Good morning, ladies and gentlemen, and thank you for joining Equinor on this call this morning at fairly short notice. I appreciate relating to our announcements this morning on Sverdrup and the share buyback program. With us on the call, I'm delighted to introduce Lars Christian Bacher, the CFO, Svein Skeie, Head of Performance Management, and Ørjan Kvelvane, Head of Finance. With that, I pass you straight over to Lars Christian. Many thanks.
Thank you, Peter. Good morning, everyone, and thank you for joining us on such short notice. As you have seen, today, Equinor launched an up to $5 billion share buyback program, materially increasing capital distribution to our shareholders. The program is launched from a position of strength. First of all, we have a strong balance sheet with a net debt ratio around 20%, cash and cash equivalents of around $15.15 billion and a solid credit ratings. Second, we are committed to capital discipline by being low cost operator and low cost developer. Finally, we expect production growth, increased value creation, and improved cash generation capacity going forward. The upcoming startup of Johan Sverdrup together with other new fields in production provides additional confidence in our strong outlook.
We have the capacity to invest in our high-quality portfolio and initiate share buybacks to increase capital distribution to our shareholders. Let me also remind you that the share buybacks are an additional tool as described in our dividend policy and comes on top of the 13% increase in our quarterly dividend to $0.26 per share earlier this year. Our dividend policy remains firm. Our ambition is to increase the cash dividend in line with underlying earnings growth. Based on yesterday's closing share price and exchange rate, the full $5 billion program represents around 292 million shares or 8.7% of the share capital. The first tranche of the program, up to around $1.5 billion, starts today and will end no later than the 25th of February 2020.
For this tranche, we have entered into a non-discretionary agreement with third party who will make trading decisions independently of Equinor. We are front-loading the program somewhat, and for the first tranche, we have ordered the purchase of shares for up to $500 million in the market. This is within the mandate given at our annual general meeting and our agreement with the Norwegian state. The Norwegian state will participate on a proportionate basis and will redeem shares ensuring that the state's ownership interest remains unchanged at 67%. The execution of further tranches is conditional on future AGMs renewing the authorization, including renewal of the agreement with the Norwegian state. Future tranches is also subject to commodity price conditions and balance sheet strength.
As we described at the Capital Markets Day in February, we have a portfolio of projects in execution with strong cash generation capacity. Our projects coming on stream towards 2025 have an average break-even of $30 per barrel, an internal rate of return of 30% and expect to provide 3% average annual production growth in the period. Trestakk and Mariner are already producing. Utgard is just weeks away, and so is Johan Sverdrup. Let me give some exciting updates on Johan Sverdrup. We expect earlier start-up. Now we expect start-up during October, and we will reach plateau production during summer 2020. After the Lundin transaction, we have a 42.6% equity. Let me underline the positive impact will be imminent.
Johan Sverdrup will have a unit production cost below $2 per barrel, and due to the delay in tax payments during the ramp-up phase, the cash impact from this asset is very strong for 2020. At an oil price of $70, we expect cash flow from operations after tax of around $50 per barrel. This is unparalleled in our industry and with the launch of the share buyback program today, more of this strong cash generation will be returned to our shareholders. With that, I'm pleased to take your questions, and I hand it back to you, Peter.
Thank you, Lars Christian. Then we open up for polling.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. There'll be a brief pause now while we register your questions.
Okay, we'll do Jonathon Rigby first.
Our first question comes from the line of Jonathon Rigby at UBS. Please go ahead. Your line is open.
Yes. Thank you for taking the question. I noticed, and I think you referred to it in your remarks, that the buyback is somewhat front-loaded. I just wanted to understand what the thought process was behind that. Does it imply that there's potential upside to the five, or are you taking a value view or decision thought around the current share price, and want to take that opportunity? Second, and sort of related to that, as you generate free cash flow over and above your investment needs, I guess you have two principal routes for the cash to go to over and above the dividend. It's either to the balance sheet or to the buyback.
I just wanted to understand, obviously the balance sheet gives you increased flexibility. I just wanted to understand the sort of decision-making process about how you will decide how cash is allocated between those two routes, prospectively. Thanks.
Well, thank you. Front-loaded somewhat, yes. If it had been a linear program, then the first tranche would have been $350 million in the market instead of $500 million, totaling then $1.05 billion. So the first tranche is then $1.5 billion. So front-loading. The thought process around this is that we are sitting today and looking at the company and the world around us, and we have a very good visibility we feel for the period leading up to the twenty-fifth of February. That's why we feel that out of strength we can front-load.
Going forward, you know, cash generation on top of this, which is the case, we said at Capital Markets Day that we are cash flow positive below 50 after dividend tax and investments. We will also, you know, continue to invest in a very high profitable portfolio and grow as a company, going forward. This is, you know, out of strength, distributing more capital to our shareholders and instilling even more sort of discipline internally in the company to continue to focus on being a low-cost operator, low-cost developer, and pursue only the best M&A deals.
Future sort of increase in earnings, you will see reflected in dividend and whether we do one or the other for later. That remains for later to decide.
Okay, thanks.
Thank you. Our next question comes from the line of Alwyn Thomas at BNP Paribas Exane. Please go ahead. Your line is open.
Good morning, guys. Just a couple of quick follow-ups from me, from what Jonathon said. Can I just ask what your projections are on sort of gearing projection, now with this? And should we think around, you know? I know we don't want to read too much into this, but is it a 20% level, a level you're very comfortable at over the next sort of few years, and therefore that's where the sort of balance sheet capacity is, to continue buying back shares around this? And I guess should we infer from this that there's less risk of material M&A, of a large-scale transaction in that context? Thanks.
On the gearing, let's assume a full $500 million in the market for tranche one and then, you know, proportionate portion of that before year-end. Our net debt ratio will increase with around 0.5% for this year-end. For the full program, everything else being equal and based on our current plans, invest in the project portfolio that we have shown you and so on, a full program of $5 billion will increase our debt with 7%, so up from the 20%. We will still be well within the guiding range that we are comfortable with, being between 15% and 30%. Just to remind you that this is pre-IFRS 16 effect.
On the M&A side, we are continuously looking for good opportunities, and only the best opportunities, whether that is within oil and gas or renewable space. We have capacity to invest in portfolios, and we have capacity to do M&A and still deliver on this capital distribution program of share buybacks.
Okay, thanks for the questions.
Thank you. Our next question comes from the line of Teodor Sveen-Nilsen of SB1 Markets. Please go ahead. Your line is open.
Good morning, and thanks for taking my questions. Two questions from me, please. First, you mentioned very strong cash flows from Sverdrup, obviously, and mainly driven by, or partially driven by low tax payments. I just wonder, is that primarily a first half 2020 effect and, if you expect to pay higher taxes in the second half based on strong Sverdrup production? Second question is, based on your updated first quarter guidance, what do you expect to be the exit 2019 production from Sverdrup? Thank you.
Could you repeat your second question, please?
The second question was, what do you expect as exit 2019 production rates from Sverdrup on a gross basis?
Yeah. Okay. Now on Johan Sverdrup, and this is partly, you know, answering your second question and first question in one go. When it comes to production guidance for 2019, it's unchanged. It is around 2018, and that's where we are at, the best sort of estimate we can give you. To your question of sort of exit production, I think the most important is that we will reach production plateau around summer next year.
This is an asset that we have never produced before, and we need to put these wells in production and see how they work and what that will give us of information, and confidence in the numbers for 2020 and onwards, including eventually, you know, one day down the road, we will start looking at reserve numbers and whether that will change as a consequence of starting to know the asset. On cash flow from operations from Johan Sverdrup, this is to give you know, more sort of knowledge around how big of a good asset this is. Yes, you are right.
This has to do with sort of the tax model in Norway, and that we will start seeing higher taxes and more normal tax levels for Johan Sverdrup in the back end of 2020. Anything to add, Svein?
No. As you said, Lars Christian, it's related. The cash flow from operations that we have calculated is then based on the cash flow of the tax that we estimate then for Sverdrup in 2020, based on a $70 oil price and then around $50 per barrel. The fact is that in the Norwegian tax system, you pay half of the tax the year it happens and half of the tax the following year.
Okay. There are no more questions, only listeners. I guess you are all off to buy the stock, huh? Have a good one, guys. Thanks.
Thanks very much.
Thank you.