Ladies and gentlemen, we're delighted to welcome you to our Capital Markets Day for Statoil 2018. Before I ask our CEO, Eldar Saetre to start the proceedings, I'd like to make a short announcement on safety, which as you know, is very important to us at Statoil. If an emergency situation should occur while we're here, the evacuation signal is a voice system announcement. Please note that we only evacuate the building should the voice announcement say to do so. Then please use the signposted fire exits within the venue, follow the signs and messages from the guards. Exiting is at ground level, and the assembly point is situated on Bartholomew close, which is just outside. Also, I'd like to note that after the presentations, we've got 4 presentations, each lasting around 20 minutes from members of the executive team. After those presentations, we'll be having questions and answers for around 45 minutes from both the floor and from the phones. Members of the executive team will be available for discussions in the area outside after the formal session. So with that, I'm delighted to pass the word through to Eldar to lead us off. Thank you very much. Eldar Sætre: So thank you, Peter, and good morning, everyone. I can assure you, we have really been looking forward to see you all again here in London. Today, we will show you that we have delivered on our promises to become stronger, more resilient and more competitive. And even more importantly, we will show you that we are now set to increase returns and grow our cash flow in the years to come. We are delivering on our strategy, investing in high-return, high-quality opportunities, strengthening our balance sheet and increasing capital distribution. Last year, we presented our strategy, always safe,…

Thank you very much, Eldar, and still a good morning to you all. I've also looked forward to coming here today, together with Margareth to share some perspectives on our journey on the NCS. And our NCS history is about a small-scale player, growing to be the leading operator. Today, we have one of the world's largest exporters of oil and gas, providing security of supply through 8,000 kilometers of pipelines. Our key message from this session is that Statoil will continue to generate value from a solid foundation. Firstly, 50 years of renewal and innovation. We operate in a basin that we know and that we master. And our NCS operatorship provide unique opportunities to pilot broadly and implement new technologies and solutions. This also includes digitalization. Secondly, we have resources in place, operated assets at scale, and we have access to flexible infrastructure and premium markets. Thirdly, our future project portfolio on the NCS is very robust, utilizing a full range of competencies and technologies, and Margareth will come back to this in more detail. When I last addressed you from this stage, I made a promise, and that was to step up even further when it came to operational excellence. And I'm proud to say that we have delivered. Since 2013, we have improved production level by 10%, the capital expenditure is down by 50%, and the production cost per barrel is down by 25%. When it comes to our operations, we never compromise on safety, having significantly reduced maintenance backlog and improved plant integrity in this period. We have also reduced maintenance and modification cost by 40% and 45%, respectively. And at the same time improved production efficiency by 7.6 percentage points, giving a record high uptime. So our safety results clearly show that efficiency and…

So good afternoon, everyone. It's a pleasure to be here, and it's good to see you again, and to be back in London. So Lars Christian and I, we are excited to discuss our international business with you. And we will improve, and we will deepen within our core areas, applying the global knowledge and skill sets of Statoil. And we have defined Brazil and U.S. onshore as our 2 international core areas. And we will discuss these shortly in more detail. Over the last decade, international production has more than doubled to 740,000 barrels per day, that represents 36% of Statoil. Our resources internationally is more than half of the total. And as you know, the cash margin after tax is on par with the Norwegian continental shelf. So Lars Christian, how are we going to leverage our experience internationally?

Thank you, Torgrim, and good afternoon. Statoil has world-class assets in Norway and internationally. We systematically leverage our global experience to benefit all assets regardless of geography. And by applying the value drivers addressed by Eldar, we have reset our cost base internationally. OpEx, SG&A per barrel is down 34% in the last 4 years. Focusing on recovery has enhanced our profitability, and this is illustrated by a 35% improvement in ultimate recovery in our U.S. onshore business. And successfully extending licenses in countries like Azerbaijan and Algeria, we have added around USD 1 billion of NPV to Statoil. And as Margareth outlined, project delivery is a Statoil's strength. And for our international nonsanctioned projects, the average breakeven is down 40%.

So maximizing the value of our oil and gas is very important. And as an example, we capitalize on 30 years of experience of gas marketing in Europe, and now we sell our Marcellus gas into premium markets like Toronto and into Southern Manhattan. And as you heard Margareth said, we aim to be a digital leader. And we have recently opened remote operating centers for our onshore activities where we stream live data from all our producing wells. And we are now able to predict when wells will have issues and we can direct our field personnel ahead of time to these wells. So this will increase production, it will reduce cost and it will improve safety. And the value is estimated to $500 million. We will reduce our driving by at least 25%, which equals 20 trips around equator. So Lars Christian, we have taken some significant steps in Brazil, and now over to you.

Thank you, Torgrim. As you are aware, we have an extensive portfolio with presence in more than 30 countries. And the 4 biggest unsanctioned projects in the Statoil portfolio are all operated by Statoil and are all international. When we will take the national portfolio, applying the same thinking as for our NCS projects, we see that the improvements are not primarily base independent, they are largely a company-specific competency. Today, we have chosen Brazil as a divide. And when Statoil presented the sharpened strategy 12 months ago, we defined Brazil as a core area for the company. 2017 has been about delivering on this promise. And the material portfolio we have built in Brazil is a result of collaboration, perseverance and being countercyclical. We have high graded the portfolio and landed opportunities, where we can apply the best of our expertise within operations, recovery and project deliveries. The journey started with the Peregrino field. And during 17 years in Brazil, we have learned to operate the asset as well as operate in the country. This operational and organizational capability has given us the confidence to develop Brazil into our core area. We became the operator of BM-C-33, which includes the Pão discovery in 2016. This is a high-quality asset with estimated 1 billion barrels of oil equivalents in recoverable resources. In addition, we have Carcará and Roncador and with these 4 assets we are well positioned to deliver high value, operate in accordance with the corporate CO2 targets, access promising gas market and strengthen our strategic partnerships. We continue to pursue organic growth in Brazil through exploration, where we will drill and participate in 5 exploration wells during the next 2 years. And we have the unsecured rig auctions for more. In 2013, [Audio Gap] Statoil has the potential…

Thank you, Lars Christian. Today, I'll update you on our promises to transform the U.S. business, and I will focus on the onshore activities. And as you know, we have invested heavily in the U.S. in the high price environments. We have had negative earnings since the collapse in oil price and we have made large impairments. But we are reaching a turning point. From now on, this business will have positive earnings, it will generate surplus cash and grow, all of that at $50 oil. And in the fourth quarter, the U.S. business was back generating positive results. So first, let me discuss our transformation. 2 years ago, we promised a lot. We were going to transform the business to generate positive earnings at lower prices. In 2014, we needed more than $90 per barrel. In 2017, we were at $53, ahead of our $60 target, well underway to make money below $50 this year. This $40 barrel reduction can be split into $10 per barrel, that is related to impairments; $20 per barrel from more efficient drilling and completion, EOR or increased recovery and midstream; and then $10 per barrel from operational cost efficiencies such as increased uptime, improved maintenance and cost reductions. And as you see from the slide, we are ahead of plan to deliver on improvements and increasing the cash margin. And finally, our production is flexible, and we expect to grow by more than 20% this year in the U.S. So let's look at it. We have invested more money each year in the U.S. than we have made. So this will not change. We will have positive cash flow at $50 going forward. And based on a $70 oil, we expect to contribute with $5 billion from now up to 2020. So our…

Thank you, Torgrim. As you've heard, Statoil's international portfolio has world-class assets and deliver on our strategic ambition. And we will continue to improve and drive value creation. In the years 2016 to 2018, USD 7 billion out of USD 10 billion of Statoil's NPV improvement come from our nonsanctioned international portfolio. Over the same period, our cash margin will be solid at above $30 per barrel of oil equivalent. And growth internationally will supply more than 40% of Statoil's cash flow to 2020. Torgrim and I have enjoyed this joint session. And we welcome our CFO, Hans Jakob to the stage. Thank you for your attention.

So thank you, Torgrim and Lars Christian. And ladies and gentlemen, good afternoon. It's good to see you all. 2017 was a strong year for Statoil. We have continued to take down costs and improve efficiency, further reduced the breakevens of our project and strengthened our balance sheet. Going forward, we are building on our industrial strengths to create value both on the NCS and international. We will do this based on strict cost and capital discipline. Let me take you through the 2017 results. Our improvement work is reflected in solid adjusted earnings of $12.6 billion in 2017, more than 3x the 4.1 billion we delivered a year before. Net operating income was $13.8 billion, close to 0 in '16. A negative net income last year of $2.9 billion is turned into a positive result of $4.6 billion in 2017. The result is of course supported by an average Brent of $54 per barrel, which clearly also demonstrates the improvements, the strong operational deliveries from our organization. This is visible in our positive free cash flow of $3.1 billion in 2017, which made us free cash flow positive well below $50 per barrel. We see an increase in reserves with a RRR of 150%, driven mainly by a positive reserve revisions on our existing fields and sanctioning of new projects. We have delivered as promised and more. We have taken down the organic CapEx to $9.4 billion through continued efficiency improvements and solid project execution. And we have delivered record-high fourth quarter and full year production, capturing increasing prices. Furthermore, despite drilling more wells, we have reduced our exploration expenditure and delivered an additional $1.3 billion in annual savings in 2017. We have more than doubled our fourth quarter adjusted earnings to $4 billion, improving across all segments. Brent…

Thank you, Hans Jakob. What we'd like to do now is just open it up for questions for about 40, 45 minutes and from the floor there'll be microphones going around. And also, we'll do a series of questions from the phone as well. Hans Jakob talked about maintaining capital discipline, I'm afraid we'll be maintaining strict questioning discipline as well. So I'd like to keep Statoil rule of one question per person. If you're clever, you can get one question in 2 parts. I've noticed some discipline creeping in and some people asking 3 questions on some of our calls. I'm afraid that won't be allowed. So if I start off first, and I saw Oswald's hand first. And it will be moving to him. Okay.

A 2-part question. Firstly, Eldar, you spoke about the buyback and you mentioned macro volatility plus some key developments that have to complete or not. So maybe macro is understandable. But on those developments that you said need to happen or not, in order to allow that buyback to potentially happen, could you just be a bit more specific on those please, if possible? And the second part was a bit more longer term. A lot of information in here on recovery factors, 50% to 60%, Roncador going up 5%. I just want to get some sense of the timing that you expect to deliver some of those numbers. Are these 5-year plans for these recovery factors could be achieved, or 10 years or kind of longer? And maybe just linked that, the extra 100 million barrels in Johan Sverdrup, Margareth mentioned reservoir maturation. I wonder if you could give us a bit more understanding of what exactly is happening there to give us that extra 100 millions on that field? Eldar Sætre: So thank you very much. So on the share buyback, it's a very conscious way of expressing it from our side. We have illustrated the cash generation potential at USD 70. And now it might not be $70, it might be something else, but that's an illustration and reference point for you. Anyway, we do see the potential to generate quite significant cash. When it comes to the dividend, that is something that we will look into annually, look at the underlying prospectivity of long-term earnings. And then we have these statements about the balance sheet, the macro environment. So obviously macro environment, they're not only how it looks today, but also how it -- the outlooks for the macro environment would be important for us. Portfolio…

Yes, I'm happy to do that. So as I said that we've increased from 30% to 50%, and the 50% has included all these sanctioned initiatives to increase recovery rate. And that is an average for the whole portfolio extending to the end of the lifetime of each individual asset. And that is why we're now working, as I mentioned in my presentation, on 23 life extension projects to make that happen. So it is within the lifespan of each individual asset.

Okay. I think Oswald got some first mover advantage on that one. I've got to say, we've got a lot of hands showing here. So can we keep to one question? The next question is from Jeff, just behind you. There.

Jeff from Invesco. If I heard you correctly, you said free cash flow cumulative 2018 to 2020 of $12 billion after dividends. So what's the dividend assumption over that period? Is it flat? Are you assuming a degree of growth every year to get to your $12 billion? Eldar Sætre: We have assumed the current step up and that there will be cash, it will be cash component going forward. We also assumed -- and I won't give you -- go into that, I'll give you a precise answer. But we have assumed a sort of reasonable increase in dividend in that period.

Theepan?

Theepan Jothilingam, Exane BNP. Just a couple of questions on CapEx. Firstly, could you talk, perhaps, about where the underlying moves on 2018 CapEx are vis-à-vis the CMD last year? I assume there's CapEx for the acquisitions made, Martin Linge and Roncador. And then secondly, I think historically we've looked at sanctioned CapEx versus unsanctioned CapEx, flexibility for the market. And then the track record recently has been from Statoil to actually go underneath that quite substantially by deflating projects that have already been sanctioned. So I'm just trying to understand the flex around this $11 billion. Because I think it's a nice problem to have, but your track record at the moment has been to substantially be lower than guidance over the last 2 to 3 years.

So I'm happy to answer that question since I look carefully after this money. On the first one, for '18, they're around $11 billion. In the fourth quarter, we sanctioned Johan Castberg and Snorre expansion. And so that's part of the assumption. We also have high activity, as Margareth described on Sverdrup. We have Martin Linge and Aasta Hansteen. We have also the Mariner that's going to be brought onstream this year. We have CapEx related to Martin Linge and some on Roncador. That's why we say around $11 billion for this year. It's really reflecting a quite high activity level, still very cost and capital-disciplined. On the improvements, we delivered $9.4 billion in '17, and that was somewhat lower than the $10 billion that we [opted] on the last occasion. And it's really the improvements that is the main reason for this lowering of the CapEx. The improvement work is also visible in the CapEx.

Jon?

Yes, Jon Rigby from UBS. Given this is a strategy event, can we talk about something that's been a major component of your strategy, which is M&A? Because you don't really talk about that within the frame. So on the assumption that you're going to continue to do some M&A, given your track record, can you talk a little bit about how you think about that? I know you acknowledged you might do some more. I noticed you talked about 2 core areas when you wanted to talk, you talked about the U.S. -- United States and Brazil. I think you talked about more in the past. Is there an ambition still to do that? And then probably, one would acknowledge that you stepped up acquisitions as the oil price fell through the last 2 to 3 years. So would it be reasonable actually to expect that you start to rebalance towards disposals and sort of the restructuring of the portfolio, if oil prices stay at current levels? Eldar Sætre: Okay. Thank you very much, John. So first of all, we have a strong resource base. We have 19 billion barrels of resources. And as I said, we have added some quite interesting prospects also during this year that we will mature further. That gives us potential to produce at current levels for quite a long time, and we have output for outlook with reserves strengthened during this year. So we are confident. We are patient. There is no urgency for us to rush for anything. So this is to get it right. Carve it out, shape the transactions. John can talk about how he's doing this, but really work them patiently and get to opportunities, whether it's on the divestment side or the investment side as really as good…

I think the distinctive aspect of the central proposition that my colleagues have set out is that we don't need to announce divestment programs in order to meet the incredible cash flow going forward. And equally, the resource base, as Eldar just said, means that we don't need to add by way of acquisition. So this is putting us in a very strong position to be opportunistic if value is available. But it's not a necessary activity in order to meet the targets both with regard to growth and cash flow that we set out today. Not everybody's in that position.

I've got a cluster around here. So we're going to do 4 from here. Then we'll be moving to that side of the room. Don't worry, everybody's going to get plenty of chance. So the next one is coming from Rob.

It's Rob West from Redburn. I've really enjoyed the holding pattern we've been in as analysts, where every year we come here, and you lift the veil on the latest interesting technology in your portfolio, and we see the efficiency target, the cost savings going up. And that happened again last year, and well done for meeting the target. I've noticed that in the guidance for this year, the ambition is a bit more muted. It's more to sustain the cost level in real terms out to 2020. And it seems like there's still really interesting new technologies coming through to the business to help boost the efficiency. So my question is why is it the target a little bit more muted this year, and just sustaining rather than deepening the cost savings? And is there anything behind that in the sense that it's just getting a lot more digital. And I appreciate that could mean it's just really hard to have transparency on how that's going to feed through to cost. And is that part of it as well? That's my question.

Yes, it's a good question. So this year, we haven't presented you with a 1 billion or 2, that kind of target. Because it is getting tougher to do the same type of improvements that we have done, when we picked many things that we -- I won't say is easy to pick, but that really had a big, huge impact. Now it's really to continuously improve and all the small steps throughout the organization bottom up, engaging the organization. It's about how we -- it's about preserving because if you lose the -- those what we have done now, that would really be significant. So to preserve it, maintain it, sustain it, I think that is really a focus area for us. When we say unit production cost, sustain that, that is actually quite ambitious. You might want to comment on that [indiscernible] we haven't given you a chance. Because we have a maturing portfolio. There are throughout costs that might put pressure on us. So that is really -- will take significant efforts just to maintain the unit of production cost that we have until 2020. But you are right. You pointed to -- you point that some of these things that we are looking at now -- we are also mentioning specifically the drilling cost, which is a big cost component for us, setting a target on that. But on the digital side, it's really tough to define sort of a target that is so transparent that in a meaningful way, can put it together into one number. So simply what we tried to do is to break it up a little bit, give you some examples, illustrations of what we have done, some confidence that there's more to be done and some illustrations of potential. And…

All those things.

Yes. It is mostly covered but, just a few additional reflections maybe. I just mentioned the recovery rate and that to maintain the production from the existing fields, really to increase recalibrate, that is one cost element that we will master to the best of our ability. I think that the digitalization, we've just scraped the surface. Eldar mentioned the integrated operating center that I think will open opportunities going forward, both on production and cost containment, that's one. And not to be forgotten, we are adding new fields on stream that will add value. But of course, that will add costs. But having said that, the challenge -- or ambition to maintain the [UPC] at 2017 level in 2020 is quite challenging. But I can promise you one thing. I should be very careful on promising. But we will continue our hunt for cost improvements going forward working within this frame.

Thank you, Hans Hegge. Biraj?

It's Biraj Borkhataria, RBC. Just sticking to the same theme of cyclical versus structural, I had a question for Torgrim in the U.S. When you put together the [ 90 to 50 ] plan originally, there was an embedded assumption of service costs change. Could you just talk a little bit about what you experienced in 2017, what you're seeing currently and what's embedded in the plan for 2018?

Torgrim.

Thank you. So yes, we assumed a 20% cost increase from 2015 to 2018. And what we have seen so far is a development in line with that. We see differences between segments and we also see geographical differences. The areas that are most impacted by cost increase is around drilling and completion and impacted the stimulation, casing, sand and all things, while operational costs are very stable. We see geographical differences that Permian is more heated than Bakken and Eagle Ford. But suppliers, they try to convince us that we have to pay up for us to go to Permian. But today, they tend to like to work with Statoil anyway. So so far so good. In the plans, we expect a 25% cost increase from this year to 2020. So that is embedded in the plans and targets.

Okay. I've got another couple on this side. If you think you're being ignored on that side, that's not the case. We're going to do another couple from here and then we're going to work our way through. And then we're going to go to the phones. Okay? Iain?

Alright Eldar. Iain Reid from Macquarie, just a question about exploration which you didn't actually talk about very much. You normally do because your background is obviously a very successful explorer, particularly with Sverdrup. But you haven't had really very much success particularly in Norway over the last few years. And international, the hopper seems to be filled by acquisitions rather than anything else. So is exploration kind of slipping a little bit in terms of your expectations for delivery? I see you're going back to some of the areas which you weren't successful in last year. Does the portfolio need shaking up a little bit do you think in order to deliver the next wave of Norwegian growth? Eldar Sætre: So I think I'll ask for some assistance from Jez Averty on exploration. Tim is not here today. But we -- exploration is -- and I've been around. It's really about being patient, being competent, being confident, add acreage. And we have been, as I say a few years back, we had a couple of years with really major successes. And the last few years hasn't been the same, but we have made discoveries and we have created value. As an illustration, the Kayak discovery in the Barents Sea financed the whole -- sort of just the whole campaign in the Barents Sea. But in terms of scale and really the impact of the discoveries, we haven't seen that over the last couple of years. But we are still confident in exploration. We have built a quality opportunity set, and we will pursue that. We are stepping up this year to 40 wells. That was actually stepped up from 38 last year. So Jez, if you have been thinking on what to comment on here, I'll give you a chance.

Thank you, Eldar. My name is Jez Averty. I'm representing Tim today. He apologizes he couldn't make it. What I'd like to do is illustrate how we are targeting our 2018 campaign towards the successes we have had. So we're looking to drill about 40 wells, of which 25 to 30 of those will be on the Norwegian continental shelf or in the U.K. Last year, we made 3 [ play out ] discoveries in Norway and the U.K., Verbier, Cape Vulture and Kayak. And we will appraise 2 of those. We also had a very successful near infrastructure-lead exploration campaign, which creates a significant value. Some of those wells are already on stream. And again, we will be drilling about 15 of those types of wells. Internationally, there will be about 10 wells. And they will be focused on the access successes we have had in Brazil, access success in Argentina and the emerging success that we are starting to get some indications of in Turkey. So what you actually see us investing our capital towards the prolific basins where there are significant hydrocarbons and where we already have positions, at the same time as creating value through near field infrastructure-led exploration in Norway.

Thanks, Jez. Marc?

It's Marc Kofler from Jefferies. I just wanted to come back to the capital spending guidance for 2018 and '19, and again, just trying to figure out if the risk is to the downside and how much potential you see to the upside? But it feels like you have a pretty good feel for the upside risk. What is the considerations which were excluded? And then maybe if you could just talk about how any currency impacts would affect your forward plans?

So thank you for the question. So on the CapEx guiding, around $11 billion this year, right, and around $11 billion for '18 to '20 as an average. On the FX, you are seeing the USD-NOK development from NOK 8.6 in '16 to NOK 8.2 in '17, and a stronger NOK of course has a positive effect on equity and negatives on costs on the NCS. The movement from the third to the fourth quarter is a weakening NOK from 8 to 8.20. So that's again positive for the NOK. So the fluctuation on the FX hasn't been substantial, but still some variations there. On '19, we don't provide a specific figure for the year, but the average for the period. Eldar Sætre: On considerations, that is not included. That -- so this is an organic forecast. So basically, the Martin Linge hasn't been closed and the Roncador hasn't been closed. And there's also additional payments on the Carcará, right? So I think that's the main.

Guidance?. Eldar Sætre: But in terms of the guidance until 2020 on cash flow and on return on capital employed, and on debt ratio, all these transactions including considerations are included.

Okay. We're going to sweep over. We're going to do Brendan, then I've got Christian, then I've got Thomas.

It's Brendan Warn from BMO Capital Markets. Eldar, just can you talk about your thinking around LNG? And obviously since Snøhvit you've looked very smart avoiding big investments in LNG, but can you think about that -- talk about it going forward? And just where does Tanzania now fit within your portfolio? Eldar Sætre: So we -- LNG is a space that we have been looking for -- goes a long way back, really. And we haven't really found the good entry points, except for what we have done organically, which goes back to the Snøhvit discoveries and the Tanzania discovery. So that is still largely coming from Tanzania. But that's really what we have seen. It has been, in a way, too expensive to enter that space inorganically with the opportunities we have seen. So in a way, we are comfortable with what we've done. We have a very strong pipe place position. So we do have Tanzania and we are working on Tanzania. And Lars Christian, maybe you would like to comment on the status on how that looks or not.

On Tanzania, we are currently drilling in the last commitment well according to the program. And there is a joint industry effort to get the government to reach what we call the [indiscernible] agreement that will determine the terms for producing LNG. And when that agreement has been reached, we will do with the calculus regarding the development of our huge gas discovery.

Christian?

Christyan Malek from JPMorgan. Two parts to the question if I may, first around CapEx. I'm still struggling to get my head around F&D costs. I mean there's portfolio of mix changes and you talked about digitalization of technology. Can you quantify the impact on F&D costs over the medium term and how that feeds into your CapEx outlook? And I guess underlying that point is I'm trying to get my head around how you sustain that $11 billion over the medium term, because it feels intuitively low. The second part is just on how sort of the cash flow, the new cash flow targets that you set out. If I go back and look at your scenario analysis on CFFO at $70, and then think about what you provide today in commentary terms of lower operating costs, better production, I'm trying to understand why that doesn't feed into a more aggressive cash flow target? Because it feels like on a like-for-like basis, it's about the same at a higher oil price. Eldar Sætre: So basically what is -- when we come up in the cash -- I won't call it a target, it's basically an indication of what we see looking at the portfolio and the numbers that we have and what we have secured in terms of improvements and efficiencies and what we expect to sustain of that. And the plan -- 3 years down the road, 2020, basically this is very much about the portfolio that we are working on. That is pretty -- a high level of transparency in that. So I'm not saying we are -- I mean we are pursuing further opportunities to increase efficiency. So this is an indication, given the status of our efficiency that we have at the moment and visibility that we have at the moment. So in terms of the CapEx guiding and sustaining, I think it's very -- and we've discussed that. It's very difficult to build in and so separate sort of impacts from what we do into these numbers. This is sort of the portfolio number taking us to $11 billion for -- as an average for this period. And it includes, as I said, all the improvements. But it's based on the current view on Johan Sverdrup, for instance. If you're able to improve that, well, that will have a positive impact. But this is what we've put into our ambitions. Also, a reasonable growth on the -- on conventional as indicated by Torgrim, but that is also a flexible part of our portfolio. So it is basically based on the current plans as we see it now. Anything you would like to add, Hans Jakob?

No, I -- it's the best estimate and I think it provides fairly good visibility. And remember in the improvements also, there is a substantial amount of CapEx. So I think this is our best estimate.

Thank you. Thomas, and then Hamish.

Thomas Adolff from Crédit Suisse. 2 questions, I'm afraid, one on digitalization. And perhaps you can talk about the challenges with digitalization, be it with the regulator. Having unplanned -- unmanned platforms is quite scary. And obviously, there's also an increase in unemployment. Or whether it's getting the engineers to work with the tech guys or getting the engineers to be retrained. What are the key challenges or hurdles to perfectly implement digitalization? The second question, I guess, is just on the timeline from discovery to first oil. It still takes quite a bit of time. And some of your competitors, they discover, 18 months later, the FID. And then 2 years later, they have the first phase on stream. So is there something you are doing to improve on the timeline from discovery to first oil? Eldar Sætre: So yes, digitalization is not without challenges as well. But the starting point for us is really the potentials in terms of safety, costs, more barrels actually a better drainage and carbon issuances. But there are definitely also challenges. So maybe you, Jannicke, would like to comment on that. Jannicke is our Chief Operating Officer. She's also in charge of what we call Digital Center of Excellence and the digital road map in the company, coordinating all and prioritizing all activities. That was an invitation.

Okay. First of all, there's lot of opportunities. We have established this Digital Center of Excellence in the road map to help us to accelerate this transformation. But as you are saying, there are also some challenges. And one of the things that we have done is to establish a Digital Academy in Statoil. Because we need also to bring our people on board on this journey and make sure that we are ready. And that is really something that we need to continue to work on, and I see great enthusiasm in the organization. And right now, it's about having enough capacity to make sure that we can also train our people. And I think going forward with there will be a lot of discussion how to work in the total value chain, how we should share data. But right now, I think we are very good prepared in Statoil. And we are ready also to have this kind of discussion on this with our suppliers, but that will be a discussion going forward. Eldar Sætre: Thank you. It's a big theme. Good question. So on speed. Well, I think it has served us well to take the time it took to create the kind of project and portfolio that we have. I think that really has served us well. And I think what we have seen is if you really start running fast because you want to get in there as soon as possible, the temptation to not sort of get the best solutions is really coming at you. But we do see areas where we can standardize. When we know what is the solution, we can really fast track. And there are -- we have many examples of that, one year from actual discovery until the production…

Thanks, Margareth. Hamish?

It's Hamish Clegg from Bank of America Merrill Lynch. 2 parts, if I might. Will the $11 billion of CapEx that you're spending between now and 2020 sustain a 7.7 or so thereabouts reserve life? Or will you need to dip into that $12 billion of free cash flow after dividend that you've guided us to? And following on from that, how will you split/prioritize that free cash flow between reinvesting, debt reduction and returning capital to shareholders? Eldar Sætre: Okay. So we are comfortable with our reserve life. We live comfortably with that life. It doesn't give us any urgency. We know we will be able to, through conscious work on both in the transaction market, and not the least, on the exploration side, we will -- that will support our resources when needed and in the most value-enhancing way. So there's no distress, no urgency and definitely no panic in addressing that. I also indicated, and that was one thing I raised when we were talking about the -- looking into the future that the $12 billion is based on the organic developments. And we will continuously over the next 3 years, which is sort of a guiding period, also look for inorganic opportunities. And that is also included in the guidance on the CapEx now. So this disciplined approach to that is for sure. And no urgency, but be cautious on really carving out the good opportunities to optimize the portfolio. So I can't give you any split of that. That is impossible. There's so many variables that goes into that. As I just talked about, it's also an indicator that we would like to strengthen our debt ratio more comfortably into our 15% to 30%. And we have all the macro outlook and developments that we also need to take into consideration, not only the oil price and gas price at the moment but how that outlook looks into the future. So anything you want to add?

Just a small one. Look where we are coming from. I mean, the RRR is the highest ever of 150%. It comes from sanctioning the cost base [indiscernible] . We have a fantastic portfolio. Sanctioning is coming up but we have positive revisions like Marcellus for instance adding to this. So moving resource classes, systematic work day by day, week by week by the organization gave the RRR around 100 on a 3-year average and 150 for 2017. So that also takes away some of the potential pressure to this topic.

So you feel comfortable that the $11 billion will sustain a 100% RRR for the next 3 years? Eldar Sætre: So with -- we -- in terms of the reserve replacement over the next 3 years, we believe that the organic developments with the project portfolio at hand, that it will be able to support at least 100% on average. I can't guarantee any individual year, but on average over the next 3 years. Yes.

Can I just thank everybody's patience on the phones. We're going to move over to the phones now and answer the bank of questions that we've got there. As I said before we do that one, can I just thank their patience for holding on . We've had a lot of questions from the auditorium today. So can we go through to the operator please?

We will take our first question from Anders Holte from Danske Bank.

My question has 2 parts for me, first one on the CapEx guidance for this year and also for the long term outlook. You have now for some time been saying that you were seeing that you've been -- same amount of activity for less. That was the main driving force behind your CapEx production guidance in Q3. And I'm also assuming that's the reason why you're not able to reduce costs further in '17 as a whole. The question is what sort of assumptions do you make on activity and potential cost inflation in the long-term perspective where you keep your CapEx level at $11 billion? Eldar Sætre: So on the cost inflation part, that is -- Torgrim has commented on how he looks upon the unconventional part of the industry. When it comes to the unconventional part -- or conventional part of the industry, we don't see the same pressure. It's a diverse set of supplies with different set-ups and different capacities and constraints and opportunities. But overall, we see a more moderate increase in the cost of supplies in the conventional part. There are still areas with quite material overcapacities. Other areas are slightly more constrained but we're working consciously on that and I think that's reasonable inflation but not really a cost inflation that is reflecting that the activity level in the industry, it might be increasing. On the $11 billion, you want to comment more on that?

No, it's just that I think that we provide some visibility in the slide deck, where the fields being brought on stream where we plan to sanction all the operators or the partner where the operator plan to be on stream. So the visibility around this should be fairly okay, I think. And as Eldar said, we will stay disciplined when it comes to these investment decisions, so we have a significant amount of flexibility still. Eldar Sætre: Could I just add we have made quite significant improvements, and Margareth delivers an oversight over our whole portfolio twice a year. And we see costs coming down and really consistent improvements across the board. Now you also on that part of -- you get to this point where sort of -- there is a limit to how much you can do and I don't think we should expect the same type of over-delivery on project deliveries into the future portfolio as you have seen lately. And that's why we basically, when we talk about this year compared to last year, it is mainly driven by activity, more fields, there's little stuff going out of the portfolio, so mostly it would be there. And there are some new projects that are coming in. And also Martin Linge that will come in with a 50% increased share. So I think it's a very -- the best estimate we can give at the moment, given the portfolio at hand.

We will take our next question from Anne Gjøen of Handlesbanken Anne Gjøen: I have a question related to renewables. Last year, you entered into solar in Brazil, and my understanding is that, that was a particularly interesting area. It's a core area for you and further growth is assumed organically. But is it rather premature to talk about possible interests outside Brazil? Could that also for you potentially be U.S.? Do you find prospects with competitive return in that area now, as long as you have such a significant cost reduction elsewhere? Eldar Sætre: So I think I'll give Jan the opportunity to comment on that.

Thanks you so much for taking an interest in this part of the business as well. We made our first entry to solar in Brazil, and it was not coincidental that we happened to do it in Brazil. We said that we're pursuing a careful solar entry strategy where we go with experienced partners and we build on our international oil and gas footprint. So we're currently pursuing or looking for other opportunities in other Statoil oil and gas areas. You mentioned U.S. That's one area that is emerging as a merchant risk market, meaning that you have to take market risk. I think that's actually an opportunity for Statoil with a strong balance sheet where we see a lot of our competitors moving away or shying away because they struggle to finance these kinds of projects. So interesting opportunities in emerging markets with fixed term PPAs, but also in more merchant risk markets.

We will take our next question from Gudmund Hartveit of Fernley Securities.

It's related to new projects and currently unsanctioned projects. Now you highlight $21 breakeven for the next-generation portfolio, which is very impressive. But most of those projects, I think, are currently in the development phase. So I think you also said you want to sanction new projects when they're good enough, which makes sense. But can you elaborate a little bit more on what you see as good enough? I think you've previously talked about an ambition to have breakeven below $40. Is that kind of level also a requirement for making new decisions on a new projects? Eldar Sætre: There is no requirement or hurdle that Margareth is definitely pushing targets on every part of our business, every project. So we do run this through targets and putting pressure on the project. But I don't have this sort of number that says that this is not good enough and this is -- Because the industry is so dynamic, and we -- sometimes we see projects, some of the big projects that we embark on. Big projects typically get better over a lifetime. There's so much optionality in long projects and big projects. And I think it's really important to understand that optionality and the value of that optionality as well. So there's no -- we'll come down, we've taken down the indicator. We're below $40 now on this portfolio is growing, and we will continue to work it because they haven't been worked to the same extent. We have focused our resources on the more near-term projects. But gradually, they will be pushed even harder. And Margareth will get her hands around them and push them. So I really think there's really significant potential to improve from where we are at the moment at below $40, and -- but I can't give you a number and definitely not a number on individual projects. But we promise we will work them harder. Margareth, this is so keen to. Margareth Øvrum: I can give them a number. No, but honestly as Eldar alluded to, we have time for constructing our portfolio, which we are working on which are pretty good. We have an early phase project portfolio which -- we have a date from digi 1 to digi 3 where digi 3 is sanctioned, and they are pretty good. Maybe next year I we will reveal this figure. But it's pretty good from digi 1 to digi 3. So we have a lot to work on. So ...

We will take our next question from Halvor Nygård from SDB investments.

So Eldar, can you say something why the reserve range is still quite wide? And secondly, what kind of recovery rates you have applied in the current estimates? And on dividend, I know the dividend policy is to grow the dividend in line with underlying earnings. But is 4.5% growth, as we saw in Q4, something that reflects this or in the next years in your view? Eldar Sætre: So I'm afraid I can't field the first question, obviously.

The first one is on reserve -- the reserve range. And we have increased the reserve range and we have narrowed it down due to the successful drilling. Why is it so wide? Maybe Arne, you want to elaborate on that, but the history is that it was wider. It was 1.7 to 3. And now, it's 2.1 to 3-plus. So we actually have increased it. But still, there is a range and the recovery factor honestly very high ambitious on a world-class level.

Yes. Maybe both me and Margareth could elaborate. But the 2.1, 3.1 is uncertainty spend. But we are narrowing it exactly based on what Margareth said on the 17 wells that we now see that it is more kind of secure estimate within that. But we will follow it closely. And as I said when going forward, there is an ambition of 70% recover rate on Sverdrup. And as discussed -- or as Margareth touched upon, there are numerous initiatives to make that happen and to work on that ambition going forward. Eldar Sætre: Could you comment on the recovery, Margareth? Margareth Øvrum: The ambition is [indiscernible ] in a good -- on a good way, on a good road map for that. We have the ability to include [indiscernible] Which is water alternating gas injection. We have the permanent result monitor so we are planning for increased order recovery from day 1 on [indiscernible] . And the reason also we will of course reduce this when we get some more production experience from [indiscernible] And we are going to start up next year -- late next year. So I don't think -- it's not that many years since we decided to sanction [indiscernible] . But now it's. Eldar Sætre: Next year. Margareth Øvrum: Yes. Eldar Sætre: Thank you, Margareth. And so on the dividend, may I? Underlying, you referenced underlying earnings. And that is basically -- that's our dividend policy. So it stays to grow -- our intention is to grow dividend with the reference to how we look upon the prospectivity of long-term underlying earnings. So that means we need to look at something that is there to stay. That should be the driver behind growing it. And this time, we feel that we have been through a pretty extensive improvement efforts and increased efficiency. And as I said, we believe a large extent of that can be sustained, 80%, 85%. So this gives us a basis at this time to indicate 4% to 5%. Next year, we will have to make another call, look at all the components and is there a reason for growth or standstill. I don't know. We will simply have to take that discussion. But I'd also say there's no formula taking us to 4.5%. So it's basically a judgment call based on what we see and the confidence in our ability to sustain any improvement. There's no formula defining our dividend as such.

Thanks, Eldar. I think we've got a last questions on the phone and then we'll be wrapping up.

We will take our next question from Oddvar Bjørgan from Carnegie. Oddvar Bjørgan: If I can go back to the free cash flow guidance of $12 billion over the next 3 years, I understand it's after dividends. But is it also after subtracting some 4 billion in net acquisitions? So if we assume some $9 billion in dividends in the period, would a good estimate of organic free cash flow before dividends and before net acquisitions be approximately 12 plus 9 plus 4, close to $25 billion over that 3-year period? Is that correct? Eldar Sætre: I think we should stick to the number that we have given you, the $12 billion, and that's referenced at the corporate level. And as you say, it did -- it's after the dividend. And I commented on that, what type of roughly assumptions. And it's after the transactions that we have made. I haven't got exactly the number that is put into that. But it's after all the transactions the Martin Linge, the Roncador, Carcará, these transactions and all implications of those transactions, they are included, and also what happens after the considerations in terms of revenue and generation -- cash generation. Oddvar Bjørgan: Yes, a quick follow-up on that case. Even though you don't have an exact number there, it's nevertheless quite impressive free cash flow guidance, I would say. But those acquisitions you are mentioning, there are some USD 3 billion, USD 4 billion. So we're talking about free cash flow here at least $23 billion maybe, as much as 25 billion over that 3-year period. If you look at consensus out there provided by FactSet, it's not $25 billion. It's closer to $14 billion over the 3-year period. And if I adjust for a difference in oil price assumption, you are using $70 while consensus is at $64. If I use your cash flow sensitivities that you provide on Page 27 in your presentation material, you can see that the $6 difference is $1 billion or -- per year or $3 billion over 3 years? So if I just made consensus come up with the same oil price that you're using, it will be like $17 billion, significantly below what you are guiding. So the question is finally this, what do you think analysts are missing here? Is it in a particular area of your business where cash flow could be underestimated by analysts, do you think?

Well, thank you for the compliments on our cash flow. I mean given a $70 world, it is impressive, I agree. And on the slide in my presentation on the strong cash flow generation, we illustrate 2 points, the cash flow from the operations but also the flexibility in the CapEx on the sanctioned U.S. onshore. And this creates really headroom for maneuvering, and that's what we are aiming at. And the strong cash flow from operation has a clear indication, but not a hard, solid line for very good -- and I might say, obvious reasons, given the volatility that we're coming from. But I like the fact that you see the strength in our cash flow.

Thanks very much. Nice question. We'll go through that as long as you like. Next question and final question please for the session.

We will take our next question from Jason Kenney from Santander

I'll just come back to the divestments if I can. I think at the end of last year on the upside, you mentioned that the Campos Basin license might be critical, given your large stake. And also you are thinking about potential new support in Carcará as well. So I'm wondering if there is potential for some asset positioning or offloading of the stake in Brazil? Eldar Sætre: So we've taken some big bites in Brazil on the Carcará and working on the -- starting to work on the utilization of the Roncador. We have a broad cooperation -- strategic cooperation with Petrobras where we also will address opportunities within the gas monetization for instance, and also exploration opportunities. So we will obviously look for all kinds of opportunities in this space and through the cooperation that we have. But I think now what we're also working on is the exploration opportunities in Brazil so there are regular rounds coming up and there is 1 coming up really soon. So exploration is really an area that really has some high potential from our side in Brazil. But it's definitely an area that we find attractive. We feel that the framework is improving. At stabilizing. It is an area that you can say is 10, 15 years behind the Norwegian continental shelf. So all the lessons that we have learned in the Norwegian continental shelf is applicable really to build and create value in a Brazilian context. So that will be the starting point for how we look at the opportunity sets further in Brazil.

With that, thank you. Thanks very much tor everybody here and on the phones. We've done slightly more than 45, about 50 minutes of questions. I wanted to give everybody opportunities to ask those questions. There will be other opportunities. We've got people from the executive team here today. So please feel free to talk to them as we move through next door. Can I just thank everybody for coming in? Can I pass this through to Eldar for some closing words? Eldar Sætre: Yes. So I would just like to thank you all again for coming. I know you have busy schedules. But we truly really appreciate to see so many of you gathered here and really spending time listening to our story, which we think is really a great story, good resource. And the value proposition that we are presenting, I think that is something that really makes us pride -- proud. And I think we're a company that is really addressing not only the short term, but also the longer term and have some really strong ideas about how to shape the future of energy, both in oil and gas and into the renewable arena. Exciting opportunities for the industry, definitely also for this company. So just to repeat, sort of you heard it before, but the 3 components main messages. First of all, we see a capacity, a really strong capacity to grow returns and grow cash flow forward. and we have lifted the dividend this time by 4.5%. We are investing in a remarkable portfolio with a breakeven price of USD 21. And industrially, what we have tried today is to highlight to you what is really the fundamental industrial value drivers really for -- in this company, coming from the Norwegian continental shelf and how we tried to leverage that to get even more, much more out of what we have the opportunities on the Norwegian shelf, by increasingly leveraging that consciously into our industrial portfolio. So that is what we have talked about today, and I hope you see that. And again, I thank you all for coming, spending the time with us and wish you all a very, very safe journey home. Thank you very much.

Thank you.