Good morning and welcome everybody to the Statoil Analyst Call for the Second Quarter 2017. We appreciate that this is an especially busy day for reporting. And we've brought forward our call early than previous quarters mainly to help people's busy scheduling today. I expect this call to run for maximum about an hour including questions of around 45 minutes. I am Peter Hutton, Head of Investor Relations At Statoil. With me as normal I have Hans Jakob Hegge, CFO, who will run through the results and then take questions. And we're also joined by Svein Skeie, Head of Performance Management and Ørjan Kvelvane, Head of Accounting. With that we'll get straight to business and I'll ask Hans Jakob to start the presentation. Thank you.

Thank you, Peter, and welcome to all. I am pleased to present another strong quarter from Statoil. Adjusted earnings before tax was $3 billion and IFRS result was $3.2 billion before tax. A positive results on a cash flow of $9 billion after tax. We have reduced hearing [ph] by 8 percentage point year-to-date. I will revert to the results in a moment. The picture on the front page is Gina Krog, which started to produce this quarter. We have used a downturn to systematically improve our project portfolio. We are working together with our suppliers to realize several large projects. Johan Sverdrup is on schedule and will be a giant on a global scale. Aasta Hansteen is assembled and ready for field commissioning to start production next year. Njord A is being refurbished to produce for another 20 years. Very good progress is also being made on the rest of the portfolio. In addition, three plants for development were approved and we submitted the plan for development of Snefrid north. And we are moving forward with our exploration efforts. Our campaign in the Barents Sea has given us an oil discovery in the Kayak Well. This is close to the Johan Castberg filed. We also have a small discovery in the Blåmann prospect. We are currently drain the Gemini north prospect before we drill Korpfjell and Koigen Central. These are interesting prospects that may open new areas in the Barents Sea. On the macro, we still see volatility in the gas and oil prices. The uncertainty specially linked to the inherent to production curtailments among the OPEC members as well as production and conventional resources in the U.S. However, our fundamental view remains unchanged as we see drivers for further oil prices going forward. Demand for oil continues to…

Thanks Hans Jakob. Yes, well indeed. Now move to the Q&A. On this busy day, I would like to drive the normal request to keep the questions to one only. And with that I'll ask the operator to open the polling and confirm the instructions. Thank you.

[Operator Instructions] We'll now go to John Olaisen calling in from ABG. Please go ahead, your line is open.

Yeah, I have a question on your reduced exploration guidance, what's the reason for the lower exploration guidance, is the cost inflation may sleeping over wells such - if you could highlight a bit - talk a little bit more about that please.

So the main reason is efficiency gains, drill - the wells 6% to 9% more meters per day, we 4% to 2% less time on each well and a 35% less cost per well, so the efficiency improvements is the main explanation, but also strict prioritization. So we started with guiding on 1.5 taken down to 1.3 we said 30 well to 35 wells we are now more specific on the number of 30 wells and again the efficiency gains is the main explanation.

Quickly follow up the five wells for direct, where are those which are all type excludes?

We're not providing any detail information and that the reason is that you know this is a continuous exercise of optimizing commercially, we go through the plans, we rank them and we do strict prioritization is part of the discipline and it's part of the natural development.

Thank you.

Thanks very much. We'll now go to Halvor Nygård is calling in from SEB. Please go ahead sir. One moment, just one second please. Halvor Nygård: Hello, so organic CapEx was $4.5 billion in the first time of the year end, you've said that that CapEx would be pretty much back in low that with higher activity. Can you elaborate a bit on what drives the activity increase in the second half of the year? And also the second question with the improvement now in cash flows and consequently lower gearing levels you discuss or consider you know moving back to full cash dividend or maybe buying back some other strip shares? Thank you.

So we maintained the guiding on CapEx at around 11 for the year due to deficiency gains on the strict prioritization. We have a lower CapEx in the first half, its lower facility costs drilling marine operations, but also facing our activities and you know in the second half the increase spending due to Aasta Hansteen that starts drilling. We have a blåmann drilling, we have Peregrino II moving to fabrication, Mariner heavy lift operations activity going on in the Hywind. Cariaga, Terra Nova and also the U.S. onshore part we expect some ramp up off there somewhat lower activity for instance in Bakken during winter operations. So it is a higher activity level. On the improved cash flow in the quarter, I mean $9 billion positive after tax $4 billion after investments and dividend in the first half is a strong - it's based on the strong operating momentum in terms some priorities we remain firm, it strict priorities and no changes to that financial framework is still the same. It's consistency. Halvor Nygård: Okay, but you're not thinking out a cash dividend or buying back shares that we should during this good program?

Well, remember when we not introduced the script program. We said clearly this is a two year program. Its plan to end third quarter this year and we have now plans to extend and we still a buy back as part or toolbox when we have access cash, so no news around the script or the framework. Halvor Nygård: Okay, thank you.

Thanks very much. We'll now go to [indiscernible]. Please go ahead. Your line is open.

Hello and thanks for taking my questions. One question on cash flow and gearing ratio, really impressive that you are reduced to gearing so much over the past two quarters I just wonder given the fact that you actually give us little bit more in a second half and in first half of the year, how much should we expect the gearing ratio to decline towards the area that you remain the same older process you had year-to-date? And second question just a little on U.S. onshore ramp that you expect, could you quantify that a little bit more in which areas do you plan to add rigs and how many?

Okay on the first one, you asked for a decline in the gearing, I didn't say that, but I'm of course pleased with the development that they have seen 80 percentage points year-to-date due to strong results and very solid cash flow. Going forward on the gearing, well the basis is the good flat cash flow on the strong operations and the continued focus on the efficiency, but as I said also higher CapEx project activity picking up in the second half, volatility in prices impact also commercial decisions, remember in the past we have other increase in the gearing due to also commercial decisions to have more volumes in transit in our MMP business. On the second we half three and sales tax installments of $9.5 billion knock each. We have the 10% increase in the Kayak discovery and the closing of that transaction. But most important for me, I mean we continue to invest in a world class project portfolio whether breakeven of $27 per barrel. On the U.S. onshore ramp up areas and activity starting point is that we continue to look closely at economics before we raise activity. We have five operated rigs and one completion in each basin. And Bakken added a second completion crew in July, recovery from the winter season and we expect a slightly increase in Bakken and Utica. The production onshore is reduced year-on-year still increase quarter-on-quarter it's mainly Bakken and going forward we were less as I said look closely at the economics before we raise the activity.

Ladies and gentlemen just like to enter the call to just make people aware of the fact that we have connected - pay to have a connection problem. And I know that there are lot of analysts waiting to fall from international calls, and our operators are trying to access those. At the moment we are on the local calls from no region numbers only, which is clearly we normally do on this event. We're trying to work this out and we'll continue with the local callers, can I ask people to again follow the instructions and press star one. We we'll do our best to get through to everybody. If we are unable to for technical fault we will follow up from Investor Relations and any direct things that we need to deal with answer you. So don't forget to try, but we will continue to do so after the next question. Thank you.

[Operator Instructions] We will now go to Mr. Anders Holte with Danske Bank. Please go ahead. Your line is open.

Yeah. Good morning guys. Two questions from my side, one is related to the CapEx activity or the activity increase for the next six months, investors also waiting in between spent in Norway and also what is to go towards the international division? And secondly it's a bit on a later, but on to the Kayak reaction made in the Barents Sea a little size of bit from the low side to such still give you the confidence that today concept is indeed working and are you most upside that you see on the back of the Kayak discovery? Thank you.

So let me start with the Kayak discovery, I mean we have started the year quite good actually, I mean you have nine out of 14 wells at discoveries, so it's a quite a good start. On Kayak we have 25 million to 50 million barrels of oil potentially being added to the cost by development remember we have the investment decision coming up later this year for Castberg, So Kayak is still relatively small, but could be important for cost Castberg. On the CapEx activity and the Norwegian versus the international, I mean, I mentioned several examples, the main point is of course that we maintain around $11 billion, because we have a high quality projects that we invest in, and I mentioned a few examples Agbami drilling, I mentioned the Peregrino II moving into the fabrication made in a heavy lift operations all international examples Cariaga, Terra Nova and the U.S. onshore as international. In Norway we have the giant Johan Sverdrup we're half way through too much earning that one, the drilling activity at Aasta Hansteen are example, so quite a lot of activity going on at the moment and even higher in the second half.

Okay. Let we move to the next question, which I understand comes from Oswald Clint.

I really wanted a bit of an update on the U.S. breakeven reduction strategy that tuning towards $50 per barrel by 2018, and I know we're half way through the year-over-year is any chance we can just see how that part of the strategy is on the folding please. And then secondly on the actual results and I wonder if you could quantify or talk about recurrence of the trading impacts in MMP business on the liquids trading plus U.S. gas trading seems to be some sequential negative impacts, if you could quantify them please. Thank you.

So we are progressing well on the 90 to 50 journey. We have ramp up of valuable gum barrels as well as the Bakken as I mentioned improving cash margins towards the target of $12.5 per barrel in 2018. Costs continue to trend down despite these barrels being more costly than the NGL and gas volumes. On the onshore part we are investing involves with competitive breakeven more than 900 operated wells yet to drill portfolio across the three areas have a breakeven prices below 50 and about half of those below 40. So on the U.S. gas liquids trading I mean the MMP result is, it will vary quarter-on-quarter of the several quarters in the high end we are having a relatively lower result this time in the first quarter you had some benefiting from African volumes to Africa to Asia, and we also experienced a sharp drop towards the end market-to-market, but there are still within the guiding of 250 to 500. And remember in the DPI result, we also had an increase in the gas prices of 65% contributing to the DPI results.

Very good. Thank you.

Thanks much sir. We'll now go to Hamish Clegg from Bank of America Merrill Lynch. Please go ahead.

Hi, guys, thanks taking my questions. Could you confirm precisely how much CapEx is dollar on noise in kroner related, I know this is something we ask you or every other year or so when is the big move, but given the big noise in kroner move recently it be interesting to know how much that would affect your CapEx and OpEx individually. And if I am allowed could you give me rest of the projects or regions contributing to the increase in your volume targets to top end of your range? Thanks.

So in this all in dollars and Norwegian business is a mix is variables, so we don't provide the great level of detail on this one. And your second question could you repeat that?

Just in terms of your volumes you are graded to the top end of your volume growth range I wonder what drives that increasing.

Yeah. So this is the highest production since the second quarter 2012 for in the second quarter despite the bigger turn around impact, which is bigger than the last year, and we have really good regulatory in operations with the record higher production efficiency year-to-date on Norwegian Continental Shelf contributions from feel like Goliat, Ivar Aasen 30,000 barrels year-on-year, also the flex gas Troll, Oseberg increased year-on-year about 40,000 barrels versus the second quarter last year and this is due to the higher prices in the summer so all these items more than compensated for the fields ceasing production and decline.

Great. Thank you very much.

Thanks sir. We will now go to Jon Rigby call in from UBS. Please go ahead. Your line is open.

Thank you. Yeah, firstly on CapEx, can you just go back and just define what you term is organic CapEx and what is taking to achieve, because obviously alongside that you are making investments into medium and longer term opportunities as you're doing in Brazil. And so they supplemental to an organic CapEx level is designed sustaining grow your business or should we be thinking about inorganic or tactical inorganic investments for the regular supplemental investment alongside what you determine as your organic CapEx? And just actually can I just add another question if is possible. Rough storage gas storage in UK which now appears to be potentially being closed down, are there any strategic responses that you can develop to take advantage of that opportunity actually it would seem to me that you are really the obvious sources swing gas into the UK? Thanks.

So first on the organic CapEx in the second quarter is $2.3 billion. This is excluding acquisitions, capital expenses and other investments. The key in inorganic investments in the second quarter has been the Korpfjell on NCS exploration signature bonuses. And if I got your questions right investments in 2017 include capitalized exploration, investments to improve oil recovery and major development projects like Sverdrup and Gina Krog had just started to produce all start Mariner and U.S. onshore part. On the rough storage, we could take advantage of it, I mean it's one of the elements that adds to the assessment of the gas markets. I mean in the quarter we saw the EU gas prices up 15%. I see the rough stories as a part of some maybe some bullish price signals for the EU gas for the rest of the year. Low storage levels that I will teach rough and the growing in cap are examples of these singles. So the beauty with our flex gas is really that we can us we did in the quarter produce more when the prices are higher.

Okay, just going back on my CapEx question, I probably wasn't clear. What I meant it was you set out for organic CapEx budget $11 billion, but alongside by you have made an investment into Carcara. What I'm trying to work out is how should we think if your investment levels in terms of a sustaining level of spend going forward, should we can commit based on $11 billion, what should we seem its base of the $11 billion plus continuing level of inorganic spend to sustain the business.

So the short answer to that is you should look at around $11 billion as the sustainable level.

Right. And the rest is optionality?

Yes.

Thank you.

Thank you much sir.

We will now go to listen to Christyan Malek calling from J.P. Morgan. Please go ahead, sir.

Hi, good morning and thanks taking my question. And first question is around the super clear under capital framework. The full price is on 40 to 50 arrangements in the second half will you renew the script for the full second half I want to understand to what extend is oil price influenced that decision. And the second question is so impact on CapEx, you've mentioned $11 billion being the study run rate, is that flex to lower that number again the full prices this year?

On the script when we set out the program we made it clear at least for two years, no plans to further extend ending third quarter year and no change in the plans on communication related to that. On the CapEx $11 billion it is related to a world class project portfolio of average break even in 2017 going forward, I think is the right thing to continue to invest in these high quality projects. At the same time we see the clear effect or efficiency gains and that's why we continue around $11 billion. We think that's a sustained level going forward.

Brilliant, thank you very much.

Thank you very much sir. We'll now go to Mehdi Ennebati calling in from Societe Generale. Please go ahead.

Hi good morning, thanks for taking my question. I will ask two questions, the first one regarding the tax payment, but you've highlighted that tax installment in Norway is reached almost double from H1 to H2, I wanted to know what will be the trend regarding the cash tax payment abroad, should we expect a material increase as well or should it remain very low as this has the indication is beginning 2016? And second question on your exploration budget that you would just go well. Why that you want to take advantage from your strong free cash flow generation and the low cost environment to explore more mesh more than your peer and try to filling the gap between zero and the sector average should we consider that you will highlight those with the acquisition and an exploration in the current environment? Thank you.

So on the exploration, first I think we are doing more than our peers. At $1.3 billion is the result of significant efficiency gains, it's also a result of strict prioritization a program of 30 wells this year is quite substantial, is also an element of replenishment of the portfolio that we actually have used the downturn to acquire cheap seismic and getting access to new potential acreage. So we are quite active on the exploration side, it has been will be in the future and important thing for us, it's a source to create substantial value and relative terms I think we are more active than our peers. When it comes to the tax, as I said we have three NCS tax installments in the second half $9.5 billion each, remember that we have paid taxes so far this year based on last year's prices, as we move along we'll start paying taxes based on this year's relatively higher prices. So it will be a bit higher. So this quarter we had a relatively low tax rate of 57.4% that was also linked to the reversion of the provision in Angola that impacted the DPI tax.

Just to come back to that, should we because you know the tax installment is only for the NCS?

Yes.

Should we consider that is a tax that you pay abroad outside Norway will increasing the material way as well?

We haven't changed our guiding you know for the international is 50% to 55% short term and more around 50% or in the lower end in the couple of years. In our midstream business it's the range of 50% to 60% and in DPN around 70%, so on group level and average around 70% and we haven't changed that. But lower prices increase the tax rate and overtime we should expect a falling tax rate particularly if prices recover.

Thank you very much.

Thanks much sir. We will now take question from Biraj Borkhataria calling from RBC. Please go ahead.

Hi thanks for taking my question. Apologies to make you repeat, I didn't quite hear the answer, at the group level you paid $1.7 billion in cash taxes for the first half of the year. What do you expect to pay in the second half of the year assuming the current environment?

.:

Just to add a bit on NCS for the first for the first half you paid $1.4 billion and saying $9.5 billion Norwegian manage installment in the second half. In the international then is more lean than to the results that you're obtaining during the quarters. But we don't have the similar deferral there and as we have in the Norwegian taxes.

Great, thanks.

Thanks much sir. We'll now be going to Mr. Rob West calling in from Redburn. Please go ahead sir, your line is open.

Hi, Jakob thanks for taking my question. My mind first one is on the $11 billion sustainable CapEx number that you mentioned. But when you say that sustainable number what kind of growth do I think about getting for that number, is that the number to run table with 0% growth or is that your 3% growth rate slightly to be continued at that level of investment. That's question one. Question two is around Castberg, which I know is a project that you followed very closely before becoming CFO. So the question is I think that's going through another round of bidding this summer in some of the EPC work. And I was wondering is there anything you really need to be coming out of that bid around in order to move forward with the sanction in the second half of the year or later in the year. And specifically some of these bids have been coming in lower and lower from the data occupancy, and I want guidance previously where you assuming some kind of cost reduction will be achieved in some of the big EPC compacts there? Thank you.

So thank you Rob for your questions. Around $11 billion sustainable CapEx on what kind of growth from 2016 to 2020 regarding on average production growth on an annual basis of 3% based on the project portfolio that we have, so that's the short answer to that one. On Castberg, yes, it's up for FID towards the end of this year in order to have confirmation on numbers, we invited suppliers to give numbers as you said. And we have a break even below 35 no update on that figure as of today you should expect confirmation of cost and breakeven levels when we do the FID that we plan to do later this year. So the only news related to Castberg its progressing according to plan, and it's exciting to see the Kayak discovery potentially adding up $25 million to $50 million extra box.

That's great. If I could have one follow up, it would be on the 3% growth number. I'm worried about being the 17 to 20 gross number but to some extent the CapEx your funding now is also going to be contributing to growth after 2020 given that typical lead times of projects, so should I think at that $11 billion as funding a 3% growth rate after 2020 as well just as my base case assumption also get passed this next couple of years. So Hans, can you say anything about that?

So 3% to 2020 but also production beyond not quantified but remember we have Johan Sverdrup coming in on-stream late 2019. We have Aasta Hansteen next year. We just started with seven hours into the quarter of Gina Krog that will be more visible in the third quarter. And the coming quarter we have the Goliat, the ramp ups from GoM. So several elements adding to production growth in nature. We also have the flexibility lined to the U.S. on-shore business. So several elements adding to the short and mid-term. And longer term you are right, I mean the project portfolio that we presented is still there for sanctioning and having additional volume. So pretty robust picture that we present and maintain as we did on the Capital Markets update.

That's very clear, thank you.

Thanks so much, sir. We'll now go to Anish Kapadia calling from TPH. Please go ahead.

Hi. Good morning. I had couple of questions. The first one was on the cash flow that we've seen so far this year and expectations for the rest of the year, so you generated about $10 million of cash flow from operations in the first half of 2017 at the Capital Markets by your guidance implied about $13 billion of cash flow in a $50 oil price environment. So given that very strong cash flow generation in the first half of the year, is that $13 billion of cash flow at $50 or is that the potential to significantly exceed that given what you done here today? And then the second one was I did wanted to get a little bit on an update on your plans in the Northeast, it seems like there has been more focus in the Northeast on the Utica side of your assets to move conventional Marcellus within the Appalachian region, so I was wondering if you could talk about where you allocate in the capital relative to the economics?

So, on the cash flow, in the quarter was $9 billion positive after tax and $4 billion after investments and the dividends in the first half. Based on the continued strong operating momentum, remember the record high production efficiency on the NCS. In the second half, I mentioned three NCS tax installments 9.5 each higher CapEx. It's still valid the 50 guiding that we gave on the Capital Markets update. We saw we have cash flow neutral and positive at 50 in 2017. That is still the case. In the first half, we benefited from lower tax payments on the NCS. If I applied effective tax to the earnings in the period, we have reduced the free cash flow by around 2 billion. Still we have free cash flow positive at 50 in the first half. So going forward, it's still valid, strong focus on efficiency, maintaining the good operating momentum, continuing to invest and of course then also take into account the closing of Carcara and upcoming NCS tax installments. On the U.S. activity, we are in what we think is three of the most politic basins in the U.S. Eagle Ford, Bakken and Marcellus. Our number one priority is of course say profitable operations and assets that we have. And you know as I said we will have a slightly higher activity in Utica and Bakken in the second half. We also want to highlight that we have 900 wells with a breakeven or 50 and below and half of them is 40 or below. So we have significant flexibility and we continue to evaluate options before we made the decisions and we will come back to the activity level in the third quarter.

Does that answer your questions Kapadia?

Yes, thank you.

Thanks so much, sir. We'll now go to Tristan de Jerphanion calling in from Kepler. Please go ahead.

Yes, hi, good morning. Thank you for taking my question. Just one quick on Brazil, you announced for the 10% acquisition BMS-8 couple of weeks ago, could you please give us an update on the pending auction on the open acreage next to BMC-8 which is scheduled for this year? And also assuming that it's getting closer, could you please give us some color on $1.25 billion contingent payments to Petrobras and possible timeline for this please and of course it applies the $190 million? Thank you.

So, on Brazil, we invested another 10% as you said. And we also are looking closely at upcoming licensing round, so now that's for October. We are looking closely at that. You know the portion of the Carcara field spans into the open and awarded acreage. So this is something we follow closely. As I said we understand an awarded acreage is indented to be part of the bid drown later this year potentially October. We also look at partners to develop this exciting asset and this is of high priority to us. And specifically on the 1.25, we made half of the payment at closing of the deal and half is contingent later development. So it's not up for this quarter. What's coming in the quarter is closing of the transaction that we just did, but that's significantly smaller scale.

No, no, of course I am aware that I was just wondering what the milestones are for the contingent payments and if you have a timeline in mind for when that may happen?

So the timeline for the Carcara is when we have - it's 2019 linked to a balancing in the structure. So that's for later. And the recent transaction is in for the third quarter. That's the milestone for that one.

Okay.

Thanks so much, sir. We'll now go to Lydia Rainforth calling from Barclays. Please go ahead.

Thanks very much. And apologize if I missed this early. But when you were talking about the high reliability for the business, are you able to actually give us what that that operational efficiency number is, how has changed over the last year and what you expect that be over the second half of the year 2018? Thank you.

Sorry, Lydia, could you please repeat your question?

Yeah, sorry. It was just in terms of the record high reliability and operation efficiency that you were talking about, are you able to share with us how that's changed over the last year, what that number and how you'd expect it to evolve for the next 12 months?

Yeah. So, this is of course for rewarding, it's a hard work by many people over long period of time. I remember when we introduced the production coordinator on the field started out pilot and these are people that really chase this on a daily basis. Good communication and dialog between the various professional expertise. It's a daily hunting for every profitable barrels. It's on optimization. It's a team work. It's also linked to better planning and executions or maintenance further intervals. It is also linked to the way we plan and execute maintenance programs. And it is definitely linked to hunting and focus from management on unplanned losses and avoiding that. And the precision level also linked to maintenance stocks, because for incidence Snoehvit has an example we have the big maintenance stock this quarter at Snoehvit. It went according to plan and we were able to start the facility on time and that without any interruptions in the immediate days following and this adds of course to a better than past performance and plan losses. So this is very systematic work over a long period of time now paying off. And no reason to doubt that we will continue to focus on this as it adds very profitable barrels to our production.

Great, thank you.

Thanks so much. As we have no further questions, I would like to turn the call back over to the management for any additional or closing remarks. Thank you.

Thanks operation and thanks Hans Jakob Hegge. Apologize for the interruption on normal service earlier in the call. I am glad that we got back on track and I think we got around to everybody question, if not apologize and we'll cover it directly after the call. Thank you for your patience and your participation and good luck for the rest of the day. Thank you.