Equinor ASA (EQNR) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, if we can please make it start. We have 2 hours for presentations and Q&A. So I want to try and get this started on time so that we can maximize that. Okay. Ladies and gentlemen, I'm very pleased to welcome you to Statoil's Capital Markets Day live in London, and to those joining on the phone and on the Internet. My name is Peter Hutton, Head of Investor Relations. We have 3 formal presentations today of between 20 and 25 minutes, followed by 45 minutes of questions and answers both from here and on the telephone. To open our proceedings, we have Eldar Sætre, the CEO of Statoil, a position in which I'm delighted to say he was confirmed earlier this week. He will be followed by Torgrim Reitan, the CFO, and Margareth Øvrum, Head of Projects, Technology and Drilling. But first off, within Statoil, I have a safety moment, which I'd like to read out. If there's an emergency situation, if an emergency situation should occur while we are here, the evacuation significant signal is a voice system announcement. Please use the fire exits within the venue in an emergency situation and follow the signs and exit at ground level. That having been said, we have no plans for any fire drill today, so if there's a rush for the doors, perhaps it's people running out to buy the stock. First on that note, I'd like to welcome Eldar to start this on the first presentation this morning. Thank you very much. Eldar Sætre: Thank you, Peter, and good morning, ladies and gentlemen. It's really good to see you all, I have to say. Times of uncertainty require leaders that see opportunities and can make adjustments whenever that is the right thing to do. And as you saw from the message that we sent out on Wednesday, I have demonstrated precisely these characteristics. I seize the opportunity when it was presented to me. So today, I'm really pleased hosting you as the new CEO of Statoil. In this new position, I see no need to suggest any changes to Statoil's overall strategy. It has served us well, and it's wisely defined for the future. However, within this strategy, I have highlighted 3 focus areas: The Norwegian Continental Shelf remains the backbone of our activities. It is a highly attractive basin where we will seek to deepen and not the least, prolong our positions based on a solid and very distinctive competitiveness as such. Our international portfolio and operations remain key to our long-term development. We will continue to invest into our international activities where we can capitalize on our competence, building materiality, and obviously, profitability. And we also must adapt to remain competitive in the low carbon future. I see this as a truly business-driven approach, and I will revert to that later in my presentation as well. So before I stop my presentation, I would like to offer some very few comments on the current market environment and without pretending to have a crystal ball of any higher quality that many of you might have. A downturn should not, in fact, have come as a surprise to anyone as the physical imbalances in the market were gradually building up, and they were quite visible. At least this was no surprise to us. But I have to admit that the force of the market direction was somewhat surprising. In our view, the long-term fundamentals of our commodities are strong. But no one can be certain as to how long the low-priced environment will last, and we expect to see quite significant volatility for quite some time. So we are, therefore, prepared for low prices for an extended period of time. At the same time, we are building resilience and working even harder to strengthen our competitiveness. And this will leave us even better positioned for the rebound, whenever that is going to take place. And this is also why seizing the opportunity, it's not me seizing the CEO opportunity. Statoil seizing the opportunity in the current environment is today's headline. Last year, we presented our plan which we called Execute for Improved Value Creation. Today, Margareth, Torgrim and myself will present how we have delivered on this plan and how we will deliver going forward. Firstly, we will continue to provide high-value growth. We plan to increase our production by around 2% annually to 2016 from ramp-ups and new capacity that is put in place. This requires lower CapEx, reduced through even stricter prioritization. Our investment program for 2015 is reduced by USD 2 billion compared to last year's guiding. And beyond 2015, we have material flexibility in our portfolio enabling us to navigate through a volatile commodity environment. We will balance our spending so that free cash flow covers dividend through the volatile commodity environment within the next couple of years across a broad set of scenarios. Secondly, we will continue to increase our efficiency. We will deliver USD 5 billion in cash improvements compared to 2013. And this will come from a step-up in our efficiency program of 30%, a reduction of CapEx and exploration spending compared to previous plans and improved operational efficiency, building on the achievements we have made during last year. And finally, we are reiterating our commitment to provide competitive capital distribution to our shareholders. The proposed dividend for the fourth quarter is unchanged from the previous 3 quarters of NOK 1.80 per share, implying a full year dividend of NOK 7.20 per share. And our commitment to total shareholders remains firm. The intention is to maintain a flat level for the first 3 quarters of 2015. Let me expand on our approach to long-term value creation. And basically, this is about being prepared to handle volatility. And that is why we initiated a comprehensive measures to improve our competitiveness approximately 2 years back. Since then, portfolio optimization reduced CapEx and increased operational efficiency, have strengthened Statoil's financial robustness. Furthermore, we are seizing the opportunity of the current downturn to strengthen our competitiveness even further through the measures we have taken. And by stepping up our efficiency program, we will navigate through a low-priced environment while making us even more fit for future opportunities and value creation. And finally, we are prepared for long-term value creation by maintaining an uncompromising focus on safe and efficient operations, increasing the robustness of our individual projects ahead of us and the portfolio, and continuing to invest in highly profitable projects like Johan Sverdrup. Earlier today, I presented our quarterly and full year results. And I will leave it to Torgrim to go into more details on this, but let me briefly comment on a few highlights. Our HSE results continue to improve, following a trend that we have seen for quite a few years now. Production is up 4% year-on-year. The adjusted earnings were NOK 136 billion which is solid, reflecting the current market environment. Our CapEx level was in line with our guiding, and our net ratio at year end was at 20%. Finally, important for the longer term, the organic reserve replacement rate was at almost 100%. And we also continue to deliver strong performance on exploration. So in sum, we have delivered on our guiding and I would characterize 2014 as a year of a strong underlying performance. However, we see some challenges in our international portfolio. The fourth quarter results is negative, and we forcefully address the profitability within this area, in particular, related to the U.S. onshore business. For the year as a whole, our international business segment delivered earnings, adjusted earnings, of almost NOK 14 billion, and the cash flow from operations from our offshore International business was actually in line with the same cash flow that we see from the Norwegian continental shelf. To manage a business through good times and bad times, we need a consistent financial framework, defining our room to maneuver. And for me, there are 4 cornerstones in this framework. Future-value creation is depending on our capacity to invest in profitable projects. The commitment to our shareholders is essential, offering a competitive direct return through the cycle. We also need to secure a positive net cash flow over time. And today, we demonstrate our capacity to do that within a wide range of oil price scenarios. And finally, we need to safeguard our financial resilience, and we will maintain a debt ratio below 30% even in USD 60 oil price scenario. Our efficiency program is progressing well. So far, it has resulted in a wide range of improvements, realizing gains of approximately USD 600 million. We have reduced modification spending quite significantly. We have improved our offshore well delivery time. We are making similar type of progress in relation to our U.S. onshore business on drilling and completions. And we are running the company with approximately 8% lower workforce today than we did 1 year ago. Today, we announced a step-up in our improvement program, increasing the target from USD 1.3 billion to USD 1.7 billion by 2016. These improvements are not including last year's achievements on production efficiency. This is not a program of simple cost cutting. We are targeting the underlying efficiency challenges of our industry. We simplify, we standardize, and we work smarter together. Margareth will address more details on this in her presentation. The team's operating facilities have reduced Statoil's unplanned losses last year by an impressive 5 percentage points, and that is compared to the year before. That equals 50,000 barrels for every day of the year on average. And I can assure you that is highly profitable barrels as well. And as a result of these efforts and new production coming onstream, we expect to increase production by around 2% towards 2016 and 3% from 2016 to 2018. Given the challenging environment for our upstream business, it is worth reflecting on the opportunities within marketing and trading. And this comment has nothing to do with the fact that, that was my previous job. In North America, we have secured access to transport capacity to reach premium markets. In Europe, our resources have access to flexible infrastructure, including production flexibility from upstream, peers like [indiscernible]. And this gives us an opportunity to really reach premium markets at any point in time. In recent years, we have significantly and seen significant changes in the European gas markets and Statoil has in fact been a front-runner in this transformation from oil indexation to gas market pricing. The timing of the renegotiations were good, especially in 2012 and '13. We saw very good prices for gas in Europe. So in sum, this has taken down our oil price exposure. And in fact, also hedging of somewhat in the current low oil price environment. We have a strong portfolio of projects in execution, and we will continue to invest in high-quality projects. Soon, we will submit a PDO for Johan Sverdrup, a truly world-class project by any means to the Norwegian authorities. And even in the current environment, this is a highly profitable project. It is among the 5 largest projects on the Norwegian continental shelf ever, and Statoil is operator with 40% ownership. At plateau, it will produce more than 25% of the Norwegian combined oil and gas production. And once in production, Johan Sverdrup will continue to produce for 50 years. It will outlive, in fact, many of us, at least some of us, so to say, to be a little bit on the cautious side here. The project is very profitable with a breakeven price below USD 40 per barrel. And it will be a true pleasure, and I will do that personally to hand over the PDO to the Norwegian government and their minister. In recent years, we have achieved industry-leading exploration results. And also in 2014, we were among the leading performers. Last year, we deepened our positions in Norway, in the U.K., in Brazil as well as Gulf of Mexico. And we strengthened our portfolio with new acreage in Algeria, Australia, Columbia, New Zealand, and in fact, Myanmar as well. Our ambition is to remain a leading global exploration company. And Statoil will therefore sustain our exploration efforts, although at a somewhat lower level. This year, we plan to spend around USD 3.2 billion on exploration. The oil and gas industry will gradually face stricter regulations related to climate change and our business. In Statoil, we see 3 dominating industry challenges that we need to respond to and for simplicity, we refer to this as the 3 Cs. And the first one should be well known to you. That is competitiveness, and you'll hear a lot of it today about sort of how we are addressing that extensively. Secondly, we must be part of the solution, in fact, to maybe the most pressing challenge of our times. The world needs more energy, while at the same time, tackling the climate challenge. Statoil is already an industry leader in terms of carbon efficient oil and gas production. And we intend to keep it that way. And thirdly, a trusted company must be in sync with society, local societies and the general public at large. And we truly believe that our strong track record in this area creates a competitive advantage both in the short term, but increasingly so in the longer term. So our industry must undergo a lot of change. Statoil has the competency, the capacity and the leadership capabilities necessary to actually meet whatever challenges that lies ahead of us. And I know this company pretty well. So with this in mind, I would like to leave you with a few key takeaways. First of all, our priorities remain unchanged. We will deliver high-value growth. We will continue to improve the efficiency of our operations, and we remain firmly committed to providing competitive returns to our shareholders, Statoil returns. Secondly, Statoil is well-prepared to address the current market environment. We started to prepare long before the current or the recent fall in oil price, and we are on track. And Margareth will even say, ahead of -- no, the track with our improvement program. Thirdly, we are seizing the opportunity in the current downturn by stepping-up our improvement program, further optimizing CapEx and exploration spending and by managing the substantial flexibility in our portfolio cautiously. And finally, we continue to invest for the future. We have a strong project portfolio that will ensure long-term value creation. And once again, the best illustration of this is, in fact, the Johan Sverdrup project, highly profitable and truly world-class project. So thank you for your attention, and then I will leave it to Torgrim.

Thank you, Eldar, and good afternoon, everyone. This morning, we announced our fourth quarter and 2014 results. And I'm sure that you have already looked at the numbers, so I will go briefly through the highlights and then I will spend time on our priorities. As Eldar said, the uncertainty is large. But we are well prepared, and we are well-positioned to capitalize on all price scenarios. Using our massive CapEx flexibility and improving oil projects, stepping up further on our efficiency and then maintaining robust financials. But first, let me take you through the results. In 2014, we delivered strong results. We maintained stable underlying cost. However, earnings were impacted by prices and by impairments. We produced more than 1.9 million barrels per day, and this is well above the guiding. Start-ups and ramp-ups contributed as did strong regularity. Our organic CapEx was $19.6 billion. That was in line with our guiding, and lower reserve replacement was solid, 95%, 96% organic. And our 3-year average is now 117%. Exploration added 550 -- 540 million barrels from the drill bits. And our projects are on cost, and they are on schedule like in Gudrun and the Valemon platform. And we announced divestments of $4.3 billion in proceeds in a higher price environment, and this has given gains of $2.6 billion. And finally, our dividend policy is firm, and we propose a dividend of NOK 1.80 per share in the fourth quarter. And this means NOK 7.20 for the full year. And this is our step-up from NOK 7 in 2013. In 2014, the adjusted earnings were NOK 136 billion. It is down from last year mainly due to lower prices. Adjusted earnings also fell in the quarter to NOK 26.9 billion due to operations resulting in high production, but lower prices in tax reversal by NOK 15 billion, and we took a large exploration charges in our international segment. The large currency movement had significant negative impact on DD&A and on operational costs. Then we make adjustments to reflect the underlying performance. Our net operating income was negatively impacted by impairments related to our international operations and various exploration assets, giving net accounting charges of NOK 18 billion. So after tax, adjusted earnings were NOK 4.3 billion in the quarter. You will notice that we had an effective tax rate of 84%. And this is due to the exploration charges with limited tax offsets. There is no change to our long-term tax guidance of around 70%. But please remember that with the lower prices, the tax rate tends to increase. Due to prices and impairments, the reported IFRS net income was negative with NOK 9 billion. We had strong operations in Norway in the quarter. High production with stable operating and low-planned losses and ramping up production from Gudrun from Svalin and from Fram. Adjusted for divestments and redetermination, we delivered a 3% underlying growth on the NCS for the full year 2014. But also here, the earnings are down due to lower prices. I'm pleased that the Johan Sverdrup partnership want Statoil as the operator for all phases. And it's a great -- and this is a great project under all scenarios. And we look very much forward to sending in the PDO shortly. I'm not satisfied by the production quarterly results outside Norway. Earnings in this segment are negative 3.8 billion, and that's mainly due to lower prices and high exploration expenses. We saw a quarterly loss in U.S. onshore, and we do address this very forcefully. For the year, as a whole, the onshore, including the midstream profits, provided a fair return. And we continue to see good returns from international offshore. So in 2014, our business outside Norway delivered NOK 13.9 billion in earnings and cash flow per barrel is on par with the NCS. We delivered high production, ramping up in Angola and in the U.S. And this was partly offset by the farm down in Shah Deniz. You will see that we have a large negative tax rate in this segment in the quarter. We made good money in high tax countries, but took significant exploration charges in areas with no tax shield. This impact, the tax rate for the quarter are also at the corporate level. Finally, MPR delivers another good result and in a challenging market. Strong performance in European gas and in LNG improved the results from the refineries and stable results from our gas value chains, including in the U.S. We produced more than 2.1 million barrels per day in the quarter. That is up 8% from the same period last year. Start-ups and ramp-ups, higher regularity and higher NCS gas offtake has been key. Decline, as expected, and divestments partly offset the increase. For the year as a whole, production were 1.93 million barrels per day, and this is a growth of 4%, which is actually twice as much as we guided at. And this growth is despite differing around 30,000 barrels of gas to future years. Our cash flow from operating activities was NOK 209 billion, slightly lower than in 2013 mainly due to lower prices. And please do note that in 2014, we pay dividends for both 2013 and the first 2 quarters of 2014. And then we invested $19.6 billion in organic CapEx. The net debt ratio by year end is 20%, also in line with our guiding. And you will remember that we expected to increase our gearing in 2014. You should also note that the stronger dollar has increased our net debt ratio by around 2 to 3 percentage points. And furthermore, the impairments have also increased the reporting gearing level. Our reserve replacement is a result of great work by our people, solid IOR deliveries, new fields onstream and continued drilling in U.S. onshore. In total, our resource base is flat at 22 billion barrels. And this is despite significant divestments during the year. So then, let me move over to the Capital Markets update. So we are on track to deliver on the promises. We are stepping up and then we take forceful actions in uncertain times. We continue to invest in high-quality assets like Johan Sverdrup, and we will grow production by 2% per year to 2016 and then 3% until 2018. We would use our CapEx by a further $2 billion in 2015. And we are prepared to use our material flexibility. Free cash flow will cover dividends in 2018 at $60 per barrel; in 2017 at $80 per barrel; and in 2016 at $100 per barrel. Second, we increased efficiency across our business. We will deliver $5 billion in pretax cash improvements. And this includes a step-up of our efficiency program by another 30% and improved operational efficiency by 5 percentage points. And by this, we will reduce cash neutrality by around $30 per barrel. Third, our commitment to shareholder returns is very strong, and our dividend policy remains firm. And finally, we intend to stay below a 30% gearing across a broad set of price scenarios. Flexibility is gold. And as operators of most of our projects, we have a lot of it. We will sanction Johan Sverdrup this year then the next wave of possible decisions are in 2016. So there is 1 year until we must decide. More than 1/3 of our CapEx is uncommitted in 2017 and 2018, so we are in the driving seat. Our job is to make our projects as profitable as possible. There can be significant values in postponing projects in the current environment, optimizing development solutions further and taking advantage of a falling supplier market. This is value over volume at work. And we are prepared to use that flexibility. In 2004, our organic CapEx was around $20 billion. 2015, we have reduced to $18 billion; and in 2015, we are actually stepping up our investments and their -- in projects under execution, stepping up by 10%. But we are reducing investments in U.S. onshore and modification significantly. So we are investing in our sanction projects which will come into production in the next years. And this will give attractive production growth all the way up to 2018. My job is not to get guess the oil price, but make us prepared for all outcomes and take advantage of that situation. We will generate strong cash flows across a wide range of price scenarios. And today, I share with you our plans at $60 and $80 and $100 oil. We have a robust underlying growth in cash flow in all scenarios. And we will use different level of flexibility in the different scenarios. And our aim is to balance cash in and cash out. And we are prepared to use our flexibility to achieve this. And please note that we also have that flexibility to increase activity. Finally, let me point out that these scenarios do not include potential divestment proceeds. Our growing cash flow and our CapEx flexibility makes us stay within a gearing of 15% to 30% in all scenarios. Even while investing in projects like Johan Sverdrup, growing our productions and delivering on our dividend policy. And I have said many times that our strong balance sheet is absolute. This is no less important today. We have about $19 billion in cash, and our objective is to maintain an A rating on a stand-alone basis as we come from a position of financial strength. You know the dividend policy well. It is to grow our dividend in line with long-term underlying earnings. I said last year that we expect to use share buybacks more actively going forward. It is probably no surprise that we will not use this in the current environment. We are putting in place changes worth $5 billion in cash. So let me break this down in detail. A year ago, we announced an improvement program giving annual savings of $1.3 billion in 2015. We are on track. Today, we are stepping up to $1.7 billion. Further, we adjust the activity level and the investment program giving $2.2 billion in reduced CapEx and exploration. And finally, systematic work on operational quality is paying off. 5% improvements give $1.1 billion in extra cash flow pretax, a great job done by our people and suppliers. In sum, this is $5 billion, and this means $30 per barrel in reduced cash neutrality. This makes us even stronger. We started early. At $100 oil, our forceful program is in place with quality and position. We are not rushing to simple cost cuts, but we are addressing the fundamentals. And we already see bottom line effects. We have reduced our corporate support and staff functions by around 30%. This has led to reduced costs of NOK 3.7 billion. I'm proud of the engagement and momentum I see around our improvement agenda. We make the right choices when we can, not waiting until we have to. And every dollar counts. And I have said that I will report on our improvements annually. In 2014, we delivered $600 million, and Margareth will come back to this in her presentation. Ongoing developments will grow production by around 2% per year until 2016, and this is from our rebased production in 2014 when we address for divestments. Many projects start up this year. Valemon, Julia, Edvard Grieg and fast-track #10 in Norway, Big Foot in the Gulf of Mexico, Corrib offshore island; and then Gudrun, CLOV in Angola and Jack/St. Malo will ramp up. Then growth will be 3 percentage points per year from 2016 to '18. Aasta Hansteen and Mariner will come onstream, and then Johan Sverdrup will come in late 2019. We manage for the client well, and it is stable around 5%. For 2015, we will reduce plant maintenance. Full year maintenance is expected at 45,000 barrels per day, and 10,000 barrels per day should be expected in the first quarter. This is types of opportunities when we step up improvements and flexibility is gold. I see our project economics are getting better, so postponing projects can be good business. We will deal forcefully with all price scenarios, securing free cash flow to cover dividends. And we have a robust financial framework with low gearing. So in short, we started earlier, and we are well positioned to create value and become an even stronger company. Now we are stepping up further on our commitments. So thank you very much for your attention. And then I leave, we leave the word to you, Margareth, the best oil woman in the world, to share your reflections. So thank you. Margareth Øvrum: There are a lot of glasses there. Thank you very much, Torgrim. I just wonder what did you say? Did you say leave the word to Margareth or leave the work to Margareth? And it's good to see you all. You have heard very clear messages from Eldar and Torgrim today. Our good-looking, white-collar workers, and that goes for you, too, Peter. Now let us get to the real stuff, the steel, the nuts and bolts and the drill bits. Good story today, good news. Our efficiency program is ahead of last year's target, and we are stepping up. I know this is a bold statement in the current industry context. My presentation today is all about us delivering. First, on projects and well execution. We are performing well and we continue -- we will continue to do so. Secondly, this -- we see strong progress on our efficiency agenda. We are ahead of expectations toward CapEx and OpEx savings, and we see substantial production efficiency effects and larger than anticipated. Thirdly, full delivery allows us to step up our efficiency program, and we are increasing the target by 30%. Today, I will give you some more granularity in our progress and how we seize the opportunities going forward. We continue to deliver projects and wells on costs on or below costs. This in a time when industry sees big cost overruns and delays. Since last Capital Markets Day, we have delivered both the Gudrun and the Valemon platform on time and on cost. And delivering such large and complex platforms like this proves to me our solid project execution. Agency performance is a fundamental part of a strong and sustainable business. We maintained very solid agency results for our facility projects with a serious incident frequency of 0.4. In a time, we'd have very high activity level and growth in our global delivery model. We in drilling and well, we have delivered a serious incident frequency of 0.6, significantly improved the last year's. And with no serious well control incident in almost 5 years, which is the most important measure. In short, we continue, as promised, on cost, on time, competitiveness. And the November 2014 results from the independent project analysis, which is IPA, demonstrates that we are competitive and improving compared to industry benchmarks. Both on facilities and on well competitiveness, we are better than industry average. So how is that reflected in our efforts to improve efficiency? Last year, we committed to end an OpEx and CapEx savings of USD 1.3 billion in 2016. And we also committed to specific improvements within identified areas, as you can see on the slide. I will refer to each of these in the following slides. And 1 year on, we are ahead of expectations. Total efficiency realization for CapEx and OpEx in 2014 was USD 600 million. In addition, improved efficiencies on the production side contributed to USD 1.1 billion in pretax cash flow. In fact, our progress gives us confidence to increase the efficiency targets by 30%. This means a new target of USD 1.2 billion in CapEx and USD 0.5 billion in OpEx in 2016 and onwards. And more specifically, we reduced the U.S. onshore cost curve vow by 30%. We increased the target on modification savings from 20% to 30%. We reduced the field cost on Norwegian continental shelf by 20%, and we are targeting sustainable efficiency improvement across the portfolio. In the current price environment, this is obviously imperative. But I would say it as important in good times as in bad times. Anyone in this industry can easily catch activity. But here, I strongly believe we differentiate from our peers. We are delivering real efficiency, real efficiency improvements now. And we are on track towards new, ambitious targets for 2016 and onwards. Next, I promise you drill bits, so let's talk about drill bits. In 2014, we increased meters drilled per day for our offshore wells by 21%, which contributed to 16% reduced time per well, a huge improvement in such a short time. We achieved it by lean designs, standardized wells, setting targets by the perfect well approach and increased operational efficiencies, together with our suppliers. And let me give you a few examples. The true latest Gudrun production wells were delivered 25% faster and 40% reduced cost. At Statoil, where we have world-class well delivery, we are 20% ahead of plan in 2014 on average. All our exploration wells globally delivered on average 20% ahead of plan last year. For implementation of U.S. onshore, where we target now a 30% reduction in cost per barrel. And last year, we delivered barrels 16% cheaper than in 2013. And there is more to come. I am confident we can further increase efficiency effects for 2015 and 2016. Statoil has -- as Eldar and Torgrim said, we have a very flexible project portfolio, and that completes for funding. And we have a target to reduce facility CapEx for non-sanctioned projects with at least 10%. These savings will materialize as projects enter execution. We are reducing CapEx in several high-impact projects by more standardization, lean concepts and cost-effective solutions. And let me give you a few details or few examples. On Johan Sverdrup, we have reduced drilling, estimated drilling costs by USD 1.2 billion by improving drilling efficiency, well placement and simplifying wells. And we will continue working on efficiency development solution, and I believe standardization will be a key both for subsea as well as for the top side. In sum, Johan Sverdrup, Phase I will be approved with a breakeven below USD 40 per barrel, a true industry adventure. And you know -- even for an unexperienced, and perhaps, old woman like me, I feel like a child opening a big birthday present when I'm looking at into the Johan Sverdrup project. The Gullfaks Rimfaksdalen is a very robust project with a breakeven below USD 40, and it was sanctioned just prior to Christmas. CapEx has been reduced from USD 1.5 billion to USD 0.8 billion by lean scoping less modification on the Gullfaks A platform as well as using existing infrastructure. For Johan Castberg, we have reduced the CapEx estimate by about USD 2.5 billion by reducing the number of wells, simplifying the subsea infrastructure and the floating production unit. Then be sure it's to reduce another USD 2.8 billion to USD 1.7 billion. For the Oseberg Future, some of you might remember my [indiscernible] from last Capital Markets Day, which is then a manned platform, with a manned well platform with minimum top-side equipment. And here it is, technically qualified and selected as a very cost-effective alternative to subsea development on Oseberg Future, now also being evaluated in 4 other, or 4 or 5 other development projects. Now to the modifications. We have reworked a trend of increased modification costs in another operated field. We have done this by stricter prioritization on modifications, lean scoping and increased productivity by working closely with our MMO suppliers. This, whilst maintaining and closely monitoring technical conditions of our facilities. Of course, [indiscernible] uptime and regularity are imperative to sustain and improve. One of the many good examples is Troll A, the oil and gas upgrade reduced or with the cost is down more than 40% by reducing scope and a leaner execution model. Now we are increasing our cost-reduction target from 20% to 30% on modifications. Let's also look at the field cost improvements on NCS. To the left, Statoil has one of the lowest unit production costs per barrel in the industry. The main operational OpEx element we can influence is the field cost. This is operational cost for rending facilities. And last year, we reduced NCS field costs by 6%, and we target a 20% reduction in 2016. As a former platform manager, I know these are really just the numbers, but we cannot aim for anything less. We have reduced field costs by capital prioritizations, sticking more to plan; more preventive and less corrective maintenance. And we have also reduced staff numbers, in particular, the external resources, which is down with 13%. And I'm proud to say HSE has never been better on the Norwegian continental shelf. And now it's a jewel in the crown. Our success in improving the production efficiency. Production efficiency is at record levels even with an all-time high number of turnarounds. This provides us, in a sense, variable barrels with a cash flow effect as already mentioned of USD 1.1 billion. And planned losses have been reduced by 5 percentage points compared to 2013, and that is just for, it's both for NCS as well as for Peregrino. And 7 percentage points compared to 2012 on the Norwegian continental shelf. And I must admit that I never thought we could accomplish these results so far. To achieve these, I make the results sustainable. It is all about leadership, setting tough targets, competent people and increasing technical robustness of our plants. A few examples. On Snøhvit and Grane, our technical people and operational people has sit together and increased robustness of our own rotating machinery. We have hold rights to issues. We utilize new nonintrusive inspection technologies to reduce inspection time during turnarounds. And during 2014, we implemented a successful production efficiency pilot at the Oseberg Field Center, building of experience from producing -- from production optimization group. By connecting operational people and technical people and developing best practices, we achieved more than 4% increase at Oseberg production compared to forecast. And we will now roll out the Oseberg field pilots' methodology for all the other offshore assets. How will we seize the opportunities going forward? The main building block for future competitiveness is more standardization, it's about targeted technology development. It is about capitalizing on the market opportunities, and it's also about our operational excellence. And my standardization stairway to heaven from the last year has been brought to life step-by-step, but more standardization is needed. Now we target standardization across the subsea industry while the subsea plug-and-play initiative we are working on standardized model scientists and open interfaces to achieve the plug-and-play functionality. Standardization is not alone sufficient. More targeted technology development is essential. Technology for cost efficiency and value creation implemented broadly is really what we are chasing. For example, plug and advancement improvements, more than 1,000 wells will be abandoned on the NCS in the coming 25 years. We think we can reduce the cost by 50% and like new technology will be a key contributor. Then we will further capitalize on market opportunities. I will do it in 3 ways: It's about joint efficiency improvement programs and KPIs with our suppliers, which I think is the most important; then it's about new contract models, more alignments, et cetera, et cetera; and the third, we will selectively renegotiate and re-tender. As we see in recent tenders, we have reduced costs by up to 30%. Fundamental is also our -- what -- is also to continue to improve operational excellence. This is pretty much what I've been talking about today. For example, the drilling and the production efficiency, leadership and rightsizing on organization as an integrated part of this. Within my business area which is technology, projects, procurement and drilling and well, we have seen a huge increase in activities the last years, particular within the projects area. Still we have reduced the staff by 10% from January 2014 by working smarter and more efficient. For example, management costs in our project is down from 10% to 7%. In total, I know we can achieve more efficiency gains in the years to come. Summing up, we deliver project on our promises and we will continue to do that. We are making strong progress on our efficiency program and we step up. And we are on track to deliver on the increased targets and the commitments. In short, we seize the opportunities. I've been in the industry for more than 33 years. And it has never been more challenging, but also never been more inspiring and energizing. To check for targets [indiscernible] and as much as I enjoy being here, I actually can't wait to get back to the team and continue the efforts. I suggest we make it an efficient Q&A, and thank you.

Thank you, Margareth. While we're just moving these onto the stage, and first of all, Eldar, Torgrim, Margareth, thank you for 3 on-time delivery. That leaves us with a little bit more time for Q&A, in which I think is important. Ladies and gentlemen, we will now open for questions. We do have microphones. And can I ask that when you're given the opportunity to ask a question, you use that microphone and you introduce yourself so that people who are following us on line on the Internet can see what the, can hear what the question is and who is answering it. We have a lot of people in the audience today and a lot of people on the phone. So I'm afraid, I'm going to be fairly wicked in terms of polling for questions. And I'm going to ask just for 1 each and 1 which is not broken into 2, 3 or 4 subparts. I know the trick, I've been on the other side of the table. So if I could ask Eldar and Torgrim and Margareth to come on. And we'll start to take the questions, okay?

Okay, now I start in the front of the room. Jon? Jon Rigby.

So I'll -- I guess, discipline has to be -- would have been a slip into the 2s and 3s but that would have gotten half an hour later, so can I just go -- it's evident, actually, one area that wasn't discussed very much, which is exploration other than to say that sort of reiteration of the fairly large budget. Can you talk a little bit about given, I guess, the way that accounting works, you take the cost but not the benefit, have you gotten any metrics or measures about how much value your exploration has contributed across the cycle so we can make some sort of judgment about that? Because clearly, the cost is scarring the historical cost accounts right now, but obviously, the value of some of the things you discovered over the last 3 or 4 years are not yet appearing on your sort of accounting valuation. Eldar Sætre: So I think it should be recognized that we have added quite substantial volume of barrels to our resources through exploration over the last few years, and I think you see an evidence of that in the list of projects that was on -- shown by Torgrim. And I guess, the most profound evidence is through the Johan Sverdrup project. So I think this is translating into concrete projects, and that's the time where you actually see the true value of the barrels being demonstrated in the exploration phase. This is about finding the hydrocarbons and then you start working on it and see how you can develop these into valuable resources. Internally, obviously, we have value estimates, but it's a difficult technology to discuss that externally. So this is really what have we translated into concrete projects, and I think they're demonstrated over this year that we have added value barrels, for instance, over Norwegian continental shelf next to the Ghana field, high value, which will be -- still a prospect for Edvard Grieg going forward, and it's highly valuable as such. We have added barrels on -- in Tanzania during this year as well. That's the project that we're working extensively on, and it's progressing. And we're working on the cost side on that project, which was illustrated and mentioned also by Margareth in her presentation.

Can I come back to you as we get one agent, and then we'll -- now Jon, go. One more.

Are you able to just give us an estimate on what you think your return on investment across the cycle is on the exploration budget? Eldar Sætre: Now the return is actually -- will turn out as we are developing this into project. So defining that, at the portfolio level is -- remains to be seen as we see the outcome of the exploration result. But as we indicated today, maybe the most significant project that we have discovered lately, the Johan Sverdrup project with a profitability below USD 40 per barrel. But at the portfolio level, we haven't any information on that to present to you today.

Anish?

It's Anish Kapadia with Tudor, Pickering. I had a question on the U.S. business and this current environment. If you're kind of thinking of a $50 to $60 a barrel world, can just run through the number of rigs you'd expect to run in U.S. this year and kind of production expectations for each play? And also, the potential for any monetization, say, infrastructure, your pipeline assets that you've got in the U.S. related to those assets? Eldar Sætre: I'll leave that to Torgrim, actually.

Okay. Thank you, Anish. We have taken on the activity significantly in the U.S. offshore over the last few years. We see good value in waiting with some of the drilling currently. So we currently -- at year-end, we ran with 6 rigs in Bakken, 5 in Eagle Ford and also 6 in Eagle Ford. And then we have reduced further this year, so it's finding the right balance and the right activity level. What we also see is that our costs related to drilling and completion are coming significantly down, and then it's extremely important to be able to take care of the hydrocarbons, and in particularly, environments like this when it comes to infrastructure and so on. So it works, but of course, it is impacted by the current price environment. For the year as a whole, the value chain in unconventional is generating a return.

Haythem, in the middle?

I'm Haythem Rashed with Morgan Stanley. My question is just regarding the comments around the dividend and some of the priorities you outlined earlier. Perhaps a question [indiscernible]. Essentially, you've talked about the dividend as staying flat for the -- or intending to keep flat for the next 3 quarters. You also talked about a net debt to capital target or a ceiling of 30%. Just wanted to get your sense on sort of as we look beyond and if we do stay in periods of weak oil prices, how do you prioritize the 2? I mean, is there a situation where you find yourselves maxing out on your flexibility and also meeting your sort of high gearing and then having to reconsider the policy around the dividend? Or perhaps, just a bit around, that'd will be great. Eldar Sætre: We are highly committed to our dividend policy. It's essential to us that we're able to deliver competitive return in line with that policy. We have demonstrated that today, and we have also shown you the financial framework, where we will be able to do that also going forward in a wide range of scenarios from USD 60 to, obviously, USD 100 per barrel. The CapEx flexibility -- we have enough portfolio. It's a part of this, ready to expecting various types of price scenarios. And what we should remember then is that in -- if these price scenarios actually pay out, it will be a situation where it makes a lot of sense to delay the projects because they're simply not profitable in the current environment to be sanctioned. So fundamentally, this is a very consistent approach what will happen in those kind of dynamics, and it gives us very strong confidence that we will be able to honor and present the competitive dividend through the cycle in whatever type of commodity environment that we will see all the way from USD 60 to USD 100.

Okay. Can you take one more from the Lydia from the floor here? Then I'm going to switch over to the phones for another couple or 2 or 3, and then we'll be coming back here. Lydia?

It's Lydia Rainforth from Barclays. On -- in terms of the flexibility that you provided in the presentation, and that was unusually helpful. It seems that Statoil was doing all of the work. How much help do you actually expect from external [indiscernible] to the external cost inflation as well? And I apologize for the [indiscernible], the second part of that question is what was the most difficult part you're finding within the efficiency program right now? Eldar Sætre: I'll give you to Margareth. Margareth Øvrum: [indiscernible] so now without the attack then the market side, I think the most important is working together with the suppliers on the improvement projects, and we are working very closely now with our main suppliers, and I think that is mainly 8% of it. But of course, in these circumstances, we are also discussing and renegotiate and retender. And of course, as I said also in my speech today that we see decreases in the prices. So you have to use the -- you have the utilize the different dimensions you have, the opportunities to do. And of course, improvement is the most sustainable. And in a negotiation, you just -- normally, you need to give something and you get something. And if you -- somebody I hear from our peers, they are giving an oil index price, and then you are back again. So I give views. We spend a lot of time to -- on the improvement side because that is lasting improvements going forward. And it's not that easy to give duration or more on the balance in these circumstances either. So I think I -- I think the best is really to work on the improvement side because there is a lot to take out on efficiency gain.

What I'd like to do now is to open up to a couple of questions from the phone. So operator, I know you polled the questions already, but if you could do that one and take the first question over the phone, please?

Our first question today comes from Teodor Nilsen from Swedbank.

One question. It's related to the CapEx guidance for 2015. Could you give us some more details on the reduction from the 2014 level or the $20 billion? What is price effect? Or what is activity effect and what is the effect from divestments you did in 2014? Eldar Sætre: All right. Okay. Thank you, Teodor. So CapEx is on to $2 billion. From 2014, we are actually stepping up on strengthening projects by 10%, and we will invest in Johan Sverdrup, so that will be an important explanation of that. Then we are reducing activity within U.S. onshore. A few years back, we invested around $4 billion a year in that business. Now it is significantly below the half of that. And then we are reducing our investments into modification and projects under execution, so those are the main elements of it. It's -- in the constant currency impact, there is a light effect of currency impact there as well.

Our next question will come from Anne Gjøen with Handelsbanken. Anne Gjøen: Is it possible to indicate the share of oil linked contract from Norway and it's usually a gradual impact of lower oil price in such contracts with a 6- to 9- month lag? And is there a downside for floor price on those oil linked contracts? Eldar Sætre: Okay. I guess this is for me. Referred to my previous occupation. So we have now been through the process where we have come a long way in performing these contracts, modernizing these contracts, to put it that way. It's a job we should not -- Western part of Europe have been 100% complete. That's come a long way in Southern Europe and less so, as we move East. But obviously, our main markets is in the North and North Western part of Europe and partly, in the Southern part of Europe. So this has come a long way. In terms of exact percentages, I will not be very precise, but by far, much more than 75% of our portfolio is actually now linked to gas market pricing. And we expect the trend towards oil market pricing to continue, but it will -- might take some time until we are finally there. But I think this is a very good development, and I'm also very pleased that the EU -- the internal market report is really enhancing this as we move forward. The structure of the oil indexation is basically depending on each individual contract and you have the delay that you indicated, but beyond that, I cannot comment on more specifics on the contract really that we really have to look at the each individual contract.

One more from the phone, and then we'll come back to the room.

Our next question from the phone lines comes from John Olaisen with ABG.

You have -- you said that you have an ambition or plan to be covering dividend with free cash flow from -- in 2018 at an oil price of $60. How would that -- if that happens, oil price is $60 in 2018 and you cut CapEx so much that you're able to cover dividend at $60 in '18. How would that impact your more long-term ambition? And your long-term ambition has been stated at every Capital Markets Day or capital update or whatever we call this day over last few years to have been about 2.5 million barrels. So if that $60 price, would that still be the ambition to do 2.5 million or -- and 2.5 million, is that still the right ambition at some point in time? Eldar Sætre: Okay. Thank you, John. So covering dividend in 2018 at $60, it's part of all the planning framework that we use. Even in that oil price scenario, there are actually quite a few very interesting investment opportunities. A lot of the IOR efforts are very solid, that we planned for, and we also planned for quite a few developments. But there is actually quite a long list of projects that will benefit strongly for simplifying and taking out cost and making them even more robust. So in such a scenario, quite a few projects that need to wait for a while. And you're right, lower investments over many years will impact the longer-term growth of the company. But we are very cautious to also take a long-term perspective into what we're doing. Exploration, Johan Sverdrup and then maturing the whole set of investment opportunities. I've been working with planning for many, many years, and I have actually never seen such a prudent plan of opportunities. What we have on the table is sufficient to grow for more than 10 years, so this is a question of how hard we push on the accelerator.

So may I just add that the strategy is also leaving us with more robust projects for the future, so it's in fact, very consistent with what we always have said now that value is more important than volume, and it will really drive value into our portfolio.

I'm going to swing back into the room, and we'll come back here later on for some more questions on the phone. I move into the center, a question from Biraj.

Biraj Borkhataria, RBC. Just looking at your step-up program, and it looks like an additional $200 million on the CapEx side and $200 million in the OpEx side. How does that additional come out on the OpEx side compared to your total adjustable cost base? And are you seeing any industry inflation/deflation in that figure?

All right. On the improvement, the step-up in improvement, it is, first and foremost, related to modification, as Margareth said, our onshore business and also, field costs in Norway and drilling on wells. So in the current cost environment, the step loss will be further cost impact than what sort of we assumed.

Pass it along, and then we'll come forward.

It's Mark Bloomfield from Deutsche Bank. Question for Torgrim, please. In your presentation on, I think, Page 11, there was a chart you're showing, the range of operating cash flow numbers, a number of different oil price assumptions. If I read the chart correctly, it looks like you're receiving around a 20% to 25% improvement in cash generation at a broadly constant oil price between '15, '16 through to '17, '18. Guidance seems to suggest that volumes will be 7% higher -- 6% to 7% higher over that time. So perhaps, you can give us a sense of what the other moving parts are just to try and bridge that gap, get us to the 20% to 25%.

All right. It is actually mainly linked to projects over the execution that will come onstream. In 2015, we have 6 projects: Valemon. We have Julia, Edvard Grieg. We have fast track on Big Foot and Corrib and then furthermore, in the period afterwards. Quite a few of the projects comes out of the Gulf of Mexico, where they are not in a taxpaying position. So there will be more cash flow with the low taxes, so that is the main contributor to that growth.

Michael?

Michael from Citi. A question on exploration actually. I was a bit surprised you -- given the comments on flexibility that the exploration budget wasn't lower. Is that a function of the fact that you've got contracted rigs that you can't layoff? Or is it a function of what committed -- what commitments you have on your acreage? And perhaps, if you can give a bit of color as to where you're spending that money in to the -- on your exploration, that will be helpful. Eldar Sætre: So the level is partly reflecting certain commitments that we have in our exploration program, but it's also reflecting that fact that we would like to continue with exploration. At a high level, we want to be an exploration company also in the future, and we want to be as successful in the future as we've been in the past. So it is important for us for the longer-term value creation to keep up a decent exploration level, but at the same time, a tightening compared to what we have seen in last year. And in terms of where to spend the money, it is wide range of opportunities that we will include in the drilling program this year. We will drill further wells in Gulf of Mexico. The East Coast of Canada is a very important focus area for us this year. So we have a rig, which is -- we'll drill continuously for more than a year in the East Coast of Canada. And Brazil is also one of the activity areas. Norway, obviously, King Lear and other -- or opportunities that's surrounding King Lear and also other opportunities in Norway, so it's a wide range of opportunities all over across the globe.

In addition, last year, we had quite a bit of carrier in the exploration program from other partners, so the drop in activity is actually quite a bit higher than what you will read out of the numbers. Eldar Sætre: Just to also mention [indiscernible] actually Tanzania. We will have more wells to drill in Tanzania and U.K., where we access some quite interesting exploration acreage. We think there is more to be done on the U.K. mature sector, and we have added acreage, and that is also something that we'll -- hopefully, we'll be able to start doing exploration on during the course of this year.

Brandon?

It's Brandon Warn from BMO Capital Markets. Just in the past, you've given us some performance sort of range of indicators for the MPRE business, and I wondered if you can make some comments in a $60-oil price environment. And just what sort of contribution to free cash flow do you see from this business in 2016, please? Eldar Sætre: So basically, this is the margin business, and the margin is something to see whether it's USD 60 or USD 100. It's very much about volatility and the structures of the curves. That sort of sets the basis for making money, so I don't see any reason why USD 60 should be worse place to be in terms of making money. Obviously, refining margins have their own dynamics but it's not a big part of our portfolio, so we have guided on a range around $3 billion in -- going forward. This has been a good quarter, but we also had quarters below that. And I think, still, we maintained that as a guiding, but I'm very happy to see that we actually have been able to deliver an average this year, which is above that level.

And we take one more from the floor and then we'll go back to the phones. Gordon?

Gordon Gray at HSBC. Just to follow-up to the question on cash flow growth -- on the outlook for cash flow growth and that big uplift you're pointing to like-for-like oil prices versus last year. I appreciate the issue about the new projects coming onstream in margin accretion. Can you just outline -- I think earlier, you mentioned that the P&L tax rate would stay flat at around 70% in the next few years. Is that the case through the plan period? And in particular, if it is, can we expect to see the cash tax rate coming down from that appreciably at all because of uplift allowances or tax shield, et cetera? Eldar Sætre: Okay. Thank you. It's also the rule of taxes, so you should expect around 70% corporate tax at the normal. And then it's important for me to say that in a low price environment, you typically see a slightly higher tax rate. The way that taxes react to oil prices is very different from place to place. And the Norwegian tax system is a system that we think works well in the high price environment and the low price environment. It is a net income or net cash OpEx, so the reduction in oil price is sort of -- the tax system is part of dealing with that, so that is part of the explanation of the cash flows going forward here. So what -- in addition, we'll see is that we pay Norwegian taxes with the 6 months delay. So as oil prices drops, there will be sort of a lag of 6 months before the cash taxes follows on.

We'll take 2 more questions from the phone. While I'm doing that, I'm very conscious that it's easy to fall into trap of having a very narrow vision and taking questions from over here. So while we got a couple of phones -- a couple of questions from the phone, people on this side of the room, if you can let me know and I can stop and direct my attention when we come back over here. So first question from the phones, please?

Our first question again from the phone line comes from Christian Yggeseth with Arctic Securities.

Just a question, I guess, to Torgrim. Could you please specify the level of CapEx you used for calculating the $60 free cash flow to cover dividends for 2018?

Okay. I can't give you the exact CapEx number, but it lends itself that we will use significant part of our flexibility in such an environment.

And our next question now from the phone comes from Jason Kenney with Santander.

I was just wondering in the fourth quarter period whether your gas business had any unusual support because of the Ukraine situation and if that was assuming it might unwind in time? Eldar Sætre: I don't see the Ukraine situation having any major impact on the -- during the quarter. The gas prices in Europe is impacted by several factors. One of them is the temperature, and that has been pretty mild so far. And obviously, LNG. They're coming into the market. And in Asia, we have seen an impact from oil indexation and lower prices, which has also have some impact on the trading market for LNG, and that has led to more LNG coming into the European sector. So that basically what has created there or defined the fourth quarter prices that we have faced, and I see no doubt it impact from, at least, not that I can identify, impact from the Ukrainian situation as such.

Come back into the room and at the back there. There we go. Thank you.

Aneek Haq from Exane BNP. Similar-ish to the question that was asked earlier on the balance sheet, but I wondered if we can bring it back to the single A credit rating and maybe talk about some of the metrics that the agencies will care about and how they look at your $60 to $80, $100 a barrel range, please. And how important, obviously, the single A rating is in that context? Eldar Sætre: Okay, so thank you. So currently, we have a AA- with Standard & Poor's and we have a notch higher with Moody's asset credit rating. There are different KPIs or metrics that are used. It depends from operations from net debt is a key one that we follow very closely, so the important for us is to remain with a strong credit rating and also to run with significant liquidity through carriers like this. So it is something, of course, we also follow very closely.

Just in front of me.

Marc Kofler from Jefferies. I just had a question going back to the free cash flow framework that you outlined in the key moving parts, particularly given, as you've referred to the volatility, the oil price environment that we see at the moment. I was wondering, does that present any opportunities in terms of the portfolio structure from an inorganic perspective, particularly in the context of your existing footprint in the U.S. and the markets over there? Eldar Sætre: We have been pretty clear all the way since 2011 that inorganic ways of developing our portfolio, sharpening it or expanding is a key part of our toolbox, and I hope I have -- didn't give any indication today that, that is not still the case. So we see that we need to use that actively, and we have demonstrated that extensively, not the least during 2014. We just also contributed significantly to our balance sheet. So in this current environment, it's an obligation we have as part of what is going on to look for both opportunities that could even be opportunities to divest. And that is something we'd like to do, but also, to look at opportunities to acquire assets or whatever, so that's something we are doing. It's a very natural normal part of our business development, and it will continue to be so. This will be sort of mistake if I didn't sort of follow that market also closely even in this -- also in this environment.

Just next to you.

It's Hamish Clegg from Bank of America Merill Lynch. Just 2 questions to go. This one's to Torgrim. Talking about liquidity, something you mentioned. Are my numbers -- and you may correct me. It looks like debt maturities this year are kind of matching undrawn credit facilities and cash when you factor in the cash burn, and I was wondering if there was a deliberate reason you guided us to 3 quarters of flat dividends as opposed to 4. Is that keeping open a degree of flexibility for you on the balance sheet?

Okay. All right. Okay. The liquidity [indiscernible]. So I mean, we will run with a significant liquidity position. It is important to us. On the dividend, the reason why we talked about 3 quarters -- and maybe this is a confusing for one. It is the mechanics because what we have done earlier is that we have amongst a new dividend level at the fourth quarter and we have kept it on the same level for 3 quarters and then we have taken a step-up in the fourth quarter again. So it is just mechanics that we know, say, NOK 1.80 per quarter, and the intention is to keep that flat as we have done earlier during the year. So there is no signal beyond the 3 quarters, although than that the dividend policy remains firm.

Okay, forward.

It's Rob West from Redburn. Margareth, just going through the operational improvement details you've taken us through. I think now faced with the mountainous task of going through all different metrics in trying to add them up and getting to your $5 billion. To help with that, I find kind of useful to consider doing that and just that overall uptime operator platforms across your portfolio, which is quite useful to kind of compare with, with other people. And was that in '13 well within '14? And where are you trying to take it to? And how much of that $5 billion total does that get you to? Margareth Øvrum: Normally, we don't reveal these figures on the total uptime. But with the unplanned losses last year, it's 5% lower than -- percentage points lower than the year before and 7% less than in 2013. Eldar Sætre: Okay, just add to that because the overall regularity is impacted by other factors and losses, so that has to do with maintenance cycles and so on. We don't do that every year, so and so, and value can impact and so and so. What is really measuring our performance and indicating our performance is on the unplanned losses, which is the biggest chunk of defining our regular.

Yes, that's why I said -- I was wondering kind of how much lower can you take it than 4%...

Well, then that's probably less -- approximately 5% left, right? Margareth Øvrum: But this is really improvement the last year. It's -- and we are working on a very broad basis so both to make the facilities more robust, but it's also the operational people driving efficiency from a day-to-day basis. So I think very helpful targets, solving all bottom mix, et cetera, so it's a very combined effort. Eldar Sætre: Can I just add? So even when the production platform co-producing, so there are no unplanned losses. It is also a thing that you can be -- and actually optimizing the wells and making sure that we get the maximum out of the production when the facility is actually produced. Margareth Øvrum: And for instance -- I can -- can I add? For instance, on the Oseberg field pilot, this is really to increase production as well as increasing the regularity. So right now, we are -- we will broadly implement that pilot for the whole company also.

Neill?

It's Neill Morton at Investec. Your question on the international upstream business, results have proven quite volatile, particularly, in the quarter-to-quarter basis. Just for modeling purposes, can you maybe give us some guidance on unit OpEx and unit depreciation for 2015, the latter obviously, in light of the big impairments in 2014?

All right. Okay. Thank you. First one, on DD&A [indiscernible] but we're seeing a growth in DD&A. It is actually significantly impacted by currency. So the increase in DD&A is -- 2/3 of it is related to currency impact, and actually increased production. Internationally, we see a DD&A per barrel in dollar term to be flat over the year, so that's an observation. When it comes to operational costs, we have a similar effect there. There is a 9% growth in operational costs year-on-year, half of it is related to currency. And then there is increased activity into that number, but that is actually contracted by lower SG&A costs and other costs elements. So over time, you should expect DD&A to -- per barrel to grow somewhat. It is natural that new developments are more capital-intensive than the old ones that are ongoing of Statoil.

Okay. I see the rigid discipline of one question per person has yielded some benefits. We still got a few minutes left. Is there anybody -- I'll try to get right in the way around the room and I'm just asking anybody that I've missed out? Or has a supplementary question at the front here.

Andrey Aleev, Crédit Suisse. I had a question on your M&A policies. So you choose to keep your exploration budget at a fairly high-level whereas we've seen that the value of this potentially just had a balance that's quite low. How do you think you're making these choices whether exploration is the best use of your capital versus potentially acquisitions in the various market? Eldar Sætre: Well, I don't accept your starting point that there's no value from our exploration. Look at what has happened to the Norwegian continental shelf over the last few years. It's a tremendous source of energy that have put into Norwegian continental shelf from new exploration and new barrels and field development, and we see the evidence of that. So this is -- obviously, I wouldn't do this unless we haven't seen value in what we're doing on exploration, so we are convinced that this is still at the core of what oil and gas industry is about, and it's something that we need to do. I've been through this experience before, and we cut exploration massively some years ago in the downturn. And we were hurt by that for years, so I think it is extremely poor that we tried to maintain a decent exploration level. In particular, as long as we have this strong feeling that we're a pretty good as well. So that, as to say, that this is not -- have to be supplemented, and we have seen that as well through inorganic measures. So again, we have demonstrated that, and it's a very important part of our toolbox. And obviously, gradually, we see that we fail yet still global exploration volume is coming down. So increasingly, difficult to stand out in this area, so it's important for us to have M&A also as a tool, part of the toolbox, into the future, and we are doing so.

Okay. Up here at the front? And then to Nitin.

Mehdi Ennebati, Société Générale. I will ask one question regarding the 2017, 2018 cash from operation on CapEx. So you show on Slide 11 that at $60 per barrel, you might have the flexibility on CapEx to be free cash flow at all plus dividend. But we're seeing that in 2017, 2018 by cutting, again, your CapEx, you might put a lot of pressure to your bargain mix with average percent ratio, which is already low compared to [indiscernible]. And do you want to take that risk? And maybe just one follow-up question on your cash from operations, 2017 to 2018, which natural gas price, particularly in Europe, do you take into account? Eldar Sætre: So obviously -- and we have discussed this a little bit on the previous question. If we don't sanction a project, you will see a bond forfeiture abound. But if we see USD 60 or USD 80 in 3 or 4 years from now, it would be a very different environment. Cost picture will look differently and a lot of the projects that -- is ahead of us. And remember, we don't have to make any additional decisions or anything significant beyond the Johan Sverdrup, so we have the flexibility throughout this year. But if we see that picture emerging, it will be a totally different situation and the fourth joint ventures or pay-offs in this will really have to address the cost picture vigorously. And I think the whole industry will come together and see that we have to improve our projects, and that's basically also what we're saying. We will do that to capture what we can gain into the project both from the supplier environment and also from the improvements that we are embarking on to put that into the project and reducing the breakeven prices, and through that, also, add value, so not only barrels to the equation. But obviously, over time, at one point, if we don't sort of invest in more projects, you will see an impact on the volumes and on the reserve replacement rate. Margareth Øvrum: And at the same time, I'm just wanting to add. We are working heavily on the very early phase project to improve them, getting better with the breakeven lower, and I think we are -- I tried to show you some of examples on my slide, how we have been working on project to get the cost down.

And if I may -- I mean, [indiscernible] yes, but the resources are still there for us, so it's a matter of timing of sanctioning and so on. And again, value is more important than being it is on as soon as we can.

Nitin?

Nitin Sharma from JPMorgan. And Torgrim, if you look at that $60 oil price scenario 2015, '18, how does your rookie stock up under that scenario? and how did it compare to your cost of capital, please?

Okay, so thank you. I think there's no secret that in the current price environment, return on capital employed will drop compared to previous years. It will -- with what we see in $60 plan or scenario is that gradually increases over the years, so when you get to 2018, '19, it is back on current levels but in a $60 environment.

I'm going to get one last question and after this, I'm going to get one last sweep for the -- and to anybody who asked an early question, frustrated with only getting one question. The first man who puts his hand the fastest gets the follow-up, so one more question after this.

Matt Lofting at Nomura. Question on impairments, if I could. Can you just clarify what pricing scenario and long-term oil price you used in the impairment testing process with full year results? And what the carrying value is for the U.S. onshore business? Eldar Sætre: Maybe I should take the CFO title -- you seem to be -- I would love to answer that. Not basically, the main part of the impairments here is related to oil price. Approximately 90% of the impairment is -- has to do with oil price, and I will not comment on the long-term perspective but what is -- what will really drive this is the short term. And from an accounting practice perspective, what we are doing is to use basically the forward curve as we look for the next few years. That is defining a set of assumptions that goes into our impairment calculations. And then you might like to add something?

I mean, the prices that we used is prices at the balance sheet date, end of year. So I just want to draw your attention to one of the notes, where we have made a sensitivity to what the lower price and all that, what sort of impact that will have on the accounts.

Okay. Great. One more from the phones and then and bid for the last remaining question on the floor. So from the phones, one last time.

And our final question from the phone lines comes from John Olaisen with ABG.

And Margareth, it's to you. You mentioned the cost reductions on Johan Castberg. Is it possible to say -- and it gives me an indication of the NPV breakeven oil price only on Castberg. And after the cost improvements, please? Margareth Øvrum: No, I don't think we will reveal the breakeven price on the Castberg. Of course, you know we are working on 2 different concepts, and we have decided to delay the concept selection and we are working and truly committed to reduce the cost even further. Eldar Sætre: This is a project that really deserves to become as good as it can get, so again, profitability is more important than timing.

One thing I'll say is that management will be around for some questions after we finish. I'm going to take the last question now. There you go.

One last question. This is Hamish Clegg from Bank of America again. Wondering, guys, on your flexibility chart on CapEx. Is that 12, 20, 40 that's on the projects on that list that you could potentially strip out if the microenvironment is in there. I read this morning on one industry journals that the Norwegian government was putting pressure on you to actually go ahead and sign that project, which has a 12% IRR relative to your 24% IRR hurdle. How should we think about these sorts of news article that are coming out? Eldar Sætre: Okay. Again, [indiscernible] in order to avoid but you're talking about it then I'll talk. So that's the project that we've been working on for some time. It's very important project. It has to do with the resources in the government and it has to do with timing, so timing is setting some constraints of that project. But in the end, it has to have to have the profitability and robustness that it needed, so that's what we really are working on. So we have put up very good people into this, really to make the best effort to take down the cost and come up with a solution that actually can make this project fly. So it's a high-priority project that have to do with resources, and from that perspective, I can obviously see why authorities would like this to move forward. But still, I'm running the business, so it has to have the value creation and the -- meet the hurdles that we have for decision-making, and I will not comment on percentages in that respect. Margareth Øvrum: But it has to be improved quite significantly both on the drilling side as well as on the facility side, and this is what we are working on.

Ladies and gentlemen, thanks very much for the questions. I'd just like to ask Eldar to round this off for the end of the presentation. Eldar Sætre: Well, I'll be very brief. You have been on quite some time now so I'm sure you would like to head back and I would, too. And it's been a busy week, I have to say. A fantastic week, and it was a true pleasure for me to sign in on Wednesday, but it has also been a true pleasure to be here today. I've really been looking forward to this day, and it actually gives me as much energy as I was hoping for. So I'm now eager as Margareth said to get back to your people, and I'll do that but I'll spend 1 day to relax tomorrow and then it's back in business. And on Tuesday, actually, 2 days, I'm gathering with top 150 leaders in São, so I really look forward to that, to set the theme, communicate what we have told you and really bring along the whole team and our leadership on this -- on the journey. And I'm sure, they will buy in with full force. So I thank you, all, for coming. I really appreciate that, the engagement and the good questions that you have put forward to us. I hope we have sort of accommodated this in a good way and I presented you with some good answers. At least, we feel we have a strong story and have what it takes to tackle the challenging environment that we are looking at for the moment. So have a nice weekend. Thank you, and see you again.

Thank you.

Ladies and gentlemen, that will now conclude today's conference call. We thank you for your participation, and you may now disconnect.