Earnings Call: Q1 2021

Apr 29, 2021

Hi, thanks, and thanks, everybody. Welcome to the Equinor Call, as you heard, for the Q1 of 2021. I'm pleased to welcome Svein Shire, Actium's CFO, who will present the results for around 15 minutes, and then we will move to the Q and A. This call will last for a maximum of 1 hour. I know a number of companies reporting today. Also joining the call, we have Ojanc Kvaalwane, Head of Accounting Rune Carlson, Acting Head of Performance and Mats Holm, Head of Finance. And with that, let me pass Immediately over to Svein to start the presentation. Many thanks. Thank you, Peter, and good morning, everyone. I very much appreciate you joining us, especially on what we know is a busy day, as Peter said. Today, we present our best quarterly results since 2014. This is, of course, driven by better commodity prices, But we also capture value from strong operational performance, continued cost improvements and strict capital discipline. In 2014, the oil price was close to $100 per barrel. We now deliver results at this high level with an average oil price of around 60. We booked gain on divestments within renewables. And we are, of course, also helped by Johan Sverdrup's major contribution to these results. A year ago, we saw rising uncertainty in the markets, and we implemented our operational and financial contingency plans. No, we see a clear improvements in the world economy and some countries are starting to reopen. However, in other areas like Brazil, where we have large operation, the situation is still very demanding and unpredictable. The status on infections and restrictions also affect manning at construction yards in several countries and may have further impact on the progress of our projects in execution. But I continue to be impressed And grateful for all our employees and suppliers who have kept our operations running safely, supplying energy to people around the world during these difficult times. The Tholarp platform has provided enormous amount of gas to Europe, delivering a total of more than NOK1.6 trillion in revenue to date. And still, we expect the remaining potential to be significantly above this. Last week, we delivered the plans for the full and partial electrification of the Troll B and the Troll C platforms, cutting almost 500,000 tonnes of CO2 per year from 2024 and onwards. Trolltree will start production this autumn, adding a total of more than 2,000,000,000 barrels of oil equivalent and at breakeven below $10 And for 3 of our commercial discoveries in Q1, tie back to Troll B or Troll C is an option. The same technology used to build the enormous trolley structure is now being developed to build the 100 meters tall Spar substructures for the 11 floating wind turbines of Haib in Tampere. This is a great illustration on how we exploit Value creating synergies between offshore oil and gas and offshore wind. Heidenthampen will be the world's largest floating wind farm, Providing electricity for the 5 Snorge and Gullfax platforms, and is an important step in commercializing this technology. We also continue to mature our offshore wind project in the U. S. During the quarter Equinor and our strategic partner BP were selected to provide renewable energy to the State of New York from our assets Empire and Beacon Wind. We completed the divestment of 50% of these wind assets in the quarter as well as the farm down of the 10% of Dogelbank A and B and booked an aggregated gain from renewable transactions on nearly $1,400,000,000 The Board of Directors has increased the dividend for Q1 'twenty one to $0.15 per share, up from $0.12 last quarter. This is consistent with our statements that the board will assess the dividend on a quarterly basis, reflecting assessments The company's financial position and funding requirements, investments in our competitive portfolio, the market conditions and the commodity price expectations. Before discussing our safety performance this quarter, I want to remember our 13 colleagues and friends who 5 years ago on April 29 lost their lives in the accident on their way home From the Gullfax B platform, our thoughts go to the families. The safety and security Of the thousands of people working at our plants, projects and offices and the integrity of our operations is Equinor's top priority. The fires at Hormar Fest LNG and Chelbogarden last year were fortunately without personal injury. But we see these as serious incidents. And after the fires, we have started several initiatives to improve on safety across the company. We will learn from previous incidents to avoid new ones. For the last 12 months, we reported a serious incident frequency of 0.5 and a total recordable incident frequency of 2.3 per 1000000 working hours. This is an improvement from the Q1 of last year. And now on to our financial results. The financial result this quarter reflect the increase in oil and gas prices. Our realized liquids price was up 28% and inverse European and U. S. Gas prices up 64% 46%, respectively. Underlying upstream operating costs were down 4% in the quarter. The continued cost control and solid operational performance position us to capture value from the price increase. IFRS net operating income was $5,200,000,000 and net income 1,900,000,000. Adjusted earnings before tax were strong at NOK 5,500,000,000 up from NOK 2,000,000,000 in the same period last year. The group tax rate this quarter was 51.3%. And for the Upstream business in Norway, the tax rate was 72.6% due to the strong results giving less impact from the tax package. No two comments to each of the reporting segments. E and P Norway delivered its best quarterly results since 2014. In 2014, E and P achieved this quarterly result with a Brent price of around $100 per barrel, while snow making it at just above 60, a true testament to the major improvements done over the last years. The production efficiency was strong. And this, together with other improvements, secured a reduction of 3% in underlying operating costs. Sverdrup and Thol are the largest contributors, but we see strong deliveries across the board. In the quarter, we had 4 high value discovery wells on the NCS, close to existing infrastructure, adding a total of around 90,000,000 barrels of oil Equivalent net to Equinor. E and P International delivered a strong result with $382,000,000 in adjusted earnings before tax. Adjusted earnings after tax are negatively affected by a nonrecurring effect in Angola impacting the tax rate. The continuing efforts To reduce cost by ourselves and our partners are rewarded, as underlying operating expenses are down 6% in the quarter. Our business in Brazil is impacted by the Peregrino field not producing due to the pandemic impacting the repair of the risers and delivers a negative bottom line in the quarter. We will drill 2 exploration wells towards the summer with a potential financial exposure for We know of around $150,000,000 including signature bonuses. Our U. S. Upstream segment delivered adjusted earnings of $192,000,000 and a strong cash flow from operations of around $600,000,000 The sale of Bakken closed on Monday, and therefore, both production and revenues from Bakken are included. E and P USA is continuing to reduce cost and the investment level has been significantly reduced compared to the same quarter last year. So to the MMP. And MMP delivered adjusted earnings of $61,000,000 in the quarter. Last year, we decided to move sales of some gas volumes from 2020 to summer 2021 and some beyond, taking advantage to capture higher prices. With the impacts of colder weather in Asia and Europe and the draw of greater LNG volumes into Asia, European gas prices were even better than anticipated. The increase in gas prices was positive for the group overall as reflected in upstream results this quarter. But it also means that MMP report losses on derivatives for gas forward sales against the stronger prices seen at the end of the quarter. Refinery margins were weak in the quarter and affected the results negatively. And the shutdown of Hammar Fest LNG also impacts the results. However, we delivered solid results within liquids trading, especially within LPG and the light ends. So to renewables, the new segment. And we report our Renewable business as a separate segment this quarter. The structure of this segment differ from the other ones in important ways affecting HOVI report. It has been a common practice to establish separate companies to develop and to operate the renewable assets. This, combined with us often having an ownership share of 50% or less, lease to equity accounting being common in this segment. Both project financing and portfolio optimization are key parts Our value creation strategy in renewables. Unlike other renewable companies, we will therefore not adjust for profits and losses from transaction in this segment. We will, however, continue to provide full visibility how we consolidate and report gains and proceeds from transaction. In addition, I would like to remind you that on equinor.com, there's further information about our renewable assets. All share of the results from renewable assets in production was $24,000,000 in the quarter. Including the cost associated with maturing our renewable project pipeline and gains from transaction, adjusted earnings for the segment was 1.3 for $1,000,000,000 So to the production and I will start with the oil and gas. This quarter, we delivered stable and safe operations with high regularity despite COVID restrictions and strict infection control measures. Our equity production was 2,168,000 barrels per day in the quarter, slightly down from the record production in the same to last year. Production is negatively affected by the outage at our Hammersfest LNG plant and at Peregrino, partially offset by higher production at Johan Sverdrup and production ramp up at Snore expansion. To capture additional value from higher gas prices, we also had high production from our flexible gas fields in Norway and from our U. S. Gas operation. So to the renewables production, our offshore wind farms had high availability and stable operation throughout the quarter. In March, Hybren Scotland was named the UK Offshore Wind Farm with the highest capacity factor for the 3rd time. However, there was less wind this quarter than expected for the season and the production ended at 4 50 gigawatt hours, down from 558 in the same quarter last year. In the quarter, we deliver a strong cash flow from operations of $6,600,000,000 and a very strong net cash flow of $5,200,000,000 after net investments and dividends. Driving the cash flow were continuous improvements and strong capital discipline, combined with proceeds from divestment. We paid cash tax of $78,000,000 in the quarter at NCS And we'll pay around SEK 160,000,000 in the Q2 based on the 2020 results. But based on the Q1 results, we expect increased tax payments in the second half of twenty twenty one. The strong cash flow helped to significantly improve our net debt ratio by 7.1 percentage point down to 24.6%. So going towards the end and let me end with our outlook. We expect annual organic CapEx in 20212022 at $9,000,000,000 to $10,000,000,000 And 2021 exploration is kept at around $900,000,000 The expected annual average Production growth from 2020 to 2026 is around 3%, while the rebased production growth for the current year is expected to be around 2%. Thank you very much for your attention and I look forward to your question and pass it back to you, Peter. Many thanks, Fain. So with that, I pass it through to the operator to open up for Pauline, and then we'll be taking the First question. Ladies and gentlemen, at this time, we will begin the question and answer First question is from the line of Biraj Borkhataria from RBC. Please go ahead. Hi. Thanks for taking my question. 2, please. The first one is on shareholder returns. Where do you want your gearing or net debt to be before you can return your dividend back to pre COVID levels as you previously planned it? And then second question is actually on maintenance. Just thinking about the portfolio as a whole, depending on the country you're in, The rules around personnel distancing, etcetera, will be different. So I'm just wondering if you look at your maintenance activities for 2021, Are you on track as it stands today or is it maybe taking longer to complete some of these things? And also can you confirm if you're still completing the same level of preventative maintenance now as you maybe would have planned 6, 12 months ago? Thank you. Thank you, Biraj, and thanks for good questions. Regarding the dividend, As we have said over the last quarter is that when the board is then doing the assessment on the dividend level based on a quarterly basis. It's an assessment of the company's financial position that we are in, the funding requirements ahead of us, Investments that we have at hand inform our good and advantage portfolio, the market condition, but also the commodity price expectations. So those are the things that we are taking into account. So what the Board Stond and on the evaluation, we see that there are some better market conditions out there. We have been able to reduce the debt by by 7.1 percentage point or to below 25%. So the assessment that has been done in this quarter is that we increased the dividend by $0.03 to $0.15 per share. There is no clear Bruce, on when we are then getting to exactly this level of net debt ratio, then we will then do Further assessment, but it's the totality that really, really matters here. And the board is doing that assessment on the quarterly basis as we have communicated. Regarding then the maintenance For the 2021. And as you might remember, in 2020, we then deferred quite a bit Of the maintenance due to the COVID situation, we had some more maintenance, for example, on NCS towards the end of the year, normally in 2nd Q3. This year, we have also focused a lot on the maintenance being on track. So what we now see and expect then in the second and third quarter is that we will have more maintenance. And for the totality For the year, we expect turnaround effects of around 50,000 barrels oil equivalent per day. The major part of it will then come in 2nd and a little bit less we expect then in 3rd. We are following the COVID And doing good planning with the people on board on there, so that we are able to prioritize and do the maintenance As we go along. Okay. Operator, can we have the next question? The next question is from the line of Oswald Clint from Bernstein. Please go ahead. Thanks, Peter. Sven, thank you. Hammerfest, another 6 months delay. I just want to Firstly, I understand the insurance. So is it $100,000,000 a quarter, but it looks like $60,000,000 of that is from the captive. So is that how we should think about that? It's kind of net 40 each quarter. And then Principally, my question is, are there any critical milestones here to ensuring this starts up by the end of March next year? I know there's 180 kilometers of cable to arrive this summer and then replace. Does that need to be in before the winter period this year? Just any color around that would be Interesting, please. And then secondly, you mentioned integrity of operations. And just with that in mind, I think this morning took a Pretty sizable warranty provision on cable protection around the wind turbines and it's all around scouring just in terms of the rock. So I imagine with your offshore experience, you probably plan for these issues. But is there any reason to expect that you might be susceptible to similar issues and now or in the future? Thank you. Thank you, Oswald. On the Hammerfest, as you referred to, is that We had an income from the insurance coming into the DPN segments this quarter of around USD 100,000,000. Part of this is coming from our captive. And around SEK 60,000,000 is then estimated to come from the while the remaining will come from external sources. This is then based on totality and not then on the Quarterly impact of it. Going forward with Sverdrup and Melkaja in this Steve, it's then quite a lot of cable and work that needs to be done. It's been working on getting the full overview here, but so it's man hours than being required. Has been some limitation also here due to the COVID and to get people on into the facility, yes, but we are also working on that one. Our best estimate now is that we will have a start up within end of the Q1 next year. On the totality with the seasons into Norther, the harbor, it's since we have the Gulfstream, it's not Iceplace, so it's possible to operate with both in and out at all time. On the wind part of it, As you alluded to, I will not comment on Osted's statements there. But what we are following on the totality is that We are utilizing, in general, the competence that we have from our offshore oil and gas in an Sensiway for the development of the areas and those things. And we are also working closely with our suppliers for the wind turbines to also make sure that we have that in good place. So no new update from us on this one. That's great. Thank you. Next question is from the line of Theodor Milsom from SP1 Markets, please go ahead. Good morning and thanks for taking my questions. Two questions. First one is on Sverdrup. This morning, Eirond Deen is out and commenting on that plot haul for Phase 2 could exceed current guidance of 720,000 barrels per day. I guess that's not an shocking news, but could you please comment on that? What should we expect after first oil at Phase 2? And second question is regarding U. S. As I understand, you said that, Oasis, as far as I understood, The earnings from the U. S. Activity includes Bakken in Q1. I just wonder how much Of the earnings of $190,000,000 is related to Bakken. Thank you. Thank you, Theodor. On Johan Sverdrup, now we are then working then to lift the production on Phase 1, then to 535,000. And we expect that, that will happen then before the summer. On the totality for the fuel field for Johan Sverdrup, our best estimate Today, it's still done the 720,000 barrels in the full capacity. It has been worked with studies and those things, but Our best assessments where we are today is that the capacity is then 720,000 on Johan Sverdrup. Regarding Bakken, the impact on the Bakken there in the results into the net operating income It's a little bit less than SEK 50,000,000 in the quarter. Okay. Thank you. Next question is from the line of Mehdi Anabati from Bank of America. Please go ahead. Hi, good morning and congratulations on those very strong results. So two questions. First one on the working capital variation, please. So this is the Q1 in a row where you have a working capital outflow. So I imagine that the reasons are different every quarter. But my question is, how do you explain the working capital outflow in the Q1? And should we expect part of that working capital outlook to reverse swing? Second question is about your natural gas production in Norway. So it has been down roughly 3% versus Q1 last year. I understand that you have been impacted by a COVID production shutdown, but I thought that you might have been able to boost production from fields where you have compressor units given that the natural gas price has been very strong. So have you been able to boost that gas production from the fields where you have a compression or no? And why? And if I may, On Gal, would you say that the demand in Iraq is currently high, Harmit? Thank you. Thank you for your questions. Regarding the working capital, what we are then seeing then from Q4 Is that mainly related to the price impact? There was not that much volume impact. In fact, that we are working on then To take that further down and looking into the totality there, of course, dependent On the market outlook, Kotangor versus backwardation. So it's been taken into consideration. But Jan, would you like to give some more details? Yes. So we see in from Q4 to Q1 that we have increase in prices. And but there are decrease in volumes that is the impact on the inventory. And also on the And other receivable, we see increased and related to both prices, and that is related to activity in December March and then limited effect on the trade and other payable. Thank you, Arjan. On the oil and gas in Norway, the snow EBIT impact is around 40,000 a barrel oil equivalent per day. And that I explained some of the reason why the production is slightly down on the Norwegian continental shelf. In Q1, on our flex gas field, both Oseberg and Toll, we have been running those at high capacity, taking advantage of all the gas prices that we have seen in Europe. And In totality, you saw that the invoice cash price is around $6,700,000 per 1,000,000 BTU in Europe. So by having then the good capacity and utilizing those two fields in the best possible way, we have been able to capture strong values from there. Regarding the European gas market, Prices then going up and being at a high level. It has been strong demand in Asia, Cold weather in Asia also then driving then demand for LNG. That has meant that less LNG has come to Europe. It has also been a cold weather in Europe. So and then also a little bit less than supply from other sources into Europe. That has meant that gas prices has been strong. And This is something that we are then taking advantage of, utilizing the capacity that we have at our fields to gain this value then for our business. So we are then well supported by the higher prices there. But of course, we also see currently that the prices are at a high level. And currently, there's then filling of storages and those things which is ongoing. And then Always the competition for the LNG with Asia also currently having high prices. Perfect. Thank you very much. Mickey, if I could just make one clarification just popping on there. In fact, if you look, The gas production in this quarter in Norway was 723. A year ago, it was 745. So actually, the snorbit reduction more than makes up the difference. Excluding that one, underlying gas production was actually higher. Yes. Yes, I admit it, but thank you. Thanks very much. Next question is from the line of Thomas Adolff from Credit Suisse. Please go ahead. Hi, good morning guys. Two questions for me. Just one going back to the dividend. And you've obviously mentioned in the past that the dividend needs to be competitive with peers. And over the past 12 months, we've seen many of your peers introduce a variable component It was a lower base dividend. Obviously, you've got a good starting point there. And I guess you don't have to really comment on what you're thinking, but is it fair to assume that we'll get a new distribution policy announced with your Analyst Day in the middle of June? And I guess secondly, on flex volumes for gas. I believe there's an annual quarter. I'm not quite sure how exactly it works from 1 quarter to another, but perhaps you can talk about the seasonal flexibility you had in the second quarter and Q3 please? Thank you. Thank you, Thomas. On starting with the dividend there and just So repeat what I said earlier is the board is then doing the assessment on a quarterly basis here And then based on the outlook, the projects that we have enhanced, the volatility that we are seeing in the market. So that's what we will also then continue to do. We will have the Capital Market Day that we are we'll have in June. Then we will update our strategic outlook for the portfolio, and that also include financial overall financial framework to it. So that's where we are there, but the board is deciding on a quarterly basis then on the dividends. With the volumes for the gas, it's then mainly related then to the toll field and to the Oseberg where we have the flexibility. So on Toll and Oseberg, We are then utilizing the quotas and the production permit in the best possible way. So we are then running and optimizing based on the prices that we are seeing. So then being able then to capture the value then from the flexibility. If If you look at compared to last year, you have seen that it's then up than for the flex gas in totality due to the fact that we saw that there were higher prices now that we then took advantage for. But The production permit is for totality. On Toll especially, there is a production permit, which also means that we can run that at a High level. So comparing then with the gas last year, you saw that The toll was mainly at a similar level, while the Oosteburg where we produced it over a shorter period, We took the advantage of having high production in the Q1 and onwards. Okay. Thank you. Next question is from the line of Johan Charrington from Societe Generale. Please go ahead. Hello, everyone. Two questions, if I may, regarding the tax losses pool in the USA, which is not reflected on the balance sheet. Are you able to touch upon the possible implications of these farm downs and the back end asset sale for this for the size of this type of this book, please? And the second question would be on turnarounds. So you are guiding for 120 kilobytes OED in the Q2 for the impact of maintenance. Are you able to say how much of this stems from Norwegian Gas versus Norwegian Oil, please? Thank you. On U. S. And the tax positions there. By doing the farm downs, for example, as we did know on Empire Wind and the Beacon Wind, We are able then to utilize our tax position in U. S, which means that we are able then to do this without having to pay tax on the transaction. So we are utilizing that one in a good way. And it's also similar on the Bakken that we can utilize the positions there when we are then doing the divestments. When you are when we are looking then at the turnarounds then in totality, as you said, around 120 for the quarter. On NCS, I would say around 2 third ish will then be related then to the gas and then around 1 third related to liquid Of the turnaround in Norway as part of the totality of the EUR 120,000,000. And Marian? Yes. Just to Comment on the bucket. So we keep the tax carry forward position within Equinor. Thanks, Oeymar. It's very clear. Thank you. Next question is from the line of Anders Holzer from Kepler Cheuvreux. Please go ahead. Mr. Holzap, can you please unmute your telephone? It is now unmuted. Sorry for that. Actually, my questions are largely concentrated around the new segment, Renewables segment. Now you've been very helpful in providing your Production per field for oil and gas assets. I wonder if you will do the same for your renewable assets on a quarterly basis? And also, while you mentioned the high end pump in your introduction there, I know it's early days still, but is there any chance you can give Some flavor on what you think levelized cost of energy will end up at when it comes to high end pump? Thank you. Could you repeat your first question because the line was not that good. If it was then Production per So the first question is related to your debt production of renewable power in the quarter. For oil and gas, you report on a field by field basis for the quarter, which is extremely helpful, and it's a very good set of numbers that you provide on a quarterly basis. But I'm just wondering will you do the same for the renewable assets? On that one, We are now in the buildup of the renewable portfolio. It is still early days, but those are things that we actually will then look into going forward, Hold on to provide good information also then for each of the wind parks that That we are then building up. So that is something that we are looking into and will then continue to look into. On your second one, on the Hywind Tampon part of it, I do not have the exact Levelized cost of energy on that one. But what we have seen is that then when we started off with the first Hywind Windmill just outside Stavanger, then moving over to Haiven, Scotland with the 6 windmills there, we saw a significant decrease in the cost The levelized cost of energy there and we saw that further into the Hywind Tampen. We have the estimate For the Hywind Tampana of the total CapEx figures and it is we are Within this. So but I do not have the exact levelized cost of energy for it. Right. Thank you. Thanks. Congrats. Next question is from the line of Martin Ratz from Morgan Stanley, please go ahead. Yes. Hi, good morning. I also have 2, if I may. I wanted to ask you about the EU taxonomy, because I find that the topic there is sort of a little hard to gauge. So I recognize the question is sort of quite broad, but What do you think the sort of EU taxonomy sort of means for Equinor? And particularly, this decision that we're all anticipating later in the year whether natural May come under EU taxonomy or not. Can you talk a bit about what that may mean for Equinor? It may mean very little, but I'm just Trying to figure it out. And the other one I wanted to ask you is that I noticed that Equinor New Energies has a separate credit rating of its own or at least from Moody's. It does not from the rest, but from Moody's, it does. And I was wondering if you could Talk a little bit about exactly what is in this entity. I would imagine it's, of course, your sort of renewables projects. But If you can sort of describe that, that would be helpful. And also, why is the credit rating of this particular company lower than the main credit rating from Equinor? And does that mean that financing renewables projects, finding an entity like this is somehow at a sort of cost of capital disadvantage? Thank you. I will start with the taxonomy and also then also ask Arjan if you would like to add something. And also On the rating, Mats, can you also then prepare for that one for the new energy company? What we see in the EU taxonomy, and it's then part of the overall then reporting and reporting requirement, which is then coming. We have been reporting with the sustainability report for quite a lot of years and and try and to give an overview of important impacts from our operations and how we are doing. So what we will now do is awaiting the final legislation to follow that one from EU and then also then towards The Norwegian legislation which will come. And but what we see as an overall is that the taxonomy aligns well with our strategic direction and also the vision of shaping the future of energy. And In that context, ESG has and will be an important part, Joss. Jan, will you add something? Yes. So we got Some important clarification last week. So we are in the middle of assessing this. And but I don't think we are in a position right now to comment any further, but we need to come back To that on a later quarter. So supporting into it and driving the strategic direction there. And Mats, Some of rating of the under rating on the new energy company? Yes. Thank you very much, Svein. So on the rating side, so I can say that Equinor New Energy is containing most On the Renewable business, but most importantly, it does not include the U. S. Offshore wind at this point in time. The rating is slightly lower than Equinor Arthur and that's not because it's not solid, but that's a little bit about how we rate these entities and set it up. Thank you. Thanks, Mark. All right. Wonderful. That's been great. Next question is from the line of Jon Rigby from UBS. Please go ahead. Thank you. Hi, Sven. Two questions actually rather more granular, I guess. The first is you made some comments about how problematic the pandemic effects are in Brazil. So I just wanted to check-in on both the Peregrino work and the Bacalhau FID, are the conditions in Brazil, it will allow you to proceed with both of those on schedule or should we just be a little bit cautious on that? I guess it depends on how much work you have to do in country. And the second is, and forgive me for asking about this, but the tax rate And the NCS has been a bit all over the place since the tax concessions last year and it's popped back up to something that looks more akin to where we were before those concessions. So and I guess, as I understand it, it's got much to do with the oil price. So If oil prices continue in the kind of range we've seen year to date, is the tax rate on the NCS We saw in the Q1 a good number to be thinking about going forward. Thanks. Thanks, John, For the question, let me then start with Brazil. And as you all know, Brazil It's been then hit hard by the pandemic there. So what is our main priority is the safety and security for our people. And that means that we are following this very closely, making sure that we are not having more people on board than is absolutely critical than to do the development. There has been very, very hard limit also limitations in Brazil on then how to be able to on number of people that we are having onboard. So we that is the main priority. And that means that it's a bit hard to say how this is developed going forward. And that means that we just need to follow it, make sure that the safety It is well taken care of. And when there are possibility then to do something and have more people on board, then we will then More people on board. That's for the Perugino main, but it's also impacted on the Perugino Phase 2. Perugino Phase 2 Wasn't planned and then to deliver with the start up by end of last year. But following this pandemic situation, It is also so that this has been delayed following the pandemic there and also on the repairs on Pergino Main. So that means that we have on our later start up. But it's still a challenging situation in Brazil. So it means that we need to Follow it closely and making sure that the safety is well taken care of. And then we also need to come back then later on when we see that It's going back to more normal again to come with the exact dates for this one, so no firm update on it. On the tax rate on Norwegian Continental Shelf and the taxes paid in Norway on the Norwegian continental shelf is then this quarter coming from the results that we made in 2020, And it was $78,000,000 that we paid. However, when we look at taxes payable, which will then impact the 2nd quarter, that is then increasing. And as you said, John, on the tax rate on the NCS, it's now then Close to 72 percentage point. That's impacted by the strong results that we have been able then to generate on the Norwegian Continental Shev. So then high earnings, but and this is the highest quarterly results since 2014 with the current prices. So with the high prices, we also see then less impact from the tax package. So that's the totality on it. So of course, dependent on investment level, that has an impact with the increased uplift, But with high results in the E and P and O segments, the impact from the tax package will then be less than what we saw In last year when we had lower results and then you had much more impact from the tax package. Okay. Super. Thanks for that. Next question is from the line of John O'Leeson from ABG. Please go ahead. Good morning, gentlemen. My question is actually more like over request So for some comments on it. The Renewables business, it's great that you started porting it as a separate segment. However, of course, when you're doing the equity accounting As main principle, the revenues, EBITDA or EBIT numbers will be missing or at least being useless. And these numbers are really important to look at when we try to evaluate the underlying performance or try to value that part of the business. I just wonder if it would be possible to, at some point, to go over to more proportionate accounting similar to what you do in the oil and gas business, I think would be more useful for us to judge. The next few quarters, your revenues that segment will be 0 unless you have any sales, of course, and asset sales. And also finally, on the same Renewable business, it would be great to get some more insight into the financing of the individual wind farms. Yes, that's more request, but I wonder if you could comment a little bit on those issues. I'm sure you thought about them. Thanks, John, for the questions there. And this quarter, we are then reporting Renewables, first time as a separate segment, following then the accounting rules there. And As you said, it's then several of the companies is then equity accounted and that we are in a way following. We tried then also then to give some more visibility on part of the totality as we also have been doing earlier on an annual basis. Also some of the commercial terms and then as well as descriptions of the totalities is then also then giving at equinorcom.com. So there are some more informations there. And then also, we have tried then to give some for example on Dogger Bank. When the financing was in place, we also released some information around that one. So I think it's a segment in development. Just a comment from my side. So, Wendy. Thank you. Okay. Next one? Next question is from the line of Lydia Rainforth from Barclays. Please go ahead. Thank you and good afternoon. Two questions, if I could. The first one on costs. If I look at sort of Norway being down to 3% year on year and then internationally U. S, 6% year on year, Are they broadly in line with what you would expect at this stage? And I'm just wondering if Norway could go a little bit further. And then secondly, On the hydrogen side and the Kirby project that you announced during the quarter, is the idea that the Equinor natural gas going into that project, but that ends up being a long term contract and that essentially is then 0 carbon gas in the way that you're thinking about it? Thanks. Thank you, Lydia. Let me then start on the cost So I then and the totality there. As we then also comment a bit on In the run through of the segments, the underlying operating Costs are down then both in the E and P Norway, in E and P International as well as in the U. S. We see that there are 3% underlying cost down in the E and P in Norway. And it's then we are able then to capture on the improvements that we have been doing over the last So that is then good and there is high focus on it in the organization. Looking at the totality, when you look at the absolute numbers on Norway, it will since we are reporting in U. S. Dollar and quite a lot of the costs So then in Norwegian kroner, there will be a currency impact on it. But what we are then Trying then to focus on the underlying, then we're trying to take out that impact. And there we see the improvements that we're getting that with around 3% in related to not the currency and the impact coming from that. On the international part of it, in the international total dividend, we have still strong focus there both ourselves as well as then all partners there. So we see that both we and but not Also where we are partners that the operators are also having a strong impact on the cost and good focus then to take that further down. On the hydrogen part of it, as you asked earlier, We have then set up a separate unit within the M and P segment. It's called Low Carbon Solutions. And we in this quarter, we have then been able then to have progress on several things. We have The releases that we have related then to around Hamburg in U. K. So we are maturing and working on that 1, as well as the MoU that we have for Netherlands, Belgium and France. So that is handled by the low carbon solution group in the MMP. I'm actually going to interrupt that actually because we do have to get away. So I think as far as I'm aware, there are no further questions. So I'd like to take this opportunity to Thanks, Fran, and our colleagues for covering those and for all of you who joined the call this morning. As always, if you have any follow-up, Please don't hesitate to call us in Investor Relations. I'll also take the opportunity to remind you that it's our Capital Market Day, as Sven said, on June 15. So we look forward to talking to you then as well. So with that, I'd like to just pass on my thanks. Stay safe and best regards. Many thanks indeed.