions that can be done, you know, on license level, mostly. Then on your second question related to working capital. You're right. The working capital level end of first quarter was $9 billion. It is down by $5 billion compared to last quarter, which is of course a significantly reduction in working capital. That is driven by lower prices. It is driven by reduced use of storages.
We're freeing up the storages, and also changes in third-party trading. Clearly a significant shift. I think it's important to point out that sort of when we discuss our cash flow from operations and the $20 billion and all of that is without any movement in working capital. That is pre-working capital movements. We just need to keep that in mind. On your point on sort of what is a normal level, we don't guide on that. I think it's fair to note that our ability to use our balance sheet to trade and make commercial decisions has a significant value, and you saw that last year with sort of the significant results from our trading and marketing business.
That was driven by that we could use, you know, our balance sheet collaterals and working capital to actually extract that value. We clearly we aim to continue to do that given that the market structures are in place. I would say that the working capital will be a function of volatility and absolute price levels and sort of, you know, if there is a contango or backwardation in the markets where we want to use storages as such. It's very hard to guide, but we'll keep you updated as we go on how working capital are developing.
Okay. Very clear. Thank you.
Your next question comes the line of Lydia Rainforth from Barclays. Your line is open.
Thank you, good morning. Two questions if I could. The first one, just coming back, going to the idea of the cash outflow in the second quarter. You talked about it being $17 billion, I think. That would still leave you with net cash position. Clearly, we've got a lot of volatility in prices, and you touched on that at the beginning. Just in terms of how long do you think it might take to get back to that 15%-30% range, and is that actually still where you're comfortable with it?
Then secondly, it was just on the cost base, and clearly sort of OpEx in dollars I think mostly went up 10%, and I think you referred to that as like environmental costs and the higher rates and things like that. Are you seeing productivity improvements as well with, for some of that? Is it kind of good cost as well as inflation? Thanks.
Okay. Thank you very much, Lydia. First on the $17 billion in cash outflow, I think it's important for me to lay out that is the cash outflow only related to tax and capital distribution in the quarter. On top of that, of course, we will pay investments and what have you. We expect a negative cash flow for the next quarter. You are absolutely right. If we take, you know, the year as a whole, we said at the capital markets update that we planned for a negative cash flow for the full year.
You know, at that point in time, we said cash flow from operations 20, we said investments 10, and we said capital distribution of 17, meaning minus $7 billion-$8 billion as expectation for the year based on, of course, on the assumptions that we laid out on prices and all of that. That remains firm, and what you have seen this quarter is in line with what we sort of had expected. Your point is that will not sort of bring us back to a sufficiently efficient capital structure, and I think it's very important for me to say that the balance sheet as it sits today is not an optimal capital structure.
We clearly have a, you know, clear intention to bring it back to a more efficient way. Capital distribution is a key tool or an important tool for us to use to bring that back. We have said $17 billion in capital distribution this year. You know, we are very committed to that, and we are also saying that beyond 2023, capital distribution will be a tool that will be used to bring capital structure back to a more efficient level. Yeah, that was the first one. Let me see the second one. Cost. Yes. Let me speak a little bit to that.
You have probably seen that our operational cost and SG&A is up 16% quarter-on-quarter or $400 million. There are a lot of sort of special things happen. If we strip out currency impact, and if we strip out some one-offs here and there, the underlying change in OpEx is 18%. Let me give a little bit of color to that. Half of that increase is related to increased transportation costs, which is related to shipping, increased shipping rates, fuel costs, and also increased volumes that we transport. Around 40% of that increase is related to operating and maintenance costs, which is increased activity and inflation.
You know, as the last 10% is related to increased activities within renewables and low-carbon solutions. As you understand, there is a lot of, you know, commodity cost in there, in addition to increased activity and some inflation. We clearly steer this, you know, pretty hard, and we are prioritizing activities to really have good control on the cost side. We increased our unit production cost guiding at the capital markets update from $5-$6 per barrel. What we see now this quarter is in line with the development we had expected at that point in time. This is happening, but it's not surprising.
Perfect. Thank you very much.
Your next question comes from line of Teodor Sveen-Nilsen of SB 1 Markets. Your line is open.
Good morning, Torgrim, and thanks for taking my question. First, let me follow up on the working capital question asked earlier. Do you expect that to reverse in second quarter or will that be distributed during second quarter, third quarter, and fourth quarter? Then quick question on dividend buyback. In the long term, what's your preference between dividend and buyback? I expect both to, you know, of course, stay at a high level given your strong balance sheet. Final question is on European gas market. In the long term, what do you believe will be the marginal cost for gas in Europe? Will that be Asian LNG, will it be U.S. LNG or will there be any other sources that set the price of gas in Europe? Thanks.
Okay. Thanks, Theodore. Thank you very much. Three very, very important questions. First on working capital. I'm not in a position where I can give you some steer on the direction, but I can give you some sort of key points to look for in that regard. One is, you know, the absolute price levels. I mean high price levels typically take more working capital to manage. The second one is volatility in the market, that typically trigger use of working capital to manage.
And the third one is, you know, the structure of the market, whether it's a contango or a backwardation, because that gives a, you know, strong price signals to whether putting volumes at storage or taking out volume from storages or ships or value chains as such. I guess if you, if you look for those three things you will get, you know, some sort of direction on where the working capital is moving. Again, you know, everything we have said on guiding and targets and cash flow is not impacted by working capital movements. On buyback. We have a split between share buybacks and dividend payment.
Currently $6 billion in share buyback, and $12 billion, $11 billion— excuse me, $11 billion in dividend. There is a limit for us to how large the share buyback can be due to limitations in, you know, how we can, how much we can share. We have a mandate from the annual general meeting on number of shares that we can use for share buyback. In addition, there are trading restrictions on how big part of the traded volume you can actually purchase during a share buyback program. That puts limitations to how much we can do as you know, the free float of the company is sort of not taking, is not including the states level.
I mean, the split that we have currently is probably a fair, you know, a fair split, taking everything into account. Yeah. On the European gas market, the way we see it is clearly in the shorter term, it is very much driven by Russian gas that is sort of not there that needs to be replaced. Is very much driven by weather and is very much driven by tightness as such. We need to be prepared for a lot of volatility.
In the longer term, which is actually, you know, your question, we see that the marginal marginal price for gas in Europe will be much closer linked to international trading of LNG cargos, whether that be sort of Asian or, you know, European prices for that LNG. The market dynamic is changing from being that Russian gas is the marginal price setter for gas to actually international LNG being that. Clearly, price signals from Asia will be very important in sort of the prices for gas in Europe for the future.
Thank you. That's useful. Thanks.
Your next question comes to line of Christyan Malek from JP Morgan. Your line is open.
Hi. Thank you very much for taking my questions. I've got two questions. I know you've addressed the sort of the outlook on the gas market. You know, I just wanna talk a few blind spots. First of all, in the context of a peace deal between Russia and Ukraine, let's say that played out over the next 12 months, I'd be interested to know what will your reaction function, what would you do in particularly given you have ramped up, in order to deliver into Europe? How would that change the dynamic on gas markets from Equinor's perspective?
The second question, I'm sorry to sort of come back on blind spots, assuming we do see a sort of a deteriorating outlook on demand and it sort of stays relatively bearish, how would you think about your special dividend on a medium-term view? I sort of think about the pre the GFC, you know, sort of the financial crisis where you had this special dividend that sort of became a sort of a rod on your back, and then ultimately it wasn't sustainable. I just want to understand, if you think it's sustainable, why don't you convert it into a sort of real dividend?
I know that's an unfair question, particularly given the backdrop, I'm just trying to square out the sustainability of a very high yield. Thank you very much.
Okay. Thanks, Christyan. First on gas market. I mean, we are in a position where the Norwegian gas is, you know, the most efficient gas available. I mean, it's short distance to market, is very low marginal cost of supply. We will always be a competitive supplier into the market. Clearly, I'm not in a position to speculate on any outcome of the terrible war on Ukraine. What I do know is that Europe is not ready to rely on Russian gas import, you know, as far as I can see into the future. Clearly we recognize that in sort of a very strong interest in speaking to Norway and ourselves around future delivery of gas.
We see a long-term strong demand for Norwegian gas to Europe, and we take that responsibility very, very seriously. Second one on the special dividend. Important to me to say that the extraordinary dividend is based on money already made. It is not dependent on future earnings or blind spot or drops in gas prices. It is there, you know, based on a very, very strong balance sheet. I just want to repeat that clearly the $17 billion that we said at the capital markets update in February remains very firm. Beyond 2023, we will use capital distribution as a tool to bring capital structure to a more efficient place as such. That is as far as I can go on this call on that topic.
Thank you. Thank you.
Your next question comes to the line of Amy Wong of Credit Suisse. Your line is open.
Hi. Good afternoon. A couple of questions from me, please. Just to go back to the European gas market again, I know a lot of questions have been asked there, but I just wanted to circle back on some of the initiatives that the European Commission floated last year, such as clubbed buying for storage or potentially longer term contracts with Norway. Where are you? Can you shed some light on the progress on those types of initiatives? My second question is just a bit of clarity on your upstream CO2 intensity figures that you provided. I mean, it's 6.6 in this quarter. Am I reading it correct that you have a target, though, to have it below eight?
Does that mean you are already at target, your 2025 target of eight of being below eight kilograms, of CO2 per BOE? Also that 6.6, is that an operated number or is that your entire, equity ownership?
Okay.
Thank you.
Thanks, thanks, Amy. On your first question on the European gas market, yes, there is a lot of discussions and initiatives being discussed. There is the joint purchasing and the hub that is sort of being put in place in Europe is happening, and we are open to participate in that. We do believe that it will be supply and demand that ultimately sets the price for the market, and we do think that that will be the case also here. Important also to help out ensuring that storages are being filled. This will happen on commercial terms. It will happen on commercial terms. I think that's very important. Longer term contracts, yes.
I mean, there is discussions and request for that and we are also open for those discussions, but also clearly they needs to happen on commercial terms, and they are typically linked to a traded market. Pricing of those contracts are typically, you know, pegged to hubs and noted market prices. Let me see here. The second one is on CO2 intensity. Yeah. 6.6 kilo per barrel, which is, you know, less than half of industry average. I think it's pretty close to 1/3 almost of industry average. That intensity has decreased.
We are happy to see that, and we're happy to see that all the efforts we are doing to making our CO2 footprint as low as possible is working. We have set the target that we are going to reduce the absolute emissions on the Norwegian shelf by 50% by 2030 compared to 2015. I'm happy to share with you that we are halfway there already. That is good to see. This has, you know, a very important part of our strategy and electrification of assets on the NCS will be a key measure to get to a target like that. Thanks, Amy.
Just to follow up on the 6.6, is that your operated fields only or?
Oh, yeah. Yeah. Exactly. You're right. That you ask about that. That is the operated assets. Yes.
Okay. Thank you very much. I'll turn it over.
Your next question comes from the line of Jon Olaisen of ABG. Your line is open.
Yeah. Good afternoon, gentlemen. Two questions. Sorry. Just reading some of notes here. First, you said that you experienced some short-term issues on the Johan Sverdrup in Q1. Could you tell us a little bit about those issues? What kind of issues they were? Given being such an important field for both you and for Norway, it'd be interesting to hear. The second question is related to the renewable segment. The CapEx is $851 million in Q1, which was by far the highest, the quarterly CapEx since you started reporting this number for this segment. I wonder what the CapEx was related to and that increase was related to and what we should expect for the coming quarters, please. Two questions, please.
Thank you very much, John . Two very important questions. First, on Johan Sverdrup. Phase 2 of Johan Sverdrup has been started up. We are also in the process of testing out the capacity on the total production. The operational issues we had in first quarter was related to gas cooling equipment and manifolds and also some vibration issues related to it. It was in the earlier part of the first quarter, and that were fixed, and it has sort of, you know, worked well in the latter part of the first quarter. We are in a process of qualifying, you know, an increased, you know, total capacity for the field. I think it's 755,000 bpd .
That is, you know, what we aim for. Current capacity is 720,000 bpd. We are in the midst of, you know, testing that and that, you know, will progress. We will clearly let you know when we have concluded those tests. We all know that Johan Sverdrup is, you know, very important for both the cash flow and production and everything when it comes to our company. When it comes to renewables CapEx. Yes, you're right, it is a significant step-up. A couple of explanations. First, when it comes to the Dogger Bank projects, they have been the CapEx, I mean, it has been through project financing.
It has been, you know, the debt that has been used for investments, you know, to a large degree now. Now it's sort of equity that is being injected, as such. Those assets are booked by the equity method, you know, from an accounting perspective. You'll see a significant shift there now, because we are actually injecting equity instead of using debt. That is one explanation. The other one is the Be Green acquisition in the quarter, the Danish solar developer. We also see increasing investments into U.S. projects and the Polish projects in the Baltic projects. All in all, this is in line with what we are expecting and what we have planned for.
We aim to spend 30% of our investments towards renewables and low-carbon solutions by 2025, which is just a couple of years ahead. Actually 50% in by 2030. This is in line with what we are seeing. You will see a growing investments into this area. Back to maybe the first part of it, I mean, off balance sheet financing, I mean, is on Dogger Bank, for instance, we have that and we have it other places as well. All in all, we have $2.5 billion now off balance sheet finance related to the renewable business.
Thank you. Just a very quick follow-up on Johan Sverdrup. The potential increase in capacity, would that require more drilling, or is it more the infrastructure which is in place or the processing capacity or something else?
No, it is, it's it is not related to subsurface. This is facilities and, you know, fine-tuning it.
Okay. Thank you very much. Very useful. Thank you, Torgrim.
Next question. Your next question comes from the line of Henri Patricot from UBS. Your line is open.
Hello, everyone. Thank you for the presentation. I have two questions, please. The first one coming back to MMP and the very strong performance this quarter. Now, it's not that long ago that you raised the guidance and you already were above that this quarter. Is it a truly exceptional quarter or should we perhaps have in mind a slightly different range in the near term very close to the upper end of the guidance range given current volatility, et cetera? Or if it's really just first quarter that was exceptional. Secondly on gas and your gas sales with the rest of the year. You talked about volumes earlier.
I wanted to ask about pricing and to the extent that you can comment whether we should expect any changes in terms of the split between the head, month ahead and then different markets for the rest of the year. Thank you.
All right. Thanks, Henri. Very quickly, the guidance on MMP remains firm between $400 million-$800 million on a quarterly basis. We will see fluctuations and first quarter, I mean, clearly we overshot that. I think it's also important to notice that, you know, there are different lengths, you know, in that business, and they deliver differently on the different market sentiments. Last quarter it was very much natural gas, and this quarter it was very much oil and gas as such. It's a diversified portfolio that will well, that is there. On sort of the gas prices and the gas volumes, I spoke to volumes a little bit earlier.
When it comes to prices, we you should use 70%, you know, day ahead and 30% month ahead as sort of a good benchmark for what you should expect on prices. Thanks, Henri.
Okay. Thank you.
Your next question comes from the line of Martijn Rats of Morgan Stanley. Your line is open.
Yeah. Hi. Hello. I know much has been asked about the European gas market already, there's perhaps one sort of wild card scenario that I sort of wanted to run by you. It's not entirely out of the question, given how high European gas inventories already are that at some point over the summer, we will hit 100% inventory fill before the winter starts. LNG imports into Northwest Europe was an all-time high in April. Pipeline imports in April outside of Russia was an all-time high. That sort of, it could happen. You can say, well, maybe that reflects how quickly supply patterns have changed. You can also say, well, maybe our storage capacity is just really very small.
There's something to be said for that if we rely on these sort of very lengthy LNG supply chains with LNG coming from all over the world rather than a pipe from Russia, sort of Europe needs more storage. I can see how that could be in Equinor's interest. Now, and therefore, I wanted to ask you if there's any interest or consideration at Equinor to perhaps expand European gas storage capacity, either new facilities or perhaps via way of filling existing storage capacity under a higher pressure, which I also understand, can, you know, could at least at the margin, give us some more gas storage capacity. That was my main question.
The other one I wanted to ask you is that, earlier this month, I read an article, saying that the Norwegian government is looking to nationalize key parts of the Norwegian gas pipeline network from 2028 onwards. I know it's several years into the future, and I expect that the answer is no, but I wanted to ask you if this is in any way, Could this in any way impact Equinor?
Okay. Thanks, Martijn. Two very good questions. You know, the, your first question is that, you know, we are very well-placed, with our gas compared to Europe, and we have a lot of flexibility. You might actually look at the Norwegian Continental Shelf as a very, very important flexible gas tool to serve Europe. Like as an example, the Oseberg asset, which is a large one, you can produce the production permit over 200 days of the year as such. That is effectively an important storage or flexibility producer as such. Overall, in general, I mean, clearly, you know, storage in Europe is important, so we have no sort of particular, you know, ambition in that regard.
Secondly on the gas infrastructure in Norway, yes, what is important for us is reliable and flexible, gas transportation systems, which we have today. As long as we have that, I think the structure around it, you know, can be in many different ways. Clearly, we are working closely with the Norwegian government, and we'll clearly give our input in that regard. We don't see this to disturb or distort the competitiveness of the Norwegian Continental Shelf in the long run. Thanks.
Wonderful. Thank you.
From the line of Steffen Evjen from DNB Markets, your line is open.
Yes, thanks. Good morning, Torgrim . One question for me on your projects that are non-sanctioned. The Rosebank you just acquired another portion there from Suncor. We also have Bacalhau and BM-C-33 in Brazil. Could you just briefly touch upon the progress here and if we should expect any PDOs or sanctioning of these this year or over the next 12 months?
Yeah.
Thanks.
Okay. Thanks. I mean, three great projects all in the international portfolio with significant value creation potential. On the Rosebank and BM-C-33, I mean, we are planning to sanction them, you know, not too far into the future. On the Rosebank, we clearly know after the Suncor acquisition we hold 80% in that asset, which is, you know, significant. This is a very important project for the U.K., for energy security in the U.K. and also for jobs and tax revenues in the U.K. over the period. Clearly, we see that we have an important role in providing, you know, reliable energy for many decades towards the U.K..
On BM-C-33, that is, you know, probably going to be sanctioned not too far into the future. Also a very profitable and good project and a significant development in Brazil, working closely with Petrobras naturally. On Bay du Nord, moving forward with that as well. We will, that is a candidate, but we need to progress it more and next year, we'll see. This is not sort of as imminent as the two others. Thanks, Steffen.
Thanks. Just to follow up on Rosebank. 80% obviously quite high interest in what is a quite complex project. Do I understand you correctly if you are more comfortable reducing this with time or can you expect Equinor to still continue owning that high share in this, in this project in the future?
I think, as you understand, I can't comment on any specifics in this regard. Clearly we have an active view on the totality of our portfolio. I mean, so yeah. Thanks.
Sure. Thank you.
Your next question comes from line of Kim Fustier of HSBC. Your line is open.
Hi. Good morning. I had two questions, please. The first one is just to follow up on the acquisition of Rosebank from Suncor. I guess just given the backdrop of the U.K. Energy Profits Levy, it just might seem a little bit surprising, certainly a kind of a vote of confidence in the U.K. North Sea, it looks like it. I'm just wondering if whether the deal is predicated on a view from your part that there might be a change later this year in the U.K. EPL terms, or does the project work under current fiscal terms as it stands? Just my second question is on offshore wind.
I saw that Norway is looking towards significant new acreage with floating offshore wind. Maybe just if you could share your latest thoughts on the opportunity for floating wind, in Norway and perhaps elsewhere as well? Thank you.
Okay. Thanks, Kim. So let's see here first on the Rosebank. Clearly what is important for us is predictable, you know, tax environment and tax environment. So that is important for us. I'm not in a position to give any direction on political discussions in the U.K. on this topic. I think what is important is that Rosebank investment has, you know, enables us to credit that against all the taxes in the U.K. It is, you know, a very tax efficient investment as such. It will over time pay significant taxes back to the U.K. through its life. I think it's actually GBP 30 billion in taxes and investments to the U.K.
It is important for U.K. oil and gas industry and for the country. On the second question on offshore wind Norway. You know, we have been active within offshore wind for 15 years. We are very glad to see that Norway is now opening up. We are clearly preparing for that. I think it is important for us to state that, you know, we have been disciplined in sort of bids when it comes to lease rounds as you have seen over the last years, and we will apply the same discipline when it comes to lease rounds and bids in Norway. We are very glad to see that opportunities are now opening up in Norway as well.
That's great. Thank you.
Your next question comes from line of Yoann Charenton from Société Générale . Your line is open.
Good afternoon, Torgrim. Just a quick question on looking at the balance sheet and looking at the financial investments, which are now equivalent to more than 1/3 of market cap. You have reported decreases in cash collaterals and margin requirements in recent quarters. At the same time, this line, so financial investment, has been rising. Is that linked to higher interest rates? Can you please provide some more color on this, please?
Yeah. We combine, you know, cash equivalent, and short-term investments as what we call. All right. Okay, no, I'm probably misunderstood your question. Is your question, was that related to the financial items on in the P&L?
No, just on the balance sheet, please, because.
Okay. Okay. All right. So we hold, you know, around $52 billion in cash equivalent and short-term investments, which is of course a very significant number. You know, given, you know, what will happen now in the second quarter, we expect that number to be lower as there are $17 billion that we will be paid in taxes and capital distribution in the quarter. I think I'll just need to repeat, you know, we don't see the current structure of the balance sheet to be efficient or optimal, and we will continue to use capital distribution as one tool to get to a more efficient balance sheet over time.
Thank you, Torgrim.
Unfortunately, that's all the time we have questions we have time for now. I'd like to hand back to Bård for closing comments.
Thank you very much, Gavin, and I would like to thank all of you who have called in and asked questions. If you have any follow-up, as usual and as always, please reach out to the investor relations team, and we will help you as good as we can. With that, we can conclude the call and say goodbye to everybody.
That does conclude our conference for today. Thank you for participating. You may now all disconnect.