Good day, and welcome to the Equinor Analyst Call First Quarter Results. [Operator Instructions]. Thank you. I'd now like to welcome Bard Glad Pedersen, Senior Vice President and Head of Investor Relations to begin the conference. Bard over to you.

Thank you, operator and thank you all for calling in for the presentation of Equinor's first quarter research. I'm here together with our CFO Torgrim Reitan as usual he will give an introduction about our research, and then we'll open for the Q&A. I know it's a busy reporting day, and we will keep the session within one hour. So with that, I hand it to you. Torgrim.

Thank you, Bard and good morning everyone, and thank you for joining. I know you are interested in the situation we are facing on Empire Wind. I will address that but let me start by saying that today, we are reporting strong financial results for the quarter. Gas production was particularly strong in Norway and the US capturing higher prices. We reported adjusted operating income of $8.6 billion before tax, and an IFRS net income of 2.6 cash flow from operations after tax came in strong at 7.4 billion. Our adjusted earnings per share was $0.66 cents. Earnings per share based on net income was $0.97 cents impacted by currency effects and book value gains. We are in turbulent times. The significant increase in tariffs and risk of trade wars creates uncertainty and volatility in the global economy and global supply chains. The uncertainty, combined with increased production from COVID led to a drop in oil prices. It has recovered somewhat, but uncertainty do prevail. These circumstances confirm the importance of a strong balance sheet and resilience toward lower commodity prices. We are well prepared for market volatility. We have a strong cash position of around $25 billion and the net debt ratio is below 7% strong cost control and capital discipline remain a priority for us. For a quarter, we deliver capital distribution in line with our CMU guiding the board approved an ordinary cash dividend of 37 cents per share and a second tranche of share buyback of up to 1.26 5 billion, including the state's share. In total, we expect to deliver $9 billion in capital distribution for the year. Before I get to our financial results, I want to address Empire Win, and I want to be clear this situation is extraordinary and unprecedented. Equinor has,…

[Operator Instructions]. The first question today goes to Teodor Sveen Nilsen, SpareBank 1 Markets

[Technical Difficulty]

I'm sorry, but you are breaking up so we are not able to hear your question. I suggest we take another one in the interest of time, and you will be the next on the list, and hopefully the line will work better than so then let's go to the next one on the list.

And that is Biraj Borkhataria from RBC.

Thanks for the details on Empire Wind. I guess there's not much you can say, given it's a legal process, but I just wondered if you could talk a little bit about, you know, what this event is, you know, making you in terms of changes the way you think about the business, because your geographical exposure is a lot more concentrated than your peers. Obviously, Norway is the backbone of the business and the home ground there, but if I look beyond Norway the international footprint, it's been a conscious decision to be more concentrated. And obviously the US is the second largest footprint you have, and your peers are much more diversified. So does this in any way make you kind of change that approach, make you think a little bit differently? Maybe think you maybe want a bit of a more broader exposure. Just any comments on that would be helpful. And then the second question is, on Bucha Lau, there's maybe a little bit of confusion around expectations there. Just wanted you to clarify expectations on startup and time to get to plateau. Is there any reason we shouldn't assume a ramp up, go back, allow that in line with other FPSOs we've seen in Brazil, which is typically less than a year to get the full plateau. Thank you.

So on your first question, you know, the situation around the Empire Wind is, you know, both extraordinary and unprecedented. And we see it as sort of an unlawful, you know, act by the by the US state. And we will treat it as that, clearly, US is us is an important contributors. We have invested many, many years. And you know, it generates $500 million in this quarter as such. So, so it remains so. I think your bigger question is about your concentration of a portfolio, which is very much about our ability to take out scale effects and synergies and getting into critical size, where we do operate and where we are so so we think that makes sense. And clearly, if you look at the political risk in our portfolio compared to many others, we have a significant high share of OECD countries in there. You know there are risks in all countries, and we need to deal with them the way it should be. And all this is very much boiling down to manage. In managing the situation around one asset and one investment then on, on Bucha low so, so startup is planned, planned for 2025 and, and the ramp up is expected to go as plan. It is on location. Commissioning is ongoing, and hookup is also on this way. So things are moving according to plan, so there should not be confusion out there. I hope so. So we are confident in the development of the of the assets. So thank you, Biraj.

Thank you, Biraj. Let's try Teodor Sveen Nilsen again from SpareBank 1 Markets, and hope that the line is better. So operator, please open the line for Teodor.

[Technical Difficulty]

Sorry, sorry, Theodore, but we are not able to hear you. So either you need to find a better line and we will put you on the list, or, if not, you are, of course, happy to you are welcome to call me or any other member of the IR team after and we will try to respond to your question.

Let's then turn to John Olaisen from ABG.

Thanks a lot for taking my question. I want a little bit about the sustainability of your dividend and total capital distribution. You don't make any change to the guidance capital distribution of 9 billion in total for '25 but just wonder, is '25 safe at 9 billion, regardless of oil and gas prices, or is that at some oil price should we expect the lower capital distribution also for '25 and also then maybe, is it possible to give some indication for 2626 if oil price stays at Yeah, now we're at 62 at current levels. Is dividend sustainable at current oil and gas price levels? Or if yes, what at what level should we expect dividends to become at risk? If you could just talk a little bit about this, please. Great.

Okay, all right, now, thanks. Thanks, John. So it's very important for us to be competitive when it comes to capital distribution. And sort of a little bit of a data points, we have distributed $45 billion over the last three years of capital distribution. And I hope that is read as a strong commitment to distribute capital. And the $9 billion this this year as well. You should see that as very, very firm. I said at the capital markets day that, you know, it is important to run with a solid balance sheet and a lot of liquidity, and that that enables us to see through sort of volatility as such, when we make decisions and when we sort of decide on capital distribution. So you should take the $9 billion as a very, very strong commitment from our side, so on, sort of a lower price environment.

Just want to remind you of, of some sensitivities we have said, you know, a cash flow for operations around $20 billion for 2025 that was based on a $70 oil and a $13 gas in Europe, if you if you assume a $10 lower oil price, which is 60, and a $2 lower gas, which is 11, that would reduce cash of operations of Around $2 billion take it from 20 to 18 as such, creating still significant room for capital distribution. It is very important for us to be competitive. We have the cash dividend that is going to, you know, be growing, and we want you to think about that as bankable. Then on top of that, we will use share buyback, and we will see to that we are competitive compared to a peer group. You know through the cycle and all of that. The last point I would like to make around a low price environment is that the Norwegian tax system, it is, it has a significantly dampening effect, because as oil price and gas prices drops, 78% of the exposure is picked up by the tax bill. There is a lag in tax payments of six months, but clearly we are seeing through that when we put together guiding and capital distribution as such. So we do see the Norwegian tax system to be a dampening effect and enabling us to manage very well in a low price environment. And then, of course, I mean, you know, you know our cost base, and you know over you know return on capital employed. You know, it cost us $2 all in cash to get to Europe without gas, selling into an $11 market. So this is a business that works well in a low, low, low price environment, and we stay committed to your capital distribution. So thanks, John.

May I have one quick follow up on that, yes, please, yeah, when you talk about low price environment, in your view, what is a low price environment? Because, I mean, you said that you have break even for new projects. Your new projects are break even below $40 there's 62 a low price environment. In your view, when do we come into a more or medium or high price environment?

Yeah, you know both you and you and me, John, have lived long enough to know that we should never have a very strong view on what is a low price and what is a high price. My job is to make ourselves as robust as we can to a volatile price, and clearly we are prepared for significantly lower prices than we see currently, both through sort of flexibility in our spending, a strong balance sheet, significant liquidity, and a tax system that sort of actually helps on the way down as well. So, so we'll see to that. You know, we are well prepared to manage all of that. And maybe the last point I would like to make is that navigating through rough waters, it is important to have control of your own spending, and since we are operating most of our investments ourselves, we are sort of the captain of our spending program makes us able to actually make the decisions necessary, to make the adjustments that we have to do in a way. So we are prepared for significantly worse, not believing necessarily in that, but our job is to be prepared.

Next in line is Peter Low from Redburn.

Hi. Thanks for taking my questions. The first was on Empire Wind and the impact of the pause on the capex budget. I thought you had a reasonably significant amount of investment this year going into empire, given you your halting work, would a portion of that not drop out? Can you perhaps just talk about the dynamics there, and then a second question, actually, on capex, kind of you alluded in your previous answer to kind of potentially some flexibility in a lower price environment. Can you talk a bit about kind of where that flexibility could potentially come from and at what price level you might look to revisit your spending plans in the coming years? Thanks.

Okay, thanks, Peter, yeah. So first of all, on Empire, our main focus is to manage that situation, getting clarity as quickly as we can, and taking the actions that you know is prudent in the current environment, to protect the value of the of the asset and the value For all shareholders. That is very, very top priority. When we know more, we will revert to guiding implications as such. But it is too early to conclude on that as such, but, but it is high priority for us to clarify the situation and take the necessary actions as such, when it comes to carpets. So just want to remind you on what we did on the capital markets day, we actually have reduced our investments over the next three years by $5 billion and also the cost reduction is targeted at $2 billion so we sort of put that forward at the capital markets day. So first, it's important to be ahead of the game as such, to set up a business that works in a low price environment on sort of further flexibility. There are some flexibility in 2025 But you know, most of the investment program is related to ongoing projects coming 2026 and 2027 there is significant flexibility opening up as well, and those are discussions we have currently. What are we going to do with the flexible part of the investments and we're being better aware that when we start a project, you sort of lock your sort of capacity as always, it's always a bad idea to stop ongoing projects.

Next one is Yoann Charenton from Bernstein

Hi everyone. So we'd like to ask about the MMP business. And if you're able to tell us what was the contribution for cash flow, or contribution to cash flow from MMP in the first quarter and this quarter as well you had the working capital. Really Is that possible to understand whether at the end of the quarter you have reached what you will consider as a normalized level for working capital? Okay,

So on the MMP results, a few data points. So the result in the quarter, $253 million impacted by two wells. into the [indiscernible] reservoirs. So adjusting for that, the result would have been close to the lower end of the lower end of the range. Then, you know, LNG trading is lower than normal. That is due to that milk. You know, the LNG facility in the Arctic has been done for maintenance for part of the quarter. And then in general, you know, within the trading environment, there is a little bit of a risk off for the time being. So there has been lower than normal result from that on working capital. So let me first say that sort of the guiding that we have on cash flow from operations that is excluding working capital movements. So it's sort of a clean number, in a way, not disturbed by working capital movements. In this quarter, we there was a freeing up of working capital of $1.6 billion as such. So, so, I mean, so that actually adds to the cash flow in the quarter. And of course, whether this is normal or not, it was, you know, I would say the end of fourth quarter, it was higher than normal. This is a fair level of working capital, but you should expect that it moves depending on whether there are contango in the market or there are special situations as such. Volatility in general, creates results, but it also takes working capital. So if you see volatility, and if you say changes in the curves, I mean, you'll see working capital movements as such, but it's a fair level, I would say.

Next one is Matt Lofting from JPMorgan.

Thanks for taking the questions most of mine have been asked to perhaps just ask you to follow ups first on Empire Wind. I just wonder if you could share any thoughts on how, what situation or duration of the sort of the hold would be required in order to trigger a write down of the two and a half billion book value as we move through 2025 and in particular, sort of then get to year end impairment testing into the second half, and then second perhaps just coming back on MMP and some of the comments talking that you just made, I just wondered the extent to which, in the current environment, that the industry as a whole is seeing moderated trading conditions in terms of the opportunities and spreads that are there, versus a sort of more temporary risk off approach. Thank you.

Matt on Empire Wind and then your question on sort of consequences for our accounts. So as you would on this. That what is happening now around the project is dramatic. It is extraordinary and unprecedented in a way. So we will do you know impairment testing related to the second quarter results. There are so many outstanding topics yet still with the project, so it's too early to say anything about what the consequences might be to it, and hopefully we will be able to create more clarity around the situation by the second quarter. So there is a reason why we are very transparent on the on the economic exposure to you to hopefully that will put you in a situation to be prepared and have an opinion about that. Your second question related to MMP and sort of the moderated trading opportunities. Yes, you know, I think in general, the risk, you know, across the various markets are sort of new type of risks. I mean, the whole world is sort of used to deal with macro uncertainty and maybe dual geopolitical turmoil. But what we currently see is sort of a different type of risk as such, and that makes everyone more careful in sort of taking risks, so that we see a risk of across that what we do, and is difficult environment to trade in. What is actually quite interesting to note is that if we see sort of increased tariffs or trade wars or whatever you call it, it might change the trade flows. And that creates opportunities normally, and we are well positioned with our shipping fleet various oil qualities and our ability to realize higher prices. So I mean, traders can make, make, make value in situations with uncertainty. I think the fact is that that the world need to get too used to what we are talking about currently, to be fair. So actually, quite a this quarter, quite good trading around refineries, actually, and the qualities we have on the liquid side. All right, that was a long answer, but it's a complex topic.

Then we'll turn to Bank of America Merrill Lynch, Chris Coupland.

Just two to tidy up for me. One more on MMP, I was wondering whether you could give us a little bit of your thinking when you issued your trading updates a few weeks ago, and I didn't really read into that trading update the weak results that you ended up reporting below the low end of the usual quarterly range. So maybe you can talk us through the visibility you had at that time and your thinking behind how to use that trading update in order to guide consensus. And then lastly, just because it's an asset that I enjoy asking you every time, also today, that 260 crowns or so, if it was a good investment at 400 why wouldn't you buy more today?

So on your question on MMP, you know, Chris, it's a good question and what we try to do in a trading update is to give you sort of some stare on the direction, and then we'd clearly, clearly, clearly recognize that there are a lot of moving parts that are just hard to analyze and hard to model as such and what this time around, there was a lot of transactions very late in the quarter that we were not able to Pick up, you know, as part of the trading update search. So that's sort of, you know, on your question related to the to the trading update and, and. And the best advice I can give is to have a close and good dialog with our investor relation department. You know, around these topics, then on Orsted, yeah, so we hold 10% of the shares. We are an industrial and long term owner. Clearly, then the share price of Orsted is impacted by the industry realities within offshore wind and. Okay, so that is clearly reflected in the price, you know, if we sort of see beyond that and what they have, they have a quality portfolio of producing assets delivering significant and a good return on capital employees. So we see this as a quality company with a with a quality portfolio, clearly impacted by the reality that surrounds this industry for the time being.

Chris. We are happy to take any feedback on the trading update. I just want to remind you that we did say that you should expect an impact from the CCS that we have in our report, and we did also say that you should expect relatively weak research from LNG trading that we saw, but happy to discuss this further.

Then next on the line is James Carmichael from Berenberg.

Another one on Empire Wind. Obviously, you're sort of, I guess, following up on your question. You're obviously an interested observer in what's going on with air portfolio in the US. Have you got any sort of indication on why it's only Empire Wind received this whole tour at this stage, and I guess you must be concerned that others might follow. I don't as much you can say on that, but any thoughts would be interesting. And then just on the power business that you're setting up in September. I think it said maybe just a bit of color, I guess, on the assets that are going into that business, and the rationale for setting that up would be helpful. Thank you.

Okay, thanks. Thanks, James, yeah, when it comes to further sort of stop work orders in the US, you know I'm not in a position to comment on that naturally. And then clearly, there are you know, rumors, you know, around these topics all the time. I think the best one to ask is actually, actually the US Federal Government about their ideas around those assets and industries and hopefully they can provide some clear answers to that. Then, when it comes to your question on, on the power business, clearly, we have, you know, power assets in, in into two business areas, currently, within the renewables and within the MMP. MMP, business, you know clearly these assets, you know belongs, you know more together to take a more fully approach to the power markets. Secondly, we do see that that going forward, there will be a good and strong link between, you know, the gas market and the power market and having, you know, gas fired power plant as part of the power business area is, is important. So the assets that, that we are talking about is, is, you know, the Triton asset. We have power assets also in also in the UK, and clearly there is, you know, trading opportunities as well.

Next one on my list is Martijn Rats from Morgan Stanley.

I also have two, including on Empire Wind. I'm afraid, if the project is not sort of permanently halted, but say there is a relatively positive outcome where at one point you could sort of go ahead, there would still be, I would imagine, a risk that you missed this year's weather window. And so I wanted to ask, how much of a delay can you have in the project? I would imagine it's probably not more than a few weeks or a few months before this year's weather window is lost. And also, if this year's weather window is lost, and the whole thing, like all the cash flows shift a year into the future, what would be the NPV impact of such a delay? That's one thing I wanted to ask, and then I can be just as perhaps a bit of a technicality. But earlier on, you talked about potential tax losses that this might generate is -- are Equinor's sort of holdings in the United States, across both the offshore wind and the upstream are they structured such a way that if there are any tax losses, say in Empire Wind, that they are available to the E&P bill? This, or it's legally so separate that it's hard to kind of move these tax offices around. I was wondering if you could say a few things about that.

Okay, thanks, Martin. I love the details of the questions here, so let's, let's get to that. First of all, it is when it comes to Empire Wind, the pro the project is progressing well. But the way these projects go is they're sort of, everything hangs together. It's a timeline. There are suppliers, there are commitments and all of that. So when you run projects like this, you are dependent on that. Sort of, it runs, and this project is in a in a critical phase. I mean, we are sort of, you know, on time and schedule, and works well, but it is a, it isn't a critical phase, because we are about to start, you know, the offshore installation, and the installation window is now, in a way, so it is A matter of urgency to get clearance on the situation and the US authorities, they are very well, very well aware of the urgency and the need for clarity, and that we are also We are considering all optionalities including take, taking legal steps to protect, protect our situation and the value of our shareholders. So, so, so, you know, it is too early to talk about NPV impact. What we have shared is sort of the gross exposure and the growth exposure in a stop case, and I think that is, you know, something that is important for us to share, but, but, but, but very important to urgency, get clearance and make decisions on the way forward on this Project, on your second question on the tax losses available to upstream? Yes. So, so that is in place, and you know, there is a common structure overseeing all the US activities here, where this is consolidated and can be used.

Next on my list is TD Cowen, Jason Gabelman.

Thanks for taking my questions. I'm afraid I'm going to stay on topic with Empire Wind. I'm wondering, since it's been about two weeks since you've gotten the stop order notice if you've had any engagement with US authorities, and if you know your senses, it's really the government that's dictating the timeline of a potential restart, or if there's things you could do proactively to move that along. And my second question, unrelated to Empire Wind, it looks like your US gas realizations having quite strong. So I'm wondering, one, what's driving that into if there's an appetite to acquire more acreage in the lower 48 with gas exposure. Thanks.

Thanks. Jason, so yeah, so the government in the US, they have not shared with us the reason for the stop work authority. So, so it is a situation where, you know, we don't understand why. What we do know is that sort of what has happened. We see that as unlawful. I mean, we have permits and approvals, you know, dating back one year ago, and we have always assumed that that United States of America will honor contracts and permits they have issued in a way. So this is an unlawful action by them, and we are going to treat it like that. So I just want to be very clear on that we are engaging on all levels that we can, and we use a massive, massive efforts in all channel channels to get a dialog that is needed to create the necessary clarity. We have been extremely clear with them that this is of urgency. We have little time, and we will consider legal actions as such, on the US gas realization with a little bit of more of a present to the team. We have a realized gas price in North America of $4.06, Henry Hub came in at $3.65 so this is actually quite a significant addition to that. Normally the North East trades at a discount to Henry Hub. So this is mainly linked to the way that we market and sell or gas, because, you know, we keep title, even if it's operated by expand. We have title to the gas, and we market and trade and sell it ourselves. We are not selling or gas. We are not hedging it. So we keep, keep opposition open to volatility in the market. And what we have seen in in the Northeast is periods of coal spells and very high natural gas prices. And the way we market and trade, we will be able to capture that. And that is what you have seen in this quarter. So that goes, you know, to a broader theme about what you should expect coming out of gas, gas machine. We want to keep our gas exposure, you know, close in time. In Europe, we sell our gas 70% day ahead and 30% month ahead, meaning that when there is volatility, when there are high prices, we will capture it, and they will go into the earnings and the cash flow of the company, and that's what we have seen in the US this quarter, this, this doesn't happen every quarter, I just want to say that, but when it happens, we'll be there.

Sorry, just on the question on appetite to acquire more US Gas?

We made two acquisitions with EQT last year into that. You know, at the at the time when gas prices were actually quite a bit lower than where they are today. So that has increased, increased or production out of the US with is it 80,000 barrels per day as such. So it's very good to see that that is coming in well in the first quarter going forward. You know, I can't comment on that but, but clearly we do believe in natural gas in the long term, both in Europe and also elsewhere.

Next one is Paul Redman from BNP Paribas.

I might as well follow the trend and stick with Empire Wind. But I just want to ask for some clarity on the urgency. So when is the weather window for offshore installation? And just to be really clear, if you missed that weather window. Could we be in a situation where Equinor decides not to progress with the asset because they can put the cost implications are just too high to generate the returns you want from this project? And secondly, just on the new power business area. Do you think you've got the organic assets that you need to develop the growth of this business, or are you looking inorganically for more power assets at the moment?

Thanks, Paul. You know the Empire Wind project is urgent. It is a very extraordinary situation, and there has been created a very significant uncertainty about the way forward of this project, and, and, and the questions we are facing is, of course, you know, you know, what about spending money in a situation with that significant uncertainty? So this need to be clarified very quickly. The whole the, you know, the construction schedule is sensitive to, you know, contractor availability, you know, the weather window, and actually commercial requirements as well. This project is also dependent on project financing to work, and as you would understand, lenders are very uncertain about the way forward. So this is much more than about a weather window, which is crucial, but it's much more complex as such. So we just want to have clarity as quick as possible, and we are preparing for all outcomes. And second question on the new power business. Yeah, so, I mean there are currently assets that sits in different business areas that belong together, and the decision made is to combine them because there are synergies there as such. So there are no sort of plans for an inorganic moves as such. But of course, I mean, that's we can't comment on what might come in the future in any part of the business as such, but it's not part of the current plans.

Thank you. Thank you, Paul. That completes the list on our end, and we have managed to do it within the hour. I want to thank all of you for calling in and for your questions, and then remind you that the investor relations team is, of course, always available for follow ups later today or during the week. Thank you all for calling in and have a good rest of the day.