Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Equinor Analyst Call Q3. [Operator Instructions] After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Bård Glad Pedersen, Senior Vice President and Head of Investor Relations. Please go ahead. Bård Pedersen: Thank you very much, operator, and welcome to everybody who has called in for the analyst call for Equinor's third quarter results. Torgrim Reitan, our CFO, is here with me, and he will take you through the results before we open for the Q&A. As usual, we will close this session within 1 hour. So with that, Torgrim, I hand you to take us through the results.

Okay. So thank you, Bård and good morning, and thank you for joining us. Before we get to our results, I have a look at the photo Bacalhau, which came on stream in October. It is the first presold project in Brazil, developed by an international operator. We reserved more than 1 billion barrels and production capacity of 220,000 barrels per day. This will contribute significantly to our international growth. The results and cash flow we report today are driven by strong operational performance. Production is up 7% from third quarter last year. Johan Sverdrup delivered close to 100% regularity and Johan Castberg is producing a plateau with a premium to Brent of around $5. The adjusted operating income was $6.2 billion before tax and net income was negative $0.2 billion, impacted by net impairments, mainly due to lower long-term oil price outlook. Year-to-date, our cash flow from operations after tax has been strong at $14.7 billion. Our adjusted earnings per share was $0.37, impacted by negative results from financial items and a one-off effect related to decommissioning of Titan. Energy markets continue to be volatile. Geopolitical unrest, tariffs and trade tensions continue to impact pricing and trading conditions. We are prepared for this. We have a solid balance sheet, strong production and a robust portfolio. In addition, we take forceful action to manage costs. These efforts are visible in our results. Costs are now stable year-to-date compared to last year, and this is in line with what we had at the Capital Markets update in February. Operating costs for our Renewables business have decreased by around 50% compared to the third quarter last year, and we expect it to be down by 30% on an annual basis. And this is driven by less business development and reduced early phase…

So my first question is on the unit depreciation charge in Norway. It's up about 13% from Q2. Can we assume that is the new normal level going forward? And then my second question is on Ørsted. You obviously decided to participate in the rights issue and to turn from a passive to an active shareholder with a Board seat. Can you elaborate a little bit on what it is that you think Ørsted is perhaps not doing very well where your active participation may help them improve. And then what type of industrial cooperation do you envisage that would benefit both sides?

Thank you, Irene. So first of all, the unit depreciation charge on [ E&PN ] is up. So that is driven by new assets onstream this quarter and in particular, Johan Castberg and also smaller developments coming onstream as well. So these will sort of depreciate over time. So you should expect a gradual reduction going forward on that basis. So that's the first one. The second one is related to Ørsted. Yes. So let me give you a little bit of further context around that. We participated in the rights issue. And clearly, that's sort of a recommitment to our shareholding, and we would like to use the opportunity to clarify more around how we think around the ownership position. And we do want to take a more active role as a shareholder with also Board seats in due time. Then important for me to say that the offshore wind industry is leading through its first real downturn. So with a lot of challenges. And we have seen that with Ørsted and we have seen that in the share price development in Ørsted. So in times like that, consolidation is typically what happens. And we also do think that this industry needs consolidation. We do think that a closer collaboration industrially and strategically between Ørsted and ourselves will create shareholder value for our shareholders, I mean Equinor shareholders but also Ørsted's shareholders in a way. And we do believe that's sort of the competence base that we have very well complement Ørsted and being part of the Board with a long-term industrial perspective in a company like this will benefit both parties. Then I do appreciate that there are uncertainties related to what this means. And let me be very clear that in the current environment, we are going to limit sort of capital commitments into Offshore Wind. It is an industry that is challenged. So the assets that we have in our own portfolio, we will continue to develop in Empire Wind, Dogger Bank and Baltic projects. Beyond that, we will be very, very careful with further commitments into Offshore Wind. And the same goes to our holding in Ørsted. So the threshold to commit new significant capital is high for the time being. So I just want to leave that with you because I do appreciate that there are sort of questions to what might happen here. Bård Pedersen: The next question is from Biraj Borkhataria from RBC.

Just the first one on the MMP guidance. I wonder if you could just dive into a bit more detail around the change in factors there. And also, you've gone from a range of $400 million to $800 million to a single figure. And I was wondering if there's a sort of signal factor in there that either you see fewer opportunistic -- opportunities to trade or if you are just taking less risk given the environment is changing? And then just a follow up on the question before Ørsted, just trying to understand why you didn't consider a Board seat in the first place? Because I recall it just wasn't really part of the discussion at the time around the CMU. So just trying to get the understanding of -- obviously, the environment has changed, policy has changed, but has your investment thesis on that business investment changed?

All right. So thanks, Biraj. So first, on MMP guiding, yes. So we are changing the guiding to around $400 million on a quarterly basis. We're sort of -- we see that the risk is asymmetrical here. So more upside than risk to the downside. It is a change. We used to have $400 million to $800 million, as you might know. I think it's important to remind you what we had before the war in Ukraine, then the guiding was $250 million to $500 million as such. So what we see now is that the market has changed rather a lot. On the gas side, in Europe, the situation has normalized with -- both on the absolute price levels and volatility and also then the volatility globally and sort of the market globally is driven to a large extent by political decisions that actually structures in the market, making it quite harder to trade around and position ourselves around. So the sort of market dynamics that drives this. In addition, sort of we had earlier divested gas transportation assets, that we are sort of -- we don't have anymore. So we take the opportunity to take that out as well. So -- and then why not a range? Because I mean you have seen that even if we had a broad range from $400 million to $800 million earlier, we tended to overshoot quite a bit, actually, even with the range. It just explains that opportunity might be very good, and it might sort of -- we don't want to limit it to -- have it limited by a range. What we want to do is that on the invite to consensus that we send out a few weeks ahead of quarter, we will give an update related to…

First one, just want to follow up on the Ørsted question recently asked here. I just want to know what has actually changed in what you can offer from the first time you acquired shares until now the recent share issue. So that is the first question. And second question that is on Bacalhau, congrats on first oil there. How should we think around the ramp-up pace to plateau?

Yes. So thanks Teodor, on your first question. Well, in the current situation, it was also important to signal that we were a supportive shareholder in what has sort of happened over the last few months. And then as part of that, being -- taking a Board seat is important. On Bacalhau, yes. So it's Bacalhau started on 15th of October. And it is probably the most complex development that we have done. It is at more than 2,000 meters of water depth and it is massive. So I'm very proud of reporting that it is started. On your question on the ramp-up. I mean, there are 2 drillships on location currently. There will be 19 wells being drilled on Phase 1, 11 producers, but also injectors, both water injectors and gas injectors as such. So this will sort of gradually happen. This is not going to be a ramp-up like you have seen on Johan Castberg. So this is sort of continuous drilling and completion to 2025 and it will continue in 2026 as such. So this -- it's too early to say, give an exact date when it will be on plateau, but things are progressing well. Yes. Bård Pedersen: Next one is Jason Gabelman from TD Cowen.

I am going to start also on Ørsted. And it's, I guess, a bit tangentially related to what's going on. But as we think about potential outcomes one of the thoughts in the market is a formation of a joint venture between the 2 parties. And with that, there's a lot of speculation on cash, that would need to be contributed into the joint venture from Equinor standpoint. So the question is really, as you look at your 3 offshore wind projects. How much equity capital have you spent in those projects thus far? And how much is left to be spent on those 3 projects? And then my follow-up is on the global gas market. There's been maybe a surprising amount of LNG projects sanctioned year-to-date. You've seen China demand slowing down, some thoughts on Power of Siberia 2 coming online at some point next decade. Can you just talk about your outlook for the global gas market? And if it's shifted at all just given the developments that we've seen year-to-date in that market.

Thanks, Jason. On Ørsted, the potential outcome here is I don't want to speculate on that, and it's not natural to say much more on that now. But clearly, there are various alternatives. I can give a little bit insight in sort of what is it that the sort of -- we will be looking for in this. We will be looking for in sort of improving the free cash flow for Equinor, that is one driver. The other one is are there ways where we can visualize or make clearer the underlying valuation within the offshore activity that we currently have, are there ways to do that? And the third one is that clearly, we we'll be very careful in -- with significant further capital commitments within Offshore Wind in the current environment. So those are the things which are sort of driving us. When it comes to the 3 projects and remaining equity injections, I can give you a little bit of insight into it. Dogger Bank is well underway and sort of production is gradually being started up. So there are sort of -- there is some more equity that will be injected. But clearly, project financing and the leverage of those projects is in sort of in the [ 70s ] as such. Within Empire Wind, what you will see there is that we have a significant equity injection in 2026, which is close to $2 billion. The year after, we expect to receive investment tax credit for approximately the same amount. So Empire Wind over the next 2 years is pretty cash flow neutral before it is finalized. And then we have the Baltic 2 and 3 projects in Poland with a very high leverage, good projects. So it's fairly limited equity that is needed…

Just some I guess, rather boring questions, Torgrim about detail. I wonder whether you can help us review what's happened in the 9 months on your net working capital, great results, I guess. And whether you can combine that review with an outlook where you think we're heading? And if I could ask you to do the same, particularly for your Norwegian business, I understand there's a lot of moving parts in terms of assets for sale outside of Norway, but Norway has seen a significant decline in the discount to Brent that you've been able to achieve in Q3. Again, I would love to have your review of that and outlook, if possible.

All right. Thanks, Chris. Yes. So working capital is clearly a very important part of what we manage and manage diligently. So this quarter, working capital is down by $1 billion, 3 points -- the total working capital now is $3.7 billion. So that's that is the reduction during the year, actually done by some $3 billion. So the question you had is what is sort of normal level and what have you. I mean, the reduction we have seen is very much linked to commodity prices and MNP-related reductions. So I won't sort of give any outlook on this, but I would say that given the structures in the markets, the volatility in the markets and the absolute price levels, it is sort of a fair level. I mean, you remember during the energy crisis, we had a massive amount of working capital, and of course, earned a lot of money. But volatility and price levels are not there anymore. So -- but I would say it's a fair level, it's a fair level. Then the second question was sort of a discount to Brent. Yes, I mean, Johan Castberg came on stream during the summer. And Johan Castberg is able to achieve $5 premium to Brent as such, and that clearly has an impact to the discounted Brent overall on the shelf. Bård Pedersen: The next question is from Henri Patricot from UBS.

Two, please. The first one, I was wondering if you can give us an update on latest thinking on timing of the Peregrino disposal? And then secondly, on Johan Sverdrup, you mentioned here the field continues to produce at a very high level? Or are you thinking about the evolution of that going into 2026? And to what extent do we start to see a decline next year?

All right. Okay. First Peregrino. So Peregrino was shut in during the autumn. It came back on stream on October 17th as such and is currently producing more than 100,000 barrels per day. So we have transacted and we will divest out of our 60% ownership position in the assets, and that will be divested to Prio in Brazil. So there are 2 legs of this transaction. 40% of the 60%, we expect to close during the fourth quarter and the remaining 20% in the first quarter next year. So the headline transaction value was $3.5 billion with an effective date of 1st of January '24, which is quite a while. So there will be a pro et contra settlement since then. So what you should expect is that on that consideration we will receive is a little bit below $3 billion, and that will be split into sort of 2/3 of that in the fourth quarter and 1/3 in the first quarter. Just want to leave with you that this is -- in Brazil is still very important to us. The reason why we did it was twofold. It was attractive opportunity. And also, we are redeploying resources to Bacalhau and Ria in Brazil, sort of high grading the portfolio in Brazil. So the long-term commitment to Brazil is very much intact. Then Johan Sverdrup. Yes. So Johan Sverdrup keeps delivering very well in the quarter, close to 100% regularity, which is a very good achievement in itself. We have worked the asset very, very hard to optimize production and recovery rates. Now we are looking at a recovery rate of 75%, in that asset. It was 65% when we sanctioned it and 65% is still a very, very high number. So what we are currently working on is multilateral wells, a retrofit existing well into multilateral wells, so we have successfully done that. And then water management is very, very important because water management will continue to increase as we produce these wells. And that has also been done in a very good way. And then we sanctioned Phase 3 this summer with the common stream by end of 2027. So in 2025, we were able to maintain the production more or less on the same level as '23 and '24. But we have fast forwarded a lot of production. So this asset will start to decline. So next year, you should expect lower production from Johan Sverdrup than in 2025. But you know what we're doing, this is at core of our competence base. So we will clearly work very hard on maintaining as high production as possible from that asset. Bård Pedersen: [Operator Instructions] And the next question is Michele Della Vigna from Goldman Sachs.

I wanted to come back to your comment about effectively restricting or being very capital efficient on Offshore Wind, given the acceleration in power demand we're seeing globally. I was just wondering, are there some other areas in the power markets where instead you see opportunities and you could look at redeploying some of the capital you're taking away from Offshore Wind at this time of low returns for those developments.

Okay. So, we do believe that there is value to be had within sort of the Power segment. And we have recently established a new business area called exactly Power as such. So what we clearly will be looking for are sort of opportunities that sort of builds on the portfolio we have and clearly -- and the customer base that we have. And we have a big presence related to our gas positions in Europe and in the U.S. So that's sort of the totality, the way we think about it. I have to be very clear that sort of we have no intentions to significantly step up investments into this area. We are facing periods with lower prices. And for us, it will be very important to remain very capital disciplined in anything that we do. And everything we do need to have a significant profitability and returns before we commit any capital to it. Bård Pedersen: Next one, please one question from you to Peter Low from Rothschild & Redburn.

Perhaps a question on the cash tax paid in the quarter, which I think was maybe a bit lower than expected. So it looks like you paid 2 NCS installments of $3.9 billion, but the total cash tax paid in the cash flow statement was $3.8 billion. Were you getting refunds in other regions? Or can you perhaps explain that number a little bit?

Yes. Thanks, Peter. So a couple of things. So 2 tax installments in the second quarter, there will be 3 next quarter in Norway. So just be aware of that. It is a timing effect related to falling prices. So we are still paying taxes based on a higher price environment. So you just be aware of that. And also internationally, the reported tax is much higher than paid tax that goes particularly across the U.K. with the EPL and then sort of Rosebank investments being offset against tax and in the U.S. as well. So yes. Bård Pedersen: The next one is as Naisheng Cui from Barclays.

Just one follow-up on MMP guidance, please. I think you mentioned in your report that part of the reason you cut MMP guidance is because divestment of gas infrastructure assets. I wonder if you could isolate the impact on that place rather than the market condition change.

Okay, thanks. I can do that's $40 million per year. We did that sort of 1.5 years ago or something like that or 2 years ago. At that point in time, we delivered sort of guiding repeated in the quarter. So we didn't see the need to sort of strip that out. But when we now changed the guiding, we thought it was useful to mention it. Bård Pedersen: Just to be clear, Nash, the $40 million effect is on a quarterly basis. I think you might have said for year, but it's per quarter.

Yes, that's per quarter. Yes. Thanks, Bård. Bård Pedersen: Next one is Paul Redman from BNP Paribas.

And I might be a little bit early, but I just wanted to ask about how you're thinking about the distribution program for next year. We're going into 2026 with quite volatile view on oil prices. difficult view into gas prices, your debt came down this quarter, and I think you're guiding to a reversion of some of that into 4Q. So I just wanted to ask about how we should maybe think about a distribution program for 2026. And then just a confirmation on whether you're going to guide to that the 4Q results or at the Capital Markets Day later in the year?

Okay. Thanks. Thanks, Paul. Yes. All right. So first of all, there's lot of good reasons to be prepared for lower prices and we all know that. Last year, we took down investments by $8 billion for a few years and also cost down. We will continue to push on this to improve free cash flow in the current environment. So this is an ongoing thing. I just want you to be aware of that. So that is so. Secondly, capital distribution will have a priority in our capital allocation model. Cash dividend -- the cash dividend, you should consider that as a bankable. I mean, that will come. On top of that, we will use share buyback and share buyback will be used on a regular basis. It is a natural part of our capital distribution framework as such. So -- and we clearly aim to be competitive when it comes to the overall capital distribution. And to be precise on competitive, I leave with you a couple of things. We know that our peers are using a formulas related to cash flow. You should think about that type of sort of levels as sort of being competitive when it comes to ourselves. I think it's worth mentioning that sort of we have specialties around the Norwegian tax, so percentage points. We always should be a little bit lower for consistency as such. Then your question on sort of what will happen next year as such. We will announce this on the fourth quarter results in February. There are a couple of specialties I would like to draw your attention to. And that is next year, we have a significant investments related to Empire Wind equity, that is around $2 billion. The year after, we will get it back…

Well, only one for me. I wanted to ask about the impairment charge, because it's more of a question of just sort of trying to make sure I interpret this correctly. So the long-term oil price assumption has come down, but it's still $75 a barrel. But that has triggered $750 million of impairments, which sort of suggests that there were projects in your portfolio that had breakevens well above $75 a barrel. And I was wondering if that is the correct interpretation. If your projects have breakevens below $75, but you lower the long-term assumption, it wouldn't trigger an impairment, right? Am I interpreting this correctly?

Martijn, thank you for your question. Well, there are qualifications that needs to be made. So first of all, we have the assets on the U.K. side, which are impaired with $650 million. First of all, I would like to say, this has absolutely nothing to do with a transaction with Shell. This is an isolated effect, and it is driven by lower oil price assumption, as you said. A very important driver for this is that these assets are held for sale in the book. So they haven't been depreciated for -- since the beginning of the year. If they had been depreciated on a normal basis, the impairment would have been significantly lower. The second point on the U.K. portfolio is that part of that asset base is linked to the acquisition we did with Suncor and the Buzzard field, which sits in the balance sheet at sort of acquisition cost as such and that has also had an impact for that asset. There are 2 assets in the Gulf of Mexico also impaired. Those are also mainly driven by price. Those are assets run by -- operated by significant U.S. operators. As such, one of the assets has been a challenging asset operational wise for several years as such. So I mean, it's -- yes, I mean, it is one asset in the U.S. Gulf of Mexico that has been a challenge. The remainder of the asset portfolio is very robust for impairments. So thanks, Martijn. Bård Pedersen: Next one is JPMorgan, Matt Lofting.

I just wanted to come back Empire Wind, Torgrim, I think you mentioned in your opening remarks that there was an availability issue that's emerged on in the installation vessel with Maersk. Could you just expand on what's happening there and sort of any risk that, that poses to the future development progress of Empire Wind into next year?

Thanks, Matt. So first of all, I think it's fair to say that Empire Wind has had a demanding year with a stop work order that has been reversed. And I just want to use the opportunity to say that the lost time has been catched up and we are back on track. And I must say that I'm very proud of what our organization has been able to do in a critical year like this. We are 55% complete. All monopiles are in the seabed. So on this issue, this is a dispute within Maersk and Seatrium, which is the yard in Singapore. The vessel is more or less completed and finished and Maersk has sort of canceled the contract as such. So we are close to the situation. We are working to either see to that this solution is resolved or looking for other opportunities. Important for me to say that this is a well-functioning market and there are other opportunities available in the market. So we will manage this -- we'll manage this, not risk-free naturally, but we will give you an update as this progress. Bård Pedersen: We move on to James Carmichael from Berenberg.

Just quickly on the U.K. and Rosebank. I was just wondering what the latest is on that approval process. And then I guess maybe just sort of general thoughts on the U.K. as we maybe get a bit closer to some clarity on the fiscal outlook here.

Okay. All right. Thanks, James. So on Rosebank, as you might may be aware of sort of the permit was sort of taken away due to that Scope 3 emission should have been taken care of in the award. So we have submitted our response recently to the regulator, and they turn around and put it into public constellation right away. That has started, and we expect the consultation to end at the 20th of November. There is no set date for the decision, but clearly, we work very closely with the ministries to get this moving as quickly as possible as such. The second part of your question, what was that, James, about fiscal outlook in the U.K?

Yes. I guess just general thoughts on the U.K., obviously, some uncertainty on the fiscal outlook, we've got some clarity there soon. Yes, just some context around that.

I think it's fair to say that there has been repeatedly tax changes on the U.K. side over years. This is nothing that we appreciate and clearly would advocate for strong and stable fiscal framework to create a basis for investing as such. Yes. Bård Pedersen: Kim Fustier from HSBC is next on my list.

I noticed that one of your Norwegian competitors has recently expressed some concerns that there may not be enough projects on the NCS within a year or 2 to sustain a healthy domestic supply chain. Obviously, you're also moving away from big greenfield projects to smaller brownfields. So it's kind of an industry-wide issue. Just interested in hearing your views on sort of the outlook for the NCS supply chain and cost inflation.

All right. Thanks Kim. We are currently having a period with very high activity. A bit of that is driven by the tax incentive program put in place during COVID as such and many of these projects are soon coming into production. So it is natural that there will be a lower activity past that asset. So I think our job as a company is to adapt to that and adjust. I think it's -- I just want to use the opportunity to talk about a project that we have established called NCS 2035. And this links very much to what we said at the Capital Markets Day in the winter, maintaining production level on the NCS all the way to 2035. That future will contain more but smaller discoveries. It will take quicker developments, and we have to operate at lower costs. So for instance, we will drill 30 exploration wells per year and that is more than we do currently. And we will put forward 6 to 8 subsea developments per year, which is also more than what we have done currently. So by what we are doing, clearly, we will be a significant contributor to maintaining a high activity level on the Norwegian Continental Shelf and also the industry in Norway. So very optimistic about what we can achieve through different way of working and different way of working with suppliers. Bård Pedersen: We are fast approaching the hour, but let's take one final question, and that is you Steffen Evjen from DNB.

So a quick one. Just remind me on the tax credit in the U.S. What's the milestone you have to get that credit paid? Is that first power or COD on the project?

Yes. Yes, it is production start, that is sort of the criteria, and it is first power. That is sort of the ultimate. So that is what we plan for in 2027. Bård Pedersen: Thank you very much. We are now at the hour. I would like to thank you all for calling in and for your questions. As always, the Investor Relations team remain available. So if there's any outstanding questions, please give us a call, and we will do our best to help you. Thank you very much, and have a good rest of the day.

Ladies and gentlemen, that concludes today's call. You may now disconnect. Thank you, and have a great day.