Good afternoon and welcome everyone. I'm Hilde Møllerstad, Head of IR, Statoil. I assume you have all seen the release from Statoil this morning. A welcome market announcement was issued, and you will find the text and the presentation on our website at statoil.com. I'm joined here today by Statoil's Chief Executive Officer, Mr. Helge Lund, and our Chief Financial Officer, Torgrim Reitan. They will give a short introduction followed by a Q&A session. With us here today, we also have Senior Vice President for Corporate M&A, Per Arne Solend, and Senior Vice President for Performance Management and Risk, Hans Jakob Hegge. I'll leave the word to our President and CEO, Helge Lund.
Thank you, Hilde, and good afternoon, to everyone. We're pleased to announce yet another major transaction. Realizing substantial value, for our shareholders and also allowing us to focus, our portfolio and to redeploy capital to future investments, among others, to our new discoveries at, Norwegian Continental Shelf. First of all, the deal we announced today has a strong strategic fit in the sense, that we exit two non-core, non-operated assets in the U.K., and also divest, two NCS assets with, a high ownership, share. We extract full value from two NCS fields through a strong industrial performance. On Gullfaks, we have invested in IOR to maintain a high production level and to secure a long life ahead at the field. We have also, as we have announced earlier, made an exciting discovery this year.
This allow us now to capture the full value of part of that investment and monetize it. Gudrun is a different story, but still rests on the industrial capability and offshore capabilities of Statoil. This was originally a marginal field that we have been able to develop into a profitable project. Development has been very well executed by our team, and production startup is only months ahead, as scheduled and also below budget. In both assets we don't divest, but we still retain more than 50% of the fields, and we have full industrial control. This is similar to what you observed for the deals we made at Peregrino and the oil sands in Canada earlier. We developed the field with a high equity share. We use our industrial knowledge.
We demonstrated value, and we realized the identified potential while keeping operatorship and a high ownership share. Rationale for the U.K. fields are a bit different. We exit what is now considered the non-core assets to Statoil. We have important work to do elsewhere in the U.K. as we are operating Mariner and Brae. It therefore made sense to us to sell the non-operated, non-core West of Shetland assets. Secondly, and beyond the strategic perspective, this transaction of course has a strong financial rationale. It's a major transaction, even for Statoil. We realize the substantial value raising proceeds of a bit less than $3 billion. We reduce future CapEx by around $7 billion, of which the majority of that is planned for before 2020.
Finally, I believe from a risk management perspective, this transaction makes good sense. By divesting non-core assets, we improve the focus of our portfolio. We also are reducing our high ownership shares at two fields. Of course, we increase the financial flexibility and strengthen our balance sheet. In sum, we believe this transaction makes us better positioned in a more volatile macro environment. Over the past years, we have been more active in terms of portfolio management, and I believe we have been quite successful. Our approach is purely value-driven. We sell assets when the right price is right. Since 2010, transactions have contributed with a total proceeds of around $15 billion and significant accounting gain.
Peregrino, Canadian Oil Sands, Statoil Fuel & Retail, Gassled, and the two most recent NCS transactions with Centrica and Wintershall being the biggest contributors. All of these transactions are fully in line with our strategy, and they have contributed to substantial value creation. They should therefore be seen as a part of a pattern and a strategic choice. We continue to use portfolio management as a means to create value for our shareholders. I think today's announcement is a prime example of what we would like to achieve. We're pleased with the price we got through this transaction, particularly noting the significant CapEx release that we have moving forward. I also think it demonstrates the value of our overall portfolio. Finally, I'm pleased that we're today also announcing that we're broadening our partnership with OMV, a competent partner.
We're already partners with the company on Aasta Hansteen and Edvard Grieg, the two fields in Norway. We are now broadening that with Gullfaks and Gudrun and also working in a broader exploration alliance across.
Several licenses in Norway, the Faroe Islands, and also in the U.K. We also believe that the two companies can enhance each other's capabilities in IOR, which is a critical area for the industry moving forward. We think this is a good transaction for both parties. With that, I leave the word to Torgrim Reitan.
Thank you, Helge. First of all, as you understand, we are pleased with today's transaction. We realize $2.65 billion in proceeds, plus a contingent payment related to the upside at Gullfaks. We realized capital gains between $1.3 billion- $1.5 billion at effective date. In addition, we reduced future CapEx by around $7 billion, as Helge already mentioned. This transaction demonstrates the underlying value of our assets. Firstly, this transaction accounts for 1.5%-2% of our reserves, and the price paid for this 1.5%-2% is $2.65 billion. Secondly, to compare this transaction with what you find in Woodmac, you see a premium of more than 50%.
The average premium across the Centrica deal, the Wintershall deal, and now the OMV deal translates into a premium of around 50% compared to Woodmac. It is important to note that the assets we have divested today have reached different stages of maturity. Gullfaks has produced for decades while the Rosebank is yet to be sanctioned. It is necessary to have an idea of future capital requirements in order to fully understand the inherent value in the deal. This is why we leave you with an estimate for future costs. This transaction will enable Statoil to redeploy around $7 billion in CapEx, of which $5.5 billion is in the period up to 2020. You also note that there is an upside to the deal. There is an additional upside in the value in the contingent payment.
This is related to the reserves that will be added from the W3-A discovery at Gullfaks. Probably a compensation of $6 per barrel of the tax is agreed for additional volumes related to this discovery. There is no cap on that upside. We produced around 26,000 barrels of oil equivalent per day from the divested assets the first half of the year. We have estimated production from the assets for the next year to around 40,000 barrels. That is next year, and around 60,000 barrels in 2015. Our portfolio still has the capacity to deliver on the 2020 ambition. There is no changes to our guiding, but as we have said, we will constantly evaluate what is most value creative. The deal is effective from first of January this year.
There will be an adjustment for the cash flow up to the time of closing, and that is expected to increase the proceeds further. We have increased our financial flexibility by this, not only due to the proceeds, but also because future obligations are reduced. This is exactly what we told you back in February when we discussed the financial framework for the next year. Let's turn to your questions. Then Helge and myself will be able to explain the deal in some more detail. As in previous years, we are not diving into the details per asset. Let's discuss this transaction on an overall level. I leave the word to you, Hilde, to lead us through the Q&A session.
Thank you, Torgrim. First I'll ask the operator to reiterate the proposed questions.
Thank you. As a reminder, if you would like to ask a question, please press star one.
Thank you. We'll turn to our first question, which comes from Theepan Jothilingam from Nomura. Please go ahead, Steve.
Thanks, Hilde. Good afternoon, Helge, Torgrim. I've got a number of questions, actually. Just firstly, coming back to the CapEx savings of $7 billion. I just wanted to try to get a feel for where you see that in terms of it appears even up to 2020, it could be back-end loaded. Sort of an extension of that question, therefore, is in terms of guidance for the next couple of years or 2014 directly, should we still expect CapEx to increase for the group next year? Secondly, just on the disposal strategy, yeah, very much makes sense to sell non-core assets. I guess in the portfolio where you are operator with a majority stake, you've got a number of assets where you're not or you're substantially higher than 50%.
Should we think about those assets potentially being also for sale? Then thirdly, I guess with Helge on the call, I wanted to ask perhaps whether Statoil had had any discussions with the government in terms of their thinking on a potential sell-down in a stake in Statoil at the group level. Thank you.
Perhaps I can speak to the two letters and Torgrim will take the first one. It goes without saying that we have no discussion with our shareholders or whether they wanna buy or sell shares. That includes the Norwegian government. In terms of disposal of assets, I mean, the key for us is all the time that we try to capture maximum value from all our fields. That is the guiding principle for our portfolio management.
Having said that, I think it's very important that those that are following Statoil read the pattern into what we are doing today and what we have done over the last four to five years, where we in a very strong way think about portfolio management as part of the overall management of value in Statoil. Of course, there's a combination of key motivations for doing that. Maximize value, making sure that we focus our strategy. Of course, I think more and more important in the volatile macro environment, that we continue to operate with a very solid balance sheet. We have a pragmatic view also to the ownership share.
From time to time, it is right to monetize the positions that we have if we see that we can capture good value.
Okay. Thank you, Theepan Jothilingam. On the question on the investment profile. $5.5 billion of this 2020 is more front-end loaded than back-end loaded, this profile. That is better cash. The maximum impact is over the next three years. When it comes to the split of the CapEx, I won't go into detail, but just remind you that Gudrun is final stages of investment, and Gullfaks has, you know, a continuous investment profile asset. Rosebank and Schiehallion, you know, have a significant investment in both of them. When it comes to your question related to guidance, we have discussed an average of $21 billion over the next years.
We have stated that this is complete with delivering 2.5 million barrels per day from then. This is still valid. These transactions, of course, create more flexibility around our investment going forward.
Thank you, Torgrim. Our next question comes from Peter Hutton from RBC. Please go ahead, Peter.
Thank you. Thank you, Helge. Thank you, Torgrim. Just following up on that last point. At this stage, the saving and CapEx, which if it's front-end loaded, might be as much as $1 billion a year at the early stages. That gives flexibility rather than an opportunity at this stage to move that guidance down towards 20. Can you just confirm that one? The second question is the guidance of 40,000 impact on volumes net to Statoil in 2014 and 60,000 in 2016. Just sort of correlating that with OMV's presentation. They're giving 15 m from Gudrun and 25 m, 26 m in 2014 from Gullfaks.
Can I just confirm that the implication of that, given that Gudrun is, I think, a 65,000 barrel a day gross project. The implication of that is expecting it to run virtually from the beginning of 2014. That would be helpful to confirm that, whether you're on track for that one. The second one is the difference between the 40 and the 60. Can we therefore assume that that would be on Gullfaks and Gullfaks alone or any other elements coming from the four areas that you're divesting today?
Hey, thank you, Peter. Hope you're doing well.
Well.
On the investments. You know, we don't make any adjustments to our guidance. I mean, such issues is for capital markets to detect. You're right, this gives us more flexibility in our investment program over the next year. When it comes to production numbers, I can't comment upon OMV's on this call, but these are consistent with our numbers. Yes, Gudrun is on track, and we expect that to be in production in the first quarter 2014. West of Shetland, there are no production in 2014. There are some minor volumes from Aasta Hansteen in 2014.
Okay. Thank you.
Thank you. Welcome from Lydia Rainforth from Barclays. Please go ahead, Lydia.
Thanks, good afternoon, everybody. Three questions if I could. Firstly, these are great assets that you're selling away. Could you just talk about the longer-term sort of 2020 aspiration for the Norwegian Continental Shelf and whether that has been affected? Then secondly, could you talk us through the research and development, the enhanced oil recovery outside the partnership that you've put in place for OMV, and what are you expecting from that? Then finally, if I could just come back to this idea of you're saving future CapEx. Are these fields towards the low end of the Statoil portfolio in terms of the return on future CapEx that you're looking at, and it's just that you have other opportunities that you would rather spend on? I'm just wondering how to think about that element of it.
Thank you.
Well, this is Helge Lund. Thank you, Lydia Rainforth. On the 2020 aspiration for the group altogether, Torgrim Reitan introduced by saying that we still have the capacity to deliver the 2.5 billion barrels per day for the overall portfolio, including the Norwegian Continental Shelf, also after this transaction. Then we will come back to, of course, how we manage that. We're clearly not driven by value ambitions, but by volume ambitions, but value. I think this transaction is a clear statement to that. We will use the strategy day later to discuss, you know, the future beyond what we say now.
On research and development or technology collaboration within IOR, this is a critical area for the oil and gas industry. I think Statoil has a tremendously strong track record on IOR at Norwegian Continental Shelf, while our counterpart has a similar, you know, track record in other fields and also smaller fields. We believe that there is a potential by these two companies working together on technology to see how we can learn from each other and launch technology efforts. It's too early to be more specific at this stage. Perhaps Torgrim, you want to comment again on the CapEx side.
These assets are, I mean, from the, you know, we are in previous situation with a lot of investment of this project that very well across the industry. For these assets, I'm not ready to discuss the specific ranking of these assets. These asset value creators from the investors is attractive to us, and we are told by ourselves.
That's great. Thank you.
Here, our next question comes from Teodor Sveen-Nilsen of Swedbank Research. Go ahead, Teodor. Teodor, are you there?
Hello? Hello?
Yes, now we can hear you. Please go ahead.
Perfect. Good afternoon. Just a follow-up question on the last question actually. It's related to production level on NCS. You have said that you'll be able to produce 1.4 million barrels in Norway through 2020. Does this transaction change that, or do you need to acquire more production in Norway to be able to meet that target?
Well, again, hello, Teodor Sveen-Nilsen. We have made specific assumptions and, you know, guiding on 40,000 barrels per day in 2014 and 50,000 barrels per day in 2016. It goes without saying that on such short time horizon, this will impact our production. On the longer-term horizon, I'm not prepared at this stage to go into specific in our ambition, 2020 ambition, beyond what we have already said earlier today and confirmed by Torgrim Reitan right now that the overall portfolio have the capacity to deliver 2.5 and beyond even after this transaction.
Of course, you are very close to Norwegian Continental Shelf, and you know that we have made significant discoveries, where of course, Johan Sverdrup will be a very, very important part of, you know, the production perspective at Norwegian Continental Shelf and of course also in terms of value creation.
Okay. Thank you. We can assume that or you have mentioned several focus areas on NCS going forward. As far as I remember, you mentioned both Gullfaks and Utsira High. After this transaction, maybe Utsira High will be even more important than before in terms of production growth towards 2020.
Well, we will continue to explore at the Norwegian Continental Shelf. We will continue to take the maximum out of the fields that we are responsible for. Johan Sverdrup goes without saying extremely important for Statoil as well with a 40% share in both of the licenses. We have an exciting exploration and further going on also in the Barents Sea and several projects under execution. I feel that we have adequate and stimulating investment of opportunities at the Norwegian Continental Shelf.
Okay. Thank you, Helge Lund. That's all from me.
I would maybe add to say that we have a strong resource base and a good project portfolio, and that is the key focus of our development activities moving forward.
Okay, thank you. Next in line, we have Ann Gjøen from Handelsbanken Capital Markets. Go ahead, Anne.
Thank you. Since you've been giving us guiding when it comes to volume impact, 40,000 barrels in 2014 and 2016. I wonder if it's possible for to you to guide on some kind of earnings impact if you, for example, assume an oil and gas price at today's level. The reason why I'm asking is that I'm a bit uncertain about the OpEx and depreciation level on these fields.
Hey, Ann. Thank you. You're right, the volume impact is as you described. When it comes to earnings impact next year, there will be an immediate effect approaching $1.5 billion on the capital. Beyond that, there are some characteristics that this item control. That is the fact that, you know, new developments typically have a very high DD&A, very small section like you have seen on SARB lately. When Gudrun comes on stream, Gudrun will typically have a high DD&A per barrel as typically Rosebank and the new investment aspect. Apart from that, we know the Gullfaks assets very well. You know how that develops in our accounts going forward.
Thank you. We have next in line, Andrea Bønnesengen from Danske Bank. Go ahead, Andrea.
Hey, good afternoon, everyone. Just a question here. It appears that the deal includes options over 11 exploration licenses. Could you give us a bit of details around that?
It's right that it includes an intention by the parties and an option for taking or acquiring share in exploration licenses in Norway and the Faroe Islands and the U.K. At this stage, we cannot go into more detail at this moment in time. Of course, we value this interest in continued build-up and strengthening their position in some of our core areas, including Norway.
Okay, thank you.
Thank you. We have John A. Schj. Olaisen from ABG. Go ahead.
Good afternoon, gentlemen. On your slides, you write that the transaction is further increasing the financial flexibility of Statoil, and your net proceeds from the transaction is about NOK 5 per share. Are you considering extraordinary dividends at all?
Well, we have a dividend policy, and there is no change to that, and nothing for us to communicate around that. But it goes without saying and beyond the dividend question that this is not only capturing good value to Statoil but also generally increasing our financial flexibility and of course, the strength of our balance sheet. We believe that it's important in industry with high investment levels and significant volatility in the macro environment. As you very well know, Jon, we have been focused on this since the financial crisis, and we continue to be focused at that.
Your balance sheet is stronger than it's been for many years. How much stronger do you want your balance sheet to become?
Well, we do not guide specifically on net debt to capital employed. I think the commitment that we have to give to our shareholders is that we're able to manage Statoil and execute on our strategy in very different oil and gas price environments. I think this transaction will support that objective.
Okay, thank you.
Okay, thank you very much. Next in line, we have Nicholas Coleman from Argus Media.
Hi. Thank you very much. Just like to ask, in terms of how Statoil balances its Norwegian activity and its international activity, how does this fit in? Is this part of the intention, for example, to free capital for future international projects, for sort of international expansion? I'm thinking, for example, East Africa or something like that. Could you just sort of talk a bit about how this fits into that sort of global or international strategy if it does? In what way it does? Thank you.
The way I would like you to think about that question is that this transaction does not alter or change the strategic direction of the group altogether. If you look at the pattern that we have established since 2008, we have, you know, sold assets or shares of assets in Norway as well as internationally. This is much more strategy and asset driven. The strategy of Statoil really at a high level includes three main pillars, and that is to maximize the value of Norwegian continental shelves and then build positions in complex offshore fields around outside Norway, building on the or capitalizing on 40 years on offshore experience in Norway. Then we have taken industrial positions in shale gas and oil opportunities in North America.
Those three areas still are where we would like to continue to develop the group. I would also like to underline in the context of your question that we have been one of the most successful exploration companies over the last few years. We have made major discoveries in Norway, in Tanzania, and Brazil and beyond. Of course, that has to also lead to a rethink about, you know, how do we deploy our capital in the best possible way. I think one way to think about Norway is here we release financial capacity to invest in a continued exploration program, but also take the full value out of the upside with field strength.
Okay. Thank you.
Okay. We only have one question left on the list, and that comes from Peter [audio distortion].
Yeah, it's just a follow-up question, if I may. I'm just reminded, looking again, that you're selling a package of four. Are these all as one package? Is there any potential complication if, for example, one of the partners in one of the fields were to exercise preemption rights? I'm just reminded that you're selling about 5.9% to Schiehallion. Royal Dutch Shell bought Marathon's Schiehallion 5.9%, so it has indicated some interest to that. If that happens, does it cause a lot of complications or is it fairly neutral?
I don't think we want to go into details in the agreement, but we believe that is relatively no completion risk for both parties.
The completion date is end of this year?
We have indicated around the year end.
Excellent. Thank you.
For this because we are dependent on approval from third parties.
Yeah. Thank you very much.
Thank you very much. This concludes our conference call for today. If you have any further questions, please contact Investor Relations. Thank you very much.