Equinor (EQNR) has announced robust second-quarter financials, with a significant $7.5 billion adjusted operating income before tax and a $1.9 billion net income according to IFRS. The company reported substantial progress in its strategic initiatives and a consistent safety performance. Equinor also revealed plans for extensive capital distribution to shareholders and updated its renewable energy production outlook, projecting a 70% increase this year.
Key Takeaways
- Equinor's adjusted operating income before tax for Q2 stands at $7.5 billion, with an IFRS net income of $1.9 billion.
- Year-to-date cash flow from operations after tax reached $7.7 billion.
- The company started production at Kristin South area and Hanz field, and closed strategic swap transactions.
- Equinor set a higher strike price for Empire Wind at $155 per megawatt hour.
- A two-year share buyback program was introduced alongside an ordinary cash dividend of $0.35 per share.
- Cash flow from operations is expected to be around $17.5 billion for the year, with a $14 billion capital distribution planned for 2024.
- Equinor maintains strong safety performance and delivered approximately 3% production growth in Q2.
- The company's financial position is solid with $32 billion in cash and cash equivalents.
- A negative net cash flow is expected for the year, but a positive net debt ratio is anticipated by year-end.
- Equinor maintains its guidance for capital expenditures (CapEx) and oil and gas production.
Company Outlook
- Equinor anticipates around $17.5 billion in cash flow from operations for the current year.
- The company plans a total capital distribution of $14 billion in 2024.
- Equinor's renewable production is expected to grow by about 70% this year.
- Guidance for CapEx and oil and gas production remains unchanged.
Bearish Highlights
- The company expects a negative net cash flow for the current year.
- Equinor is struggling with increased costs and limited value creation opportunities in low carbon projects.
- The hydrogen sector is developing slowly, with clear returns anticipated only in the long term.
Bullish Highlights
- Equinor has a strong operational performance and robustness in production.
- The company is focusing on value-creating projects in its renewable business.
- Major projects like Johan Castberg and Bacalhau are progressing well and on track for first oil.
Misses
- Equinor has not made a decision on whether to drill more or abandon a specific well.
- The renewable business's balance sheet stands at $3.54 billion, which is not included in the report.
Q&A Highlights
- Equinor plans to distribute $14 billion in cash returns this year and between $4 billion and $6 billion next year.
- The company plans to increase cash return by $0.02 per share per year.
- Equinor's investment in the lithium sector reflects its interest in the commodity's future potential.
- The company is facing supply chain issues in the offshore wind sector, though its own projects remain unaffected.
Equinor's commitment to shareholder returns is evident in its plans for extensive share buybacks and dividend payments. The company's strategic progress and solid financial position, despite some challenges in the renewable sector, suggest a focused approach to growth and capital discipline. The updates on major projects and production guidance provide a clear picture of the company's direction and priorities for the near future.
InvestingPro Insights
Equinor's financial resilience and commitment to shareholder returns are underscored by the latest data from InvestingPro. With a robust market capitalization of $72.53 billion and an attractive price-to-earnings (P/E) ratio of 8.13, the company presents a compelling case for investors. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands even lower at 7.12, indicating a potentially undervalued stock in comparison to its earnings.
InvestingPro Tips highlight Equinor's strong shareholder focus, with a noteworthy dividend yield of 11.32% as of May 2024, reflecting a substantial 335.81% dividend growth from the previous year. This is a testament to the company's commitment to returning value to its investors, having maintained dividend payments for 23 consecutive years. Furthermore, Equinor's financial health is solidified by its cash position, which exceeds its debt, and its ability to cover interest payments comfortably with its cash flows.
For investors seeking stability, Equinor's stock is characterized by low price volatility, which, alongside the company's significant dividend, may appeal to those looking for steady income streams. Moreover, with 4 analysts having revised their earnings estimates downwards for the upcoming period, investors might want to keep a close watch on the company's future earnings calls for any potential adjustments to their investment strategies.
For more detailed analysis and additional InvestingPro Tips, including the company's status as a prominent player in the Oil, Gas & Consumable Fuels industry and its strong return over the last five years, visit https://www.investing.com/pro/EQNR. There are 13 additional InvestingPro Tips available for Equinor that can provide further insights into your investment decisions.
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Full transcript - Equinor ASA (NYSE:EQNR) Q2 2024:
Operator: Thank you for standing by. My name is Angela and I'll be your conference operator today. At this time, I would like to welcome everyone to the Equinor Second Quarter Analyst Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. I will now like to turn the call over to the presenters. You may begin.
Bard Glad Pedersen: Thank you, operator. My name is Bard Glad Pedersen. I'm heading up Investor Relations in Equinor. Welcome all to the analyst call for our second quarter results. As usual, I'm here together with our CFO, Torgrim Reitan, who will take us through the results before we open the Q&A. So with that, I hand it to you, Torgrim.
Torgrim Reitan: Thank you, Bard. Good morning, and thank you for joining us, and I hope that you are enjoying your summer. So let's dive into the results. So the second quarter demonstrates good progress and it confirms what we said at our Capital Markets Day. Today, we delivered solid financial results, driven by continued strong operational performance. In the quarter, we report adjusted operating income of $7.5 billion before tax and an IFRS net income of $1.9 billion. Year-to-date, we have delivered cash flow from operations after tax of $7.7 billion. The taxes in the second half of 2024 will be lower, and we expect cash flow from operations to be in line with what we said -- what we have said around $17.5 billion for the year. I will revert to this. Adjusted earnings per share were $0.84. Across the portfolio, we are making strategic progress. On the NCS, we started production from the Kristin South area earlier this month, and the partner operated Hanz field came on stream in April. Together with our partners we made an investment decision for the field which will accelerate the production and maintain high gas export levels. This investment is highly valuable with the net present value to Equinor of more than $500 million. We continue to high grade our oil and gas portfolio. In Norway, we align our ownership interests across licenses through a swap with Petoro. Aligning ownerships will be important for accelerating production, reducing costs, and driving the full potential in key areas. In the U.S, we closed the swap transaction in Onshore Gas with EQT (ST:EQTAB), creating more longevity and robustness and reducing the breakeven for [Technical Difficulty] with more than 30% [indiscernible] million tons in injection capacity per year. Finally, for Empire Wind, we achieved a new higher strike price of $155 per megawatt hour earlier this year. We continue to move forward with the project and our next external milestone will be the financial close. The competitive capital distribution continues in line with what we have said at our Capital Markets Day. For the quarter, the Board approved an ordinary cash dividend of $0.35 per share and in addition, $0.35 in extraordinary dividend. At CMU, we introduced a two year share buyback program to increase predictability. The program is $10 billion to $12 billion in total with $6 billion allocated this year. In line with this, we announced a third tranche of up to $1.6 billion starting tomorrow. For 2024, we expect to deliver a total capital distribution of $14 billion. Safety remains our top priority and our long-term safety trend is positive. Our reported safety performance has never been better. But we do know that this is a race without a finishing line. In June, we presented the Internal Investigation Report of the helicopter accident in February. We will use the report to further strengthen our work. We delivered around 3% production growth this quarter in line with our expectations. On the NCS, we had strong operational performance and good regularity. Total production was up 5% from the same quarter last year and gas production was up 13%, with strong contribution from Troll and Oseberg. The ramp up of new fields like Breidablikk and Hans also contributed. In addition, turnarounds were well executed impacting production less than expected. So we have reduced the overall turnaround impact for the year to 55,000 barrels per day. For E&P International, production was up 2.5%. The Buzzard field in the U.K. and U.S. contributed positively, partly offset by turnarounds and lower production in Brazil. For E&P U.S., production was down in the quarter as expected U.S. Offshore was impacted by the planned turnaround on Caesar Tonga. Within our onshore gas production, we indicated there would be curtailments, and we saw some of that in June. For the year, we still expect curtailments based on our operators' commercial decisions to create higher value. Our renewables production is significantly higher than last year, mainly driven by onshore power plants in Brazil and Poland. In the U.K., offshore wind production increased. At Dogger Bank A, 27 turbines have been installed, but full commercial production is now expecting during first half of 2025. And this impacts our production outlook this year. Now over to our financial results. Liquids prices remain higher than last year. And this quarter, we saw an increase in European gas prices. As expected, storage levels in Europe are healthy, but the market remains fragile and small changes can give large fluctuations. Going forward, prices will depend on the weather, European demand and competition for LNG, as well as uncertainty related to transit through Ukraine and as always supply side disruptions should that happen. Our E&P Norway results were driven by strong production, delivering adjusted operating income of $6.1 billion and $1.4 billion after tax. Our international E&P segments delivered $963 million in adjusted operating income and close to $700 million after tax. The Argerich well in Argentina was dry and expensed in the quarter. The overlift in the second quarter contributes to around $250 million in adjusted operating income for E&P Norway and around $170 million for E&P International. Our MMP results were driven by European piped gas and strong LNG trading and supported by successful power trading. These results were also impacted by turnarounds at Mongstad and high activity in low carbon solutions. Our renewables assets in operation contributed with $41 million this quarter. As we continue to build our renewable business, the adjusted operating income was negative as expected. We will continue to be disciplined and not overpay for access. And this is key to building a profitable business. Since second quarter last year, adjusted OpEx and SG&A is up by 11%, driven by higher production, overlift effects, general inflation and increased activity in renewables and low carbon solutions. We also see an underlying upstream cost increase of around 4%, quite in line with that production growth. We continue to maintain a strong focus on capital discipline and cost control. Then to our cash flow. This quarter, our cash flow from operations was $1.9 billion after tax. We paid the final two NCS tax installments based on 2023 results totaling $7 billion in the quarter. For the second half this year, we will pay three NCS tax installments, one in the third quarter and the remaining two in the fourth quarter. Each installments will be NOK 31.3 billion, which is lower than in the first half of the year. We expect cash flow from operations for this year of around $17.5 billion after tax, as we said at the CMU. While gas prices currently are below, our CMU price assumptions, oil prices remain somewhat higher. And the impact from the lower gas prices is softened by the Norwegian tax system. Next year, we expect to be back at around $20 billion in cash flow from operations after tax. In the quarter, we paid total capital distribution of $2.5 billion. Organic CapEx was $2.9 billion and $5.7 billion year-to-date. After taxes, capital distribution and investments, our net cash flow came in negative as expected at $4.2 billion for the quarter. We have a solid financial position with $32 billion in cash and cash equivalents. And our net debt to capital employed ratio increased to negative 3.4% this quarter. It is important to note that following our AGM in May, the States share of buybacks from last year was treated as a financial debt, impacting the net debt ratio for the second quarter. However, the payment of $4 billion was done in July, which will impact the cash flow in the third quarter. We are planning for a negative net cash flow for the year in line with what we indicated at the CMU, and we expect a positive net debt ratio by the end of the year. Finally, our guidance for CapEx and oil and gas production remains firm. We have updated our renewables production guidance. We now expect it to grow by around 70% this year, mainly reflecting the progress on Dogger Bank A. Now I hand it back to you, Bard, and I do look forward to your questions. So thank you.
A - Bard Glad Pedersen: Thank you, Torgrim. We are then ready to start the Q&A, and I see that we have a good list of questions already, so that is good. [Operator Instructions]. We will try to keep it within the hour since we started. So the first question is Martijn Rats from Morgan Stanley (NYSE:MS). So Martin, please go ahead.
Martijn Rats: Wondering whether the overlift in this quarter will be mirrored in an underlift maybe next quarter or the quarter thereafter. And also, if then, it's just a volume effect or if there's also a sort of a price/revenue sort of element to it. Can you sort of talk a little bit about that? And then secondly, last quarter, you mentioned that European industrial gas demand was starting to show a bit of a sign of life. I think you mentioned something like up 5% on a weather adjusted basis. But sort of listening to your comments now and also other comments that you made this morning, maybe that has reversed. I was wondering if you could give us an update on that?
Torgrim Reitan: All right. Thank you very much, Martijn. So yes, so this quarter we had an overlift situation both within the NCS assets and also internationally as such. So just want to remind you that on the NCS we had a similar underlift in the last quarter as we have an overlift in the current quarter. So there's no sort of carry forward or effect of that, it is sort of -- will fluctuate from quarter-to-quarter. And the same goes for international E&P. That sort of -- that fluctuates from overlift to underlift across quarters. So there is no sort of things that is carry forward related to this overlift, more than sort of a natural rhythm of production. In Norway, the overlift came across a large set of assets. And internationally, the overlift was related to Angola and Azerbaijan mainly. On your question on industrial gas demand in Europe, yes, we see that continuous. It is -- we see approximately a 10% growth or increase in sort of industrial gas demand in Europe. And of course, it is very glad to see that. And the total industrial gas demand in that market, we see that to be around 100 bcm on an annual basis. So it's sort of clearly an addition to the demand. When that is said, there are other drivers that are, I would say argue more important in sort of the price setting in Europe. And that is particularly the demand from Asia. So clearly, that is something to watch very, very closely. And China, we see this year has an 8% growth in demand. So that is important to follow on. And then sort of that brings me into the concept of weather, because weather clearly means a lot for both storage levels and demand and what have you. And this summer, we see that it is a warm summer in Asia and China and that actually increases demand for gas to power and air conditioning actually impacting demand of LNG. So weather is actually playing a role also in the summer. Then I would like to draw your attention also towards Ukraine and the transit of Russian gas through Ukraine, currently around 13 bcm is coming in that direction. And sort of Ukrainian government has said that they want to end that transit by year end. So we'll see, but also an area to watch when we sort of try to get our hands around sort of demand supply balances in the European gas markets.
Martijn Rats: Wonderful. Thank you very much.
Bard Glad Pedersen: Thank you, Martijn. The next question is Teodor Sveen Nilsen in SpareBank 1 Markets. Teodor, please go ahead.
Teodor Sveen Nilsen: Good morning, and thanks for taking my questions. First, on your production guidance for oil and gas, Torgrim, at the first quarter presentation, I think you made some comments around that we should expect lower production and definitely seeing that during second quarter. So how should we think around the total production guidance for the year being flat year-over-year? Do you still see some downside risk to that? So that's the first question. Second question, that is on renewable. I know that you have recently made some reorganization in your Renewable business and that you may be looking to reduce the project portfolio somewhat. I just wonder how that will impact your long-term target. So 35 to 60 terawatt hours production by 2030. It looks a little bit ambitious now, so any thoughts around that and the reorganization would be useful? Thanks.
Torgrim Reitan: Thanks, Teodor. So first on production guidance. What we have seen this quarter is a strong operational performance in where we produce and also that maintenance has gone very effectively and smoothly. So that is one element into it. The other one is that we have finalized, closed the Equity transaction, which actually adds a little bit of volume into the mix. And then the reason why we said about a little bit of downside last quarter that was linked to curtailment of U.S. Gas production, which we expected. We still expect some of that, but we do see a robustness in our production. So we say we actually stand firm on the guidance that we have. I think when we talk about production, I just want to make you aware of sort of the turnaround program this summer, because in the second quarter, we have had a production turnaround of around 55 barrels per day. In the third quarter, it will be significantly higher. It will be 125,000 barrels per day as such. So this is a little bit contrary to the way it was last year, where sort of it was the second quarter that had the highest turnaround. So just for your modeling, so you're aware of that there is a significant turnaround program happening in this quarter. But taking all of that into account, production guidance remains firm. Then on renewables and targets and ambitions and all of that. We will build a renewables and low carbon business on top of our oil and gas business, which will continue to invest $10 billion a year as you are very well aware of. It is very important for us that the investments we are doing are creating value, that they are robust and that they are profitable. So capital discipline needs to be the headline on sort of the way we conduct and build our business. So and Anders has said this for a long time that sort of if he has to choose or we have to choose between delivering -- between value creating projects or volume targets, it will be value creating projects. So that is very sure. More specifically, the projects we have ongoing are moving forward, and they will contribute clearly to growing the renewables production. And we are moving in line with sort of towards the ambitions that we have said. But clearly, we will focus very much on reducing costs where we can and focus our efforts and investments into where we see that the value creation is happening. So, yes, so thanks.
Teodor Sveen Nilsen: Okay. Thank you.
Bard Glad Pedersen: Thank you, Teodor. Next question is from Biraj Borkhataria from RBC (TSX:RY). Biraj, please the line is open.
Biraj Borkhataria: Hi, everyone. Thanks for taking my questions. I've got two. The first one's on the Rosebank sale. You've talked about selling down your interest in the past, but then suspended the sale due to the change in government. I was wondering if you had so far any clarity on fiscal changes, particularly around whether there could be any retroactive changes in the U.K., oil and gas taxes, because I suppose that would have quite a significant impact on the economics both for you and also for the potential buyers. So any color around your confidence in the fiscal regime there would be helpful. And then the second question is just on Empire Wind. Has there been any update on the project financing progress there? Are you still expecting that by year end? Thank you.
Torgrim Reitan: Okay. Thank you, Biraj. On Rosebank, yes, you know we acquired 40% of Rosebank together with other assets in the U.K. From Suncor (TSX:SU) last year. So currently, we hold 80% in that asset. So that is higher than we sort of like to be in assets like this. And we said early this year that we plan to farm down part of that. So that's clearly dialogs that we have with other companies related to that assets. On your specific question on sort of change of government in the U.K. and tax uncertainty, we are a very significant energy investor in the U.S. and have a close dialog on all levels with the government. And they are very much aware of the needs and for our industry. In the manifesto they put forward after the election, they have some statements that sort of we clearly recognize. One is that they want to create an attractive investment climate for industry. And also they really would like to focus on growth and energy transition. In that means that and our expectation is that any changes to the tax system needs to be balanced and business friendly. And in particular, that means capital allowances towards tax as such. And sort of what we read out of the manifesto is that sort of they will work on changes that safeguard a business friendly environment as such. This is very important and they are very much aware of that. So but Rosebank is a great asset, low breakeven. We plan to start it up in 2027 and it's going to be an important part of our cash flow in towards the end of this decade. Let's see. That was the first one, Biraj. That was a long answer on that one. But then we have the second one and that was Empire Wind. Yes, so Empire Wind, so we said at the Capital Markets Day that this year is the year of derisking the Empire Wind project. So, renegotiating the price contract with the State of New York, getting in place sort of project financing and levering and then thirdly, farming it down. So a little bit of an update on these topics for you. One is that we got sort of the contract and the price increased from $118 to $155 per megawatt hour. The project finance is underway. So the bank group is coming together. And we plan to for a sort of a financial close towards the end of this year, and that will be sort of the next sort of official milestone for this project. And then thirdly, farming down the asset will be important for us. And currently, we hold it 100%. It is 100% consolidated in our accounts. And that is also reflected in sort of the CapEx guidance that we have put forward. And if I remember right, we said it had in isolation and in CapEx impact of $1.2 billion this year and $1.5 billion next year. So if we successfully are able to farm down that assets and have it off balance sheet, reported CapEx will naturally be lower as such. So it is progressing according to plan.
Bard Glad Pedersen: Thank you, and thank you, Biraj. The next question is Lydia Rainforth from Barclays (LON:BARC). Lydia, please go ahead with your question.
Lydia Rainforth: Thank you and good morning. I actually have two questions. And actually just picking up on the low carbon spend and evolution there. So obviously, if you're talking about the idea that we need to be disciplined and risk fee value creating, I mean, at some point, you have to go actually this carbon, the low carbon spend actually is probably too much that we put in there that we just can't spend all of that money. And then secondly on the cash return side, can I just ask how you're thinking about this? Because we got $14 billion [ph] this year that goes out and obviously it's quite a big part of your market cap. It's a little bit less next year, and then it's lower in kind of 2026. I mean, when we think about '26 in the guidance you've already given, and I know this is way out, but are we thinking about that as a minimum level? Or I'm just trying to get a sense of actually what's the underlying cash return to shareholders at this point. Thanks.
Torgrim Reitan: Okay. Thanks, Lydia. It was a little bit hard to hear you on your first question. I know it was related to low carbon solution and capital discipline, but maybe you can repeat that.
Lydia Rainforth: Thanks. I'm sorry. I'll do it a little bit slower as well. I was just thinking, I mean, at some point, you've talked about there needs to be value creating earlier in the call. At what point sort of do you go actually we just can't spend all this money we allocated to low carbon because the projects are becoming in more expensive or there just aren't those value creation opportunities? So effectively, do you struggle to spend the low carbon budget that you've got?
Torgrim Reitan: Okay. No, it greatly does. Okay. So yes, I mean, currently the project that has matured the most is the Northern Lights project. That is well supported by government and sort of has a return that is absolutely or is appropriate. Currently, we're working on in the U.K. on carbon capture and storage projects, which are mature. It is the Net Zero Teesside and the NEP Endurance Storage project as well. So those are moving forward and they are providing our returns that is sort of appropriate as such. On sort of beyond that, clearly quite a bit of work ongoing on CCS storage side and also CO2 gathering and transportation. And we are in discussion building a CO2 pipeline from the continent to the Norwegian continental shelf. We see that it will still take some government to support to lift all of this. But we do believe that is going to build a meaningful and constructive return business in a way. I would say within the low carbon solutions, the hydrogen type of universe is not moving forward as quickly and sort of there are still work to be done before we see a clearer road map to returns in the longer term there. On cash returns or capital distribution, $14 billion this year, that's right. That should translate into 18% or 19% directly yield. We have said that next year, we have sort of the cash return, $0.35 per share is growing by $0.02 per year and then 1.2% in sort of a standard share buyback. And then on top of that, additional share buybacks. So in total between $4 billion and $6 billion next year. Then your question was, so what about 2026? And this is not the time and place to give you specifics on that, Lydia. But what I can say that we have the cash, the ordinary cash dividend. We have $1.2 billion in sort of standard share buyback. And then we have said that we intend to use capital distribution to bring our gearing and balance sheet back to sort of in better balance assets. So but we will come back on this on the Capital Markets Day in February. And clearly, capital distribution to have that competitive is a key priority for us as leaders.
Lydia Rainforth: Brilliant. Thank you.
Bard Glad Pedersen: Thank you, Lydia. The next question is Yoann Charenton from Bernstein. Johan, please, the line is open.
Yoann Charenton: Yes. Good afternoon, Torgrim. I would like to ask about an update on M&A activities overall. I have three questions related to this. First, can you please tell us how many assets are classified as held for sale as of June? The second question is in relation to Rosebank. Are you able to say what is the impact of Rosebank on the group CapEx this year? If I remember correctly this year's plan form down was reflected in the full-year CapEx guidance earlier this year? And then the third question is about basically any color you could provide on the timing for closing deals that have been announced, but that have yet to complete? And what is the overall impact on cash flow please?
Torgrim Reitan: The last final one was closing on Azerbaijan.
Yoann Charenton: Yes. Okay. Right. Okay. Thanks.
Torgrim Reitan: Thanks, Johan. Yes. So first, it was a very specific question on held for sale and M&A. So currently, it is the Azerbaijan asset that is as classified as held-for-sale. In addition to that, we did a swap, a value neutral swap with Petoro this quarter in various licenses. And the one leg of that swap which we are divesting is classified as held-for-sale for the time being. On the Rosebank, so, yes, we said that in the early of the year that sort of we were planning to divest Rosebank and part of Sparta. But we also said this quarter that our CapEx $13 billion remains firm. And I just want to say that that's sort of that guiding. We see that as a robust for progress of planned divestments as such. So we are comfortable delivering on what we have promised. And then the last question was closing of Azerbaijan, right? Yes. So we have both Nigeria and Azerbaijan as assets we have actually signed an agreement on and moving towards closing. I won't promise anything. They are progressing. And as you know, we have there's still some outstanding topics in sort of discussions with government, but it is progressing and is getting closer to closing of those transactions.
Yoann Charenton: Thank you, Torgrim.
Bard Glad Pedersen: Thank you, Yoann. The next one is Peter Low from Redburn. So Peter, please go ahead.
Peter Low: Thank you. The first one was just on Dogger Bank. Can you talk a bit about what the issues have been there that have led to the delays that have resulted in you kind of reducing the power output guidance this year? And then the second was just could we get an update on some of your upcoming major project startups in oil and gas, for example, Castberg? Is that still on track for first oil this year? Anything on Bacalhau, and its start up next year? Thanks.
Torgrim Reitan: Okay. Thanks, Peter. So on Dogger Bank, the operator of that development is SSE (LON:SSE). So they should be the one that actually provides sort of an in-depth explanation to this. Currently, there are 27 turbines fully or partly installed. And there are seven turbines in production for the time being. It is somewhat slower than planned. And the reason, one of the reasons behind it is actually it has been a very windy summer. So I mean, so it's proving, it's a good location as such, but that is part of the reason as such. It is progressing and we expect it to be sort of fully in production in the second half of this year. On major projects, so Johan Castberg first, which currently sits in a fjord. It has sort of left the yard on the West Coast of Norway and sits in sort of the fjord and doing commissioning work, planning to sail away to the Barents Sea (NYSE:SE) in August and on track to sort of come into production by the end of this year or in fourth quarter as such. There's still significant work, but it is progressing well. The expected production in 2025 is around 80,000 barrels per day. So it's a significant contributor to our production. You also mentioned Bacalhau, also progressing well, the vessel currently sits in Singapore in the yard. And sort of subsea work in Brazil is ongoing. We expect first oil in 2025 as such. So it is also progressing. And then we have spoken about Rosebank as another sort of large development. And then there are two more, a little bit longer out in time, Raia in Brazil planning coming on stream in '28 and also Sparta in Gulf of Mexico in '28. So actually five very large greenfield developments moving forward and they are moving forward according to plan.
Peter Low: Thank you.
Bard Glad Pedersen: Thank you, Peter. The next one is Kim Fustier from HSBC. Kim, please go ahead.
Kim Fustier: Hi, Torgrim. Thanks for taking my questions. I've got two, please. First one is I was wondering if there has been any progress on Wisting and on Bay du Nord. Both of these were previously put on hold, but there seems to have been some movement on engineering procurement lately. And then maybe just some general comments you can offer on the cost and contracting environment in the offshore? And secondly, I see that you've acquired a small lithium project in the U.S. It's a very small amount, but I just wondered how serious you are about lithium. One of your U.S. peers seems to be quite serious about it. So any comments you can offer there would be helpful. Thank you.
Torgrim Reitan: Okay. Thanks, Kim. So on Wisting and Bay du Nord, those are two projects sort of where we have said they need to do some more work before they are ready. And sort of we have had good success with that over the years to say push things back to improve them further. So both of them are progressing. Wisting we are maturing that towards a final investment decision in 2026. And that work is progressing. On Bay du Nord, also progressing well. And we do hope and expect to bring that forward to this to sort of a concept select not too far into the future. We have an ongoing drilling program, in those waters. And that hopefully can prove up even more volumes there. In the contracting environment, it is generally a rather tight market and we see clearly inflation. But in sort of the projects which are sanctioned, we have good control. I mean, the non-sanctioned projects, I mean, we're not immune, so we see more exposure there. As a large sort of investors and operator, clearly, we were able to steer this on a portfolio level and limit the exposure to inflation as such. So we have what we need, but clearly, we are not immune to inflation. On lithium, yes, we made an acquisition into standard lithium earlier this year. We see synergies between what we already do and this, particularly with the subsurface and sort of activities. And we do see lithium as sort of an interesting commodity for the future as such and taking an early and small position into that line of business.
Bard Glad Pedersen: Thank you, Kim. Next one on the list is John Schj. Olaisen from ABG. John, please.
John Schj. Olaisen: Hey, good afternoon. Thanks for taking my question. Two very quick questions. First, could you please elaborate on the dry well you had in Argentina in Q2? Was the result so disappointing that you will give up exploration in the area? Or do you plan further exploration wells in the area, please? That one first please.
Torgrim Reitan: Okay. Thanks, John. Yes, so the Argerich well was dry. It was a frontier exploration well with naturally lower expectation for discovery as such. So that's the way it is. The license that Argerich sits in is called CAN-100, which is a very significant and large acreage. But clearly, we have not made up our mind on the way forward and we will clearly analyze and consider what we will do here. We have covered area with seismic and we have good overview on the area.
John Schj. Olaisen: Okay. So no conclusion as of now whether you're going to drill more or abandon?
Torgrim Reitan: No, we haven't made a decision. I mean, clearly, still analyzing, but the well was dry.
John Schj. Olaisen: All right. Thank you. And my second question is related to the Renewable business. Given the equity accounting practice, only a small portion of the underlying net debt from that part of the business is reflected in your balance sheet. But is it possible to give an indication of the size of your balance sheet that it relates to the Renewable business, please?
Torgrim Reitan: Yes. That is $3.54 billion.
John Schj. Olaisen: So it's $3.?
Torgrim Reitan: $3.54 billion at the end of the quarter.
John Schj. Olaisen: All right. That's very, very accurate. Is that number given somewhere in the report?
Torgrim Reitan: No. It is not sort of written in the report, but we are happy to provide it in calls and discussions on an ongoing basis on the size of it.
Bard Glad Pedersen: All right. John, thank you. Sorry, but thank you, you have had your two questions and I have a lot on the list so.
John Schj. Olaisen: Thank you.
Bard Glad Pedersen: Thank you, John. The next one is Henri Patricot from UBS. So Henri, please.
Henri Patricot: Thank you. Hello, everyone. Two questions, please, from my side. The first one in MMP and the other subsection in MMP, which was a more negative number this quarter. You mentioned developing low carbon projects. I was wondering if that's something that we should expect to be an increasingly negative sort of a drag on earnings in MMP? Or was that quarter particularly weak? Just a percent of performance to expect next two quarters in that particular subsection? And then secondly, a follow-up on Dogger Bank. So you mentioned you had some delays to Phase A. I was wondering what the implications, you see for Phases B and C for the projects and whether we should expect to be some delays here as well and effectively full capacity of the project a bit later than expected? Thank you.
Torgrim Reitan: Okay. Thanks, Henri. So the MMP result came in at 521, which is sort of within the guided range. And I'm happy to see that MMP have been able to deliver within or above the guided range, all since we introduced sort of the increased guiding. So I would argue that they continue to deliver strong result across the business. This quarter, LNG trading and gas trading in particular is worth mentioning. However, sort of the other areas within MMP delivered fairly around sort of what you should expect this quarter. Expect the asset that has sort of been under maintenance is Mongstad refinery. So that is sort of very limited results from sort of that part of the business. But when that is in operations, they provide typically a meaningful part into the earnings from MMP. So I would say that MMP is sort of fair. On your question on low carbon spending, clearly, we are in a growth phase. And clearly, there are business development and early phase costs. We have taken that well into account into our guiding when we put forward. The costs that we do spend here is specific project related cost, is not administration or general cost. They are linked to projects, but projects which are in an early phase. So you don't book it as investments. You have to book it as operational cost as well. Right. The second question was Dogger Bank B and C. So they sort of they are planned to come sort of following each other with sort of one year between them. So it's sort of a long-term operational sort of we do it one after the other too and all of that. So they are planned to come with one year between them. So I'm not in a position to say whether what we see now is impacting them. But what we do see is that, that Dogger Bank B, we expect first power in first half of '25 and full power first half of '26. And Dogger Bank C, first power first half '26 and then full power first half in '27, which is one year after what we expect from Dogger Bank A. So that's sort of the latest update I have on this. SSE as operator is the one that really need to provide with more details here.
Henri Patricot: Thank you.
Bard Glad Pedersen: Thank you for your question, Henri. Next one is Michele della Vigna from Goldman Sachs (NYSE:GS). Michele, please the mic is open.
Michele della Vigna: Thank you very much, and congratulations on the good delivery. I will be quick. Two questions. First, I was wondering on Johan Sverdrup, if you could provide us a little bit of an update, one more quarter of good production. When do you expect the field to start declining if this has been pushed back into next year? And secondly, we've heard of some disruptions in the offshore wind supply chain, especially in the U.K. I was just wondering if you are finding it difficult to get especially the vessels or if effectively this is just normal course of business? Thank you.
Torgrim Reitan: Okay. Thanks, Michele. On Johan Sverdrup, progressing according to plan. As you remember, we sort of increased the production plateau level earlier this year to 755,000 barrels per day. And we expect it to come off that sort of increased total level towards the end of this year or next year. So the key here is to drill wells to manage water handling. So all of that is progressing according to plan. Two new wells this quarter. We planned 10 new wells during the year and then it will be around 41 wells drilled on Johan Sverdrup. Next year, we will launch a drilling campaign focusing on multilaterals as well. And then we have Johan Sverdrup Phase 3, where we plan for a concept select in the fourth quarter and start by end '27 on the Phase 3 here. I just want to say, this is what we do. I mean, this is absolutely the core competence of the company. And here we apply all the competence and technology and sort of deep knowledge that we have. And managing reservoirs is sort of Equinor at its best and we apply that at Johan Sverdrup and it's progressing well and it continues to deliver as we expect. You had one more offshore wind supply chain. Yes, I think it takes too much to give a full answer on that. We are sort of well on the projects that are ongoing, but clearly there are supply chain issues within offshore wind. We do recognize that. But for our own projects, we are good.
Bard Glad Pedersen: Thank you, Michele. Paul Redman from BNP Paribas (OTC:BNPQY). Paul, please. Hi. Paul, are you there?
Paul Redman: Yes. Can you hear me? Sorry.
Bard Glad Pedersen: Can hear you now. Thank you, Paul.
Paul Redman: Perfect. On turnarounds quickly, you've gone into a 125 mboe/d for 3Q '24. If I look at 3Q '23, what was the planned maintenance? And you also have a number four unplanned maintenance impacted you last quarter. I'm trying to just see whether a 125 mboe/d is more or less year-on-year? And then second, when we talk about value over volume in the renewable division, just building a little bit on Lydia's question, if there's areas where you think that you could slow down capital, do I see that as CapEx out of the plan, or would you see a reallocation into other parts of the business? Thank you very much.
Torgrim Reitan: Okay. So good. So turnarounds, we expect 125,000 barrels per day in the third quarter this year. And then last year, it was 38 in the same quarter. And I'm not sure I really got your question, and that was related to unplanned maintenance. We had some prolonged maintenance related to troll last year, but I think that impacted the fourth quarter more than the third quarter. But I think maybe you should call Investor Relations afterwards to get more specifics on that. But my point is, it is sort of a significant program we have in the next quarter, but production guiding remains firm. On value over volume, well, we are planning to invest $10 billion into our oil and gas activities, and that sort of remains firm. It has a high priority in the capital allocation project and capital allocation process. And sort of if we should make any changes, I mean, we have a guiding out there and sort of -- there's no sort of -- well, let me put this differently. I mean, we are not in a position where we want to change anything related to our CapEx guiding for the time being. Things are progressing according to our plan. And sort of -- in sort of the value over volume considerations that is typically impacting more the early phase sort of activities than ongoing investment programs. So I mean you have seen that we haven't sort of won in sort of lease rounds recently. That is because we just find them to be too expensive. That is not impacting sort of a short-term investments. It's more sort of the longer term investment, it will have an impact on. So I have not an update to give you on this for the time being, Paul. But clearly, we are not starting new projects, unless we see that they are value creative.
Bard Glad Pedersen: Thank you. Next one is Chris Kuplent from Bank of America (NYSE:BAC). Chris, please go ahead.
Christopher Kuplent: Thank you for taking my question, Bard. And I'll try and keep it short, one remaining. Torgrim, would you mind updating us what kind of macro deck was prevalent when these new tax installments were set for the second half? That's it. Thank you.
Torgrim Reitan: Yes. Great, Chris. So that will typically be close to forward prices that we are sort of in earlier this spring. So I don't have the number, Chris, particularly, but I think it would be around I think if you have a look at sort of the forward prices early June, I think that is a good estimate for sort of the assumptions we do for those calculations. And I can't remember what it is, but have a look at that and you'll find the answer.
Christopher Kuplent: That's fine. Thank you very much.
Bard Glad Pedersen: Thank you. Let's move on to Jason Gabelman from TD (TSX:TD) Cowen. Jason, please the mic is open.
Jason Gabelman: Yes, hey, thanks for taking my question. Just one quick one for me. Next year, you have a $2 billion range for shareholder distributions. Can you just talk about what the factors are, what do you consider the low end or the high end of the range? Is it commodity prices? Is it things like Empire Wind farm down? Is there kind of one or two items that could tilt the balance to the low end or the high end for next year? Thanks.
Torgrim Reitan: All right. Okay. Thanks Jason. Yes. So between $4 billion and $6 billion in share buyback next year. So it is not linked to any farm down or Empire Wind or anything like that. We haven't made up our mind yet and we will communicate that on the Capital Markets Day. But typically parameters to consider is the strength of the balance sheet and sort of the macro outlook at that point in time as such. Those are the two major parameters that we'll sort of go into that consideration.
Bard Glad Pedersen: Thank you. We are fast approaching the hour, but let's take one final one and that is Matt [indiscernible] from JPMorgan (NYSE:JPM). Matt, please.
Unidentified Analyst: Hi, guys. Thanks for the update. Just one question left, please. I just wanted to ask you about full-year operating cash flow generation. It struck me that the run rate in the first half looked somewhat light, at sub $8 billion pre working cap relative to the 17.5% or so, I think, that you'd referenced in Feb for the full-year. So obviously, cash tax is expected to be lower in the second half, but equally you're signaling a heavier turnaround effect certainly in 3Q. So how do you sort of see the run rate gap second half versus first half? And absent of higher gas prices, where does that additional cash generation come from? Thanks.
Torgrim Reitan: Okay. Thanks, Matt. So you're right, 7.7% in the first half and then 17.5% for the full-year. So it's a lot of higher towards the end. We see actually a relatively flat cash flow from operations before tax through the four quarters this year. And the tax -- there's a shift in tax payment is actually the major explanations to this. And I would say that sort of like should explain absolutely most of it. So the production is we are getting back quite a bit of U.S. production in the second half of the year, and that has a very low tax associated with it. So that clearly helps on sort of the after tax cash flow. If you sort of compare that to sort of the after tax cash flow of maintenance on NCS, which has a large tax coverage, if you like. So but it is -- the major explanation here is actually tax payments.
Bard Glad Pedersen: Thank you and thank you everybody for calling in and for your questions. We are just above one hour. As usual, let me remind you that the IR team remain available if there are any follow-up questions. So thank you, and have a good rest of the day.
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