Ladies and gentlemen, welcome to our Fourth Quarter and Capital Markets Day for 2016. It's a pleasure to see you and to have an opportunity to talk through our results and our outlook. I think we give some good detail in the presentations today, and I'm glad that we're -- in this year, we're also being joined by 5 Executive Vice Presidents, who are going to talk through the impact on their business and what they're doing in the present situation and their outlook for the next 4 years. Safety is a number one priority for Statoil. And as always, I just like to start with a brief safety announcement for everybody. So just to run through this, if an emergency situation should occur while we're here, the evacuation signal is a voice system announcement. Please note that we only evacuate the building should the voice announcement tell us to do so. Please use the fire exits within the venue and follow the signs and exiting at ground level. The assembly point is situated on Bartholomew Close. Okay. The format for today, we have a lot to get through. We will start with a presentation of about 20 minutes each from the CEO and CFO. And then we'll have an opportunity for questions -- Round 1, predominantly from the floor. I'm afraid I'm going to impose the same rigid discipline as we had last year. For this round, there's a lot to get through: half an hour, one question in one part only, but there will be plenty of opportunities in the second round and also at the end of the session. After that -- after these presentations and the Q&A, short break for a sandwich. At 10 past 1, we will gather again, and we'll have a series of…

Thank you, Eldar. Ladies and gentlemen, good morning. It's a pleasure seeing you all. Let me start by sharing 3 things that are important to me in order to deliver on our strategy of capturing -- resetting cost and capturing the opportunities. First, driving performance every day. Second, capital discipline, saying yes only to the excellent projects. And third, securing financial flexibility to invest in the right opportunities, while remaining committed to capital distribution. These will be the main themes in my presentation today. But let me start with the performance from 2015. In a year with high-market volatility, we delivered adjusted earnings of NOK 77 billion, down from around NOK 136 billion in 2014. New fields on steam, ramp-ups, accelerated wells and higher regularity delivered a production growth of 6%, adjusted for divestments. We saw material impact from our efficiency program and strict prioritization in all our investment decisions. We reduced organic CapEx in 2015 by around $5 billion compared to 2014 to $14.7 billion, $3 billion below our original guiding. Cash flow from operation was NOK 166 billion for the full year. And through the year, we maintained our firm commitment to our dividend policy. Achieved liquid prices were down 29% in kroner compared to last year. But our results also reflect strong operational performance, continued high production and significant cost improvement. We've reported an adjusted earnings of NOK 15.2 billion, down by 44% from the same quarter in 2014. Net adjustments in the quarter of NOK 13.5 billion, mainly due to impairments as a result of short-term price assumption that has been taken down. An effective tax rate of 89.5%, up from 84.1% the same quarter last year, mainly as a result of losses in countries with limited tax shield. Mainly due to the lower realized prices,…

What I'd like to do now is, if I can ask, Eldar to come back to the stage, and then we'll have an opportunity of about 30 minutes for questions and answers from the floor. We'll try to get some in from the phones as well. So if I could ask the operator to start polling now, and we'll come on to those questions in a short while. It's a lot to get through, 30 minutes. So if we can keep it to one question each. We have some roving mics around. I can see those.

So if I start with these, and I'm going to start at the front with Mike Alsford.

It's Mike Alsford from Citi. You mentioned very good progress around your current operated portfolio in terms of breakeven reductions. But what I wanted to try and get an understanding of is the moving parts. So what is the actual volume sacrifice? So you talked about projects starting up in 2022. What is the impact to those on volumes as a result of our basically pushing out high-cost projects from that suite of projects? And what is really the reduction you've been able to generate from recycling projects and -- on capturing cost savings? Eldar Sætre: So some projects have been pushed out, like the Tanzania gas project. We don't see that being realized in this time horizon. When it comes to the project that is in the portfolio, like the Johan Castberg, we are talking about the same volume. So we haven't scaled down the projects. That would be very marginally. So this is an optimization all the way from the reservoir to the market, and we need to take very good care of the barrels. So that is a firm part of our strategy that we capture the resources and focus mainly on how we can simplify, how we can challenge the solutions and come up with lower, more efficient solutions in total to get the same volumes out of the reservoirs. Is there anything you would like to add to that Hans Jakob?

No, I think it's important to just underline that we guide on the production of 1% growth from 2014 to '17 and from '18 to '19 it's 2% to 3%. We still have the gas flexibility. We have demonstrated we can use that, based on our price assumptions.

Okay. Jon?

Yes, Jon Rigby from UBS. One of the things that comes up a lot when discussing Statoil is the position of your larger shareholder, the government. And clearly, there are some radical changes taking place at Statoil and sort of a change of the nature of the company since it IPO-ed, basically, and I think that's picked up over the last 2 or 3 years. And it seems to me there's 2 big moving parts that you're highlighting today. One is a reduction in spending on the NCS, that's driving your efficiency gains. And the second is a change in your dividend policy or a change of the way that you implement your dividend policy. So from the outside, the relationship is somewhat opaque. So I wonder whether you're able to make some comments sort of characterizing what the discussions with the government have been, how supportive they are of what you're doing? And where you've got to in sort of implementing strategy and how you discuss that with the Norwegian government? Eldar Sætre: The Norwegian government and the ministry behaves as a very professional owner. I can assure you. And we have the same type of regular discussions with this owner as we have with other major shareholders. So basically, they support all the measures that we are taking. I think that can be well documented in the Norwegian environment in terms of strengthening the -- increasing the efficiency, taking down cost. And they, fundamentally, see that this is to the benefit of the whole Norwegian society because this is about creating optionality and increasing efficiency and by that creating options for projects and activity that in the long run will be good for the Norwegian society and also the whole Norwegian oil and gas cluster. So I feel a very strong support, not only through the meetings that I have, which are formal meetings addressing these kind of -- this relationship, but also through the way the government is addressing this current situation in the Norwegian environment. When it comes to the scrip, we've found it natural to have a dialogue with the majority shareholder because they need to support this, and they would also need to consider how to approach the parliament on this. So to have a discussion on that and make sure that we have support in general for that, we found that prudent. And they have given that support, and we're very happy with that, also demonstrating that the government is an arm's-length and very professional owner to the company.

And do a couple more in the middle, and then we'll move over to the right-hand side. So Lydia?

Thanks. Just within the presentation, you talked about what seemed clearer policy signals for gas versus coal within Europe. What is it that you're actually wanting? And within that framework, how do you actually make the decisions in terms of where the investment comes -- goes to, when you don't have that policy framework? Eldar Sætre: I think, on Europe, it's basically a question on Norwegian gas and new opportunities and new investment decisions to be made. And it is very important for us to have confidence that there is a policy supporting long-term use of natural gas in Europe. And that has been a question mark, I have to say, previously, for some time. We still moved on with the Aasta Hansteen project, but we need that. And I think it will be particularly important, if we discover new resources, big resources, and the question mark becomes how do we develop these resources. What we see now are positive signals, and I'm convinced that there is no way for Europe to take part in the global effort to reduce climate without actually addressing the coal issue in Europe. Whether that is through the ETS or through direct regulations, that remains to be seen. Hopefully, both, but they will have to do something, which will support further gas developments from the Norwegian continent shelf. By the way, you will have a gas seminar in a couple of weeks, and Jens Økland will also be able to answer more questions later today.

Okay. Can we more over to Hamish and then Brandon, and then we'll move back.

Some very commendable CapEx cuts, cost-saving initiatives and more so than many of us thought you could achieve. So it's very good. Focusing on the sort of resource side of your business, you mentioned the reserve replacement ratio, organically, around 88%. Could you tell us through how -- could you tell us how you intend to address the reserve life and sustainability of the portfolio going forwards? You mentioned a few other projects and the good cost cuts you put through on those and the lower breakevens. You did mention, I think, Hans Jakob mentioned on the Q3 call, potentially going above the 30% gearing threshold in order to do M&A. Is that something you'd still guide us towards? Eldar Sætre: So I'll comment on M&A, and you do the reserve based on a more general -- from a more general approach. So M&A is -- obviously has been for a long time a key component of our dynamic strategy. It is an obligation to look at opportunities, both to divest assets that others can do -- enhance better than we can do and also to look for opportunities to do acquisitions. And the more you can do this in a countercyclical manner, the better it probably is. So we are looking -- and Jon here and his team is looking at opportunities all the time, persistently, assets in various parts of the world. But it has to be right. It has to be the right price, fit into the strategy, stepping stones that we can build on. So if we get that right then we have done some -- actually, also during the last year, which leads nicely into that strategy, that's good. But it also has to fit into the overall corporate financial framework. So it's part of that. But at hand, we have a huge, very attractive portfolio, organic assets with names that we are working on -- that you heard about. That is also a top -- definitely top priority. On the reserve replacement...

I'll do a more technical comment that in general, we, relative to peers, also prioritize exploration quite highly. Last year, we booked Johan Sverdrup Phase 1, and there is a SEC rule accounting wise that make us use the average price for the year. So in the disclosure at the back of the financial disclosure, you will find a reduction of 330 million due to these price assumptions. But as you know, we have a 3-year rolling average on the RRR, and we have reported 110%.

Brendan?

It's Brendan Warn from BMO Capital Markets. Just since announcing delay at Aasta Hansteen and Mariner, just what you have changed internally to make sure we don’t see delays on some of the big projects coming up and further reduction of production growth towards the end of the decade? And then just secondly, I appreciate you're not reliant on disposals, and you're giving organic numbers. But obviously it was successful for you in the past. Are there any sort of targets you look at internally in parts of the world where you’d look to exit or dispose, please? Eldar Sætre: Well, I'm sure Margareth would love to answer the question about all the efforts that she's doing to make sure that we are not getting into a situation of cost overruns. Actually if you look at our overall portfolio, it's not a story about cost overruns. It's the opposite. We have been struggling with the -- with some of our projects in -- at Korean yard [ph]. Very high -- and we have been -- we were seeing delays on these projects as well. We are putting a lot of effort and Margareth is there frequently to visit the management of the yards to make sure that we get sufficient priority, that we have the progress that we are -- that we need, and I feel confident that the plans that we are -- is now public and that we are working on that we will be able to stick to those plans. But you can never issue guarantees. But it's a high focus on that. When it comes to divestments, I will -- would never be specific. There is always components in our portfolio that might be a little bit stranded or where we don't see a lot of building blocks on top of it and so on. So you will always find that, and that's something continuously to be considered. So I won't give a list of those names, what that could be. But obviously, again, if you do that kind of stuff, it would have to be at the right price at the right time, and so timing is, as I said in my speech, essential in our industry.

Rob?

It's Bob West here from Redburn. You might not like my question entirely. It's about the deflation in cost that you've mentioned today. So going from your $70 to $40, which I'm guessing is on a barrel of oil equivalent basis, which I think means something like $90 to $50 if we take pure oil. If you can do that and everybody can do that, you might take that to mean the marginal cost in the oil industry is closer to $50, and that's where prices might go to. So it -- my question to you is, what is it about your portfolio and how you are deflating cost that make you think that's a Statoil effect that can't be generalized by the broader industry? Eldar Sætre: So I'm confident that the whole industry is addressing the same issues. It's 2 type of improvements there, of cost issues that we are looking at. It's the structural and then it's the market. Our improvement program is focusing mainly on the structural issues. So then what we have achieved and Margareth will show you a slide later today on Johan Castberg, the components, what is taking us from the 80 [ph] to where we are today. The market is part of it, but it's not by far the biggest component. This is really structural, how you -- what you solve for, what kind of solution, not starting the sort of big scopes, but really what do you really need, and then challenge every single bit that you need on top of that and make sure that everything hangs together. It's using our competence and our capacity and the engineers to solve that equation. I'd have to say, it could also be why we haven't done that before. And if the industry is doing the same, I don't know. I think still we are a company that is quite forceful on this, and hopefully, the industry is doing the same. So yes, market impacts is part of it, but the program and the impacts that you see and being presented today is much more about the structural efforts. Margareth will also show you how the market impact comes out, looks like in relation to different types of services and how that could look in a time horizon.

Haythem?

Haythem Rashed from Morgan Stanley. Just if I could come back to the comments you made about the balance sheet and sort of the way you see net debt to capital employed potentially, sort of evolving to. Within that, it seems like you're assuming an uptake of the scrip, something like 40%, and if we assume that, that might be lower and we assume an oil price closer to where the oil price is today, for example, it's not impossible to see that reaching 40% potentially in the near term. Just wanted to get a sense, I know you talked about 35% being something you were comfortable with, but when we get into sort of those sorts of levels, does that trigger different thinking from yourselves in terms how you react to it? And perhaps just a broader comment, if you could, about what metrics matter to you. I mean, isn't net debt to capital employed the most important one? Would you look at other metrics, you look at net debt to cash flow on the balance sheet? Eldar Sætre: So currently a debt ratio of 27%. 30% has never been a hard line in the sand, triggering any specific actions of such. It's been a reference point for us. It's clear to us that with the current opportunity set and the quality of work we're pursuing, it is important to do that. I think that is value-enhancing for our shareholders and strengthening our dividend capacity in the long term to actually pursue good projects. That's how we create value. So we have shown that we are able to pursue the current opportunity set in line with the existing plan -- time horizons and be cash flow neutral at $60 in 2017, at $50 in 2018. That will take us…

I'm very conscious that we've got a lot still on the floor. I'm going to take one more on the floor, then we'll go into the phones, and then we'll come back and collect some of the ones remaining in this room.

It's Marc Kofler from Jefferies. Two questions, please, broadly relating to the total capital allocation process. I think it's fair to say that the dividend policy has been tweaked a few times now in recent months. So really I was looking for clarity, I suppose, around what the policy actually is and how we should be thinking about that for the next 3 quarters. And then, just within sort of the comments you made around M&A, how should we interpret the transaction with the Lundin equity? Eldar Sætre: So I do the dividend policy and you do the Lundin, right?

Sounds good. Eldar Sætre: So the dividend policy states clearly that it's our intention to grow the dividend over time in line with the expected underlying earnings. There are also statements in terms of what if conditions turns out to be very difficult. We haven't pushed -- pulled that brake because we could like to rely on the first part of the dividend policy, which is consistency, capacity to pay cash dividend through the cycle, and we have a fantastic set of opportunities that actually justifies that also towards our shareholders. That's the interpretation. I don't see any tweaks. It is the way it is, and it's consistent. And we have just added another tool that was just not inconsistent with the policy in terms of the scrip dividend. So the board has stated clearly that the intention -- that's what they can say. The intention is to maintain the current level of $0.2201 for the first 3 quarters of this year. And then, it would be a formal process on dividends beyond that.

On Lundin, as you're aware of, we are the operator of Johan Sverdrup, and this expresses our strong belief in the Norwegian continental shelf, and it increases our indirect exposure to high quality assets on the NCS that we know very well. And it also underlines our long-term view on the industry and the potential value of capturing on the upturn.

Be patient in the center of the floor. We'll come back to you. I'm just going to open up to the operator now, so that we can run through a couple of calls for people who weren't able to make it to the room today.

We'll now take our first question from John Olaisen from ABG.

Yes, it's John Olaisen from ABG here. A question, if you have projects now that are profitable below $40 oil price, do you then continue them regardless? Or do you have any project that you're currently holding back here with -- to have -- and to be breakeven below $40? In other words, could you have invested even more with -- in projects at the moment that are profitable with the oil price below $40? Eldar Sætre: So flexibility is gold. And in fact, the case is, we still have a lot of flexibility. If we look at the next 18 months or so, there is no major FIDs. There's no major project that is mature enough to be up for decision-making in -- within that time horizon. That means, we have -- we are retaining flexibility. We cannot -- and we are -- we'll use that time very efficiently to continue to work on the project and the new challenge of getting below USD 40. So we are -- we lost one project on the Norwegian continental shelf in December. We decided to move forward with Trestakk on the Norwegian continent shelf. Johan Castberg we have firmed up the concept and the solution for the concept. So we are maturing these projects, but they are not ready to be concluded. So I think the next one to be up for decision-making is the Trestakk project by this summer. So that is the characteristic we are not -- we are working on all projects. Some of them we have sort of a little bit on the back burner because they are not urgent, we need more time. We need to firm up like resources. For instance, Bay du Nord in East Coast of Canada. We're now into drilling program. So we need to know like we did for Johan Castberg more -- what is the resource base that we would like to base a development on, not build all types of [ph] optionality into solutions, but we have time to wait to see what are we solving for.

And my follow-up question would be there were some slides that Torgrim will present later so I might be too early with this question, but it seems like the U.S. onshore needs some $50 in oil price to be breakeven on average. Is that correctly understood? And if so, why invest in the U.S. onshore at all? Eldar Sætre: If I may, I could go into this, but I think -- that's by Torgrim this year. So if I might offer to allow him to answer that question later, I would appreciate that.

We will now take our next question from Anne Gjøen from Handelsbanken. Anne Gjøen: In third quarter '15, second quarter '15 and third quarter '15 in your report, you're saying that you've used $80 as the assumption behind the impairment testing. This time you have excluded the price assumption. It's not longer in there. So could you confirm that $80 is still used because if it's not significant right at this time, and if it is, because previously it's -- and particularly hit devaluation on the U.S. assets. If you think it's right to keep kind devaluation of the U.S. assets of $80? Eldar Sætre: So I leave that to Hans Jakob.

Yes. Thank you for that question, Anne. You're absolutely right. We were disclosing the $80 in '18 in our financial statement. That is still within our uncertainty range in current times. But for impairment testing, we are using the forward prices for '16, '17 and '18, with an average of USD 44 per barrel. As you said, there are NOK 10 billion net impairments in this quarter, and we still have a firm belief in the upturn of the prices, but we do not know when and we haven't updated our long-term price assumptions since first quarter last year, but we do -- have adjusted the impairments with a 3-year forward for '16 to '18.

One more from the phones and then I'll come back to the auditorium, please.

We will now take our next question from Teodor Nilsen from Swedbank.

I have a couple of questions on exploration. You clearly reduced exploration spending pretty much from 2015 to 2016. So I just wonder, what's the main driver behind the reduction? Was it price driven? And was it activity driven? And where should we look for areas that you will focus on in 2016 when it comes to exploration? Eldar Sætre: So in line with the efforts to address cost efficiency, we have also done significant achievements within exploration, drilling wells, on the administrative side. You will hear more about that, the efficiency gains, in the presentation later today. We are in a situation now where it's natural for Tim to replenish a little bit his portfolio. He has been having a high drilling activity, and we need new acreage and new opportunities. So that is the kind of process we are into, which is also a good thing because it fits nicely into the financial thinking currently and the uncertainties that we are facing. But it is also time of opportunity for Tim, and he's done a tremendous job accessing new acreage in many exciting places, and he will love to talk about that later. And also, do counter-cyclical things, for instance, on seismic activities and so on. So it's a lot of things that comes together into the number that we are presenting today for this year and through that he creates optionality for the future. Now I probably answered questions that he would love to do later today, but he will get the chance to elaborate in his presentation.

Okay, all right. Okay. As I was saying, we're now back in the room. Apologies for those on the phone. There'll be opportunities in the second round of questions as well. So we were over here, I think was a remaining question from the center here. No. In that case, can we go through to the gentleman over there.

Ilkin Karimli From Crédit Suisse. So you say you have around 20 billion BOE of reserves and resources of which 1 piece is around NOK 5 billion. So of the remaining NOK 15 billion, can you give was an idea firstly, how much of it is gas? And secondly, how much of it is commercially, you say, breakeven below $50 oil? Eldar Sætre: I don't think -- for some of these projects that we talked about, that is the project that is coming up for decision over the next couple of years. Some of these projects are -- there have been discoveries. They are laying there. So to comment and give you some indication as to breakevens, that wouldn't be prudent because we haven't even started to really work these projects. So we have a capacity to address project like the Tanzania gas project, for instance. There are so many issues that needs to be resolved, and when we are done then we really start addressing sort of what is -- what are we heading for. I talked about the Bay du Nord and so on, and we are doing exploration in that area. We know we have resources, we know it's going to work. But really to optimize, get into a concept selection and so on, what is -- which is what it really needs to have a firm view on profitability, it’s too early. So to give you profile reflecting the difference between the 5 out of 20, that is -- that wouldn't be very meaningful. It might actually be misleading. On the gas share...

Yes. Well, just a teaser for the U.S. story that Torgrim is going to tell. On the reserves, it's been a change on the U.S. onshore due to the price assumptions that I mentioned. And there is also potential step-up on the offshore side. So the relative composition of the portfolio in the U.S. would be changed, but you'll hear more about that when Torgrim is on the stage.

We've got time only for a couple more in this session. I am sorry. Theepan?

I've got a question just coming back to Norwegian continental shelf, I mean, you've had improved performance there. But I was wondering could you just talk about direct spend on the base in the NCS, where that is in '16, how that may have changed and the implied decline rate? And just coming back to Slide 13, just a point of clarity. What's your assumption on Norwegian gas profits when you talk about breakevens of $60 and $50?

Thank you for that question. I'll start and maybe you continue, [indiscernible]. As a general information, we have in the additional information more on the composition or CapEx profile, so that's being released outside the presentations. It's part of the additional information. The expenditure level on the Norwegian continental shelf is half of the offshore investments for next year, maintained at high-level. One of the explanations is, of course, the Johan Sverdrup project, which is a unique project where we continue to invest. You mentioned decline, it's been around 5%, fairly much the same rate as the international. When it comes to improvements, as you're aware of, for the full year per barrel, Theepan, it's 11% down, so we get more outdoor investment, and that's the traction in our efficiency program as well.

So when it comes on the natural gas of breakevens, actually if you look at our portfolio and what is at hand is very much an -- a liquids portfolio, actually. So like the name [ph] our projects are liquids and oil, mainly. There's one project that is in the pipeline, the Aasta Hansteen project on the Norwegian continental shelf, which I would say at the point of decision-making, had a breakeven which was somewhat above the levels that we are talking about now. So I was basically stopped there, and the project has been 1 year delayed and some cost increase, so obviously this project hasn't increased. Eventually, I am confident that it will also be a good project and particularly because it adds optionality, adds infrastructure in the area, which will open up for further developments, which then will be more profitable. And by the way, we have made 3 discoveries surrounding Aasta Hansteen, which add approximately 25% to the resource base. So that's the dynamic of this industry, that individual project that might not look that good now, but it opens up for future value-creation.

Okay. One last question before we have a very short break and a little bit of choreography on stage to get ready for the second session. So Neill, to close this session.

It's Neill Morton at Investec. I just wanted to clarify. You've talked about lower CapEx and lower OpEx but -- versus a year ago. Your cash flow targets also look to have reduced at sort of broadly similar oil prices. So what's changed? Eldar Sætre: I think what is changed is that we are -- we see the opportunity to improve the project portfolio, right, and we are prioritizing, continuously learning what we can do, and we also get more impact from the commodity price environment. So it's the totality that has taken down the CapEx stricter prioritization. Basically, we're moving forward with the same projects and some delays. We have delayed some projects because we need more time to improve them. But it's simply, I would say, the main driver is actually the opportunity set we see and what we can do with the projects when we give ourselves slightly more time to optimize and not be driven by volumes as much as value. Get it right, spend the time it takes, and don't push any button until you feel comfortable with the answer.

Okay. Let me bring this session to a short close. We got a quick break and some sandwiches and food waiting outside. And then, if you -- we can be back in the room for 10 -- just before 10 past 1, please. And we'll will start the sessions with the business leaders as well. Thank you very much. See you in a few minutes. [Break]

Okay. Ladies and gentlemen, I hope you've had at least some chance to refresh and refill. I haven't, unfortunately, but the show goes on. I'd now like to start a series of presentations from many of our business areas. We'll do these fairly quickly. I won't get up and introduce everybody in between every single presentation, but just let me start with the first 3 presentations. Arne Sigve Nylund will be talking about DPN, and then as you'd be very aware, our international business is composed of -- it's actually 2 areas. It's the U.S., and it's all the rest of the world. We've got each of the EVPs for those 2 areas. Starting off with Lars Christian Bacher who does the international part. And then Torgrim Reitan who does the U.S. So it will be those 3. Then we'll have a very quick reshuffle, and then we'll go into Margareth talking about TPD and Tim talking about exploration. So with that, Arne Sigve, if I could introduce you to the stage. Thank you very much.

Thank you so much, Peter, and good afternoon, everyone. From Eldar's and Hans Jakob's presentations, you have seen how DPN -- the DPN organization contribute to Statoil's results. And my focus is to share with you how we work to improve the operations on the Norwegian continental shelf. Statoil has a solid competitive position with a world-class portfolio of producing assets and development projects on the NCS. The NCS offers predictable framework conditions designed to stimulate technology, development, industrial growth and value creation. We produce with half the CO2 emissions per barrel compared to the industry average. And I consider that as a competitive advantage. So let me focus on what we have achieved. We have delivered strong safety results. And as Eldar referred to in his priorities, we have gone faster and deeper in reducing field cost. And we have a solid operational performance and a competitive project portfolio. At the same time, we have maintained control of our maintenance portfolio and technical integrity. In other words, deliver sustainable improvements. So let me now elaborate on how we have worked to deliver these results. And first, I would like to start with the safety. There has been a positive trend in our serious incident frequency due to systematic work overtime. However, statistics become irrelevant when experiencing a fatality like we did on COSL Innovator at the Troll field last year. To secure the sustainability of our improvements, we monitor key indicators to ensure that we don't compromise on HSE and integrity. Both preventive and corrective maintenance has a positive trend since we started the Statoil Technical Efficiency Programme, and you may know the abbreviation STEP. And we have systematically reduced the preventive, corrective and safety and also critical maintenance portfolio between 40% and 50%. And I believe there is…

Thank you, Arne Sigve, and good afternoon. You have seen the results for the fourth quarter and the results for the full year presented earlier today. Needless to say, we are not satisfied with our financial performance within the international segment. Affected by liquids prices, we reported negative net operating income. However, let me underline that for the quarter we are breakeven, if you exclude exploration costs. And for the full year, we delivered positive underlying results, demonstrating the quality of our current portfolio. Ladies and gentlemen, we are not in a business as usual situation and our international business is exposed to the same market as the rest of Statoil. And we compete for capital and opportunities, I really like that. But we need to continue improving by focusing our efforts on what we can -- on where we can have an impact. At the same time, my view is that the current market also represents opportunities to lower operating cost even further, to drive capital discipline even stronger and to prioritize even better. Looking at 2015, our underlying performance is good. And solid operations will always be important and even more so during periods of lower prices. We are building on even stronger safety security culture, production is stable and for the year we produced 487,000 barrels a day. And overall, our production efficiency is also quite strong. But there is no doubt that our heavy oil assets struggle when the Brent price is at the current level, mainly due to the price discount. However, our assets in Azerbaijan, Algeria, Angola, Nigeria, to mention a few, all make money, also at this level. In 2016, our DPI portfolio will be profitable around $46 a barrel before exploration expenses. We cannot influence the prices, but we can and we…

Good afternoon, everyone. It is very good to see you. And yes, I have missed you. I'm half a year into this job, and we are reporting losses in the U.S. And we will do what it takes to make money in the U.S. business, but also to create growth options. So today, I will talk about how we are transforming to make money also at lower prices. And there is no better time than this to get business right. We have already made significant changes. In October, we restructured our business and we reduced manning by some 20%. We have taken down investments significantly and costs are coming down, and we have established a clear road map to making money. We will transform the U.S. business from being dependent on high prices to making money at low prices. We needed $90 per barrel in 2014, we will take it down to $50 in 2018. We will need $50 to have a positive earnings. From $90 to $50. So how are we going to do that? First, we will step up our improvements. We have delivered more than we promised, but that is not enough. And I will present a new set of targets to you today. Second, we will grow with quality. We have the potential to grow by more than 50% by 2018. But much more important, the cash margin per barrel will double in the same period. So this is an ambitious plan that I will show you today. It will not be easy, but it is very necessary. So first, an overview of our business. Our U.S. business has been built over 10 years. It has been a stepwise growth, starting with Gulf of Mexico assets acquired from EnCana in 2005. Over the years, we have…

If I just sort of -- in terms of I need to put these into context. Now you will be aware that we report the U.S. and the international part of the business together as international, and we will continue to do so. So you won't see quarterly changes on these. But one of the things why -- one of the reasons why we wanted to present these through today is because, in a area at the moment where there's a lot going on, we get a lot of questions, we wanted to provide some visibility. And we will continue to do this. So on an annual basis, you'll be able to see how we're doing and progressing against these targets and these challenges as we go forward, not on an individual quarterly basis, as we go forward. Okay. Now the other thing I wanted to do before we go on with Margareth's presentation is just a reminder, if we can open up for polls for the questions in the presentations 2 away from now, so we have plenty of time for people to register their questions ahead of those. With that, I'll call Margareth. Thank you. Margareth Øvrum: Just have to tidy up. Okay. It's good to see you all. You've heard a lot of ambitious targets today and guess who has to deliver on most of them? My responsibility is to deliver project development and execution, drilling in wells, procurement and technology globally. Last year, we set the bar high and I can assure you we have worked very hard to impress you today. So if at all I talk too fast and too much, it's just because I'm so eager to tell you about our achievements. I have 3 messages for you today. We make very strong…

Thank you, Margaret. Nice and tidy. No, thank you. I thought that was a very impressive story. And your messages were very clear, Margareth. So it's going to be a different act to follow, but I'll do my best. Good afternoon, everyone. It's good to be back and to have the opportunity to give you an update on our exploration progress and plans. So let me start with our exploration strategy. I think it's fair to say that our exploration strategy has served us well and it stands firm. During the period 2011 to 2015 we delivered approximately 800 million barrels per year on average at a finding cost of approximately $4 per barrel. And in total, we discovered 4.8 billion barrels of oil equivalents. Approximately 80% of those volumes came from impact discoveries. And we were very successful at testing impact opportunities in 2011, '12, and '13. Since then, we have tested fewer such opportunities as we appraised and matured the discoveries and focused on replenishing our portfolio. Ultimately, exploration is about the ability to create value through the drill bit. And I am very pleased to say that we have already moved 3.5 billion of these barrels through the value chain, delivering projects for Margareth to develop and Arne Sigve and Lars Christian to produce. In 2015 alone, exploration passed on 16 new discoveries and more than 800 barrels of resources. And as you have seen in previous presentations, we have reduced the breakeven for our next-generation portfolio to $41, which gives me confidence that the majority of our discoveries in recent years will be profitable. Continued replenishment of our exploration portfolio is needed to replace resources in order to sustain and grow production. And we intend to do that by: first, exploiting prolific basins, i.e. deepening our…

Thanks, Tim, and thanks to all the presenters this afternoon. We're going to move a table here so that we can get some -- get everybody on stage who's presented here for the Q&A over the next half an hour or so. I hope that the presentations this afternoon have given you a bit of a clearer picture about all the things that are going on in Statoil and how they conform to the themes of deeper -- faster and deeper cost reduction, capital discipline and flexibly and positioning competitively for the upside. I -- it's a lot to cover in one afternoon, but they're part of the day-to-day in Statoil that we want to give you a picture of while you're here with us this afternoon. So if I can do -- if I can ask people to come and stand on stage. Again, before -- as before, we'll take some questions from the floor. We'll -- we've opened it up for questions on the phones. We've got people with the mics, and we'll have an opportunity to -- for people to ask the various EVPs what they wish to do. Okay. Just let people get comfortable. Okay.

Right. Okay. Haythem, we got a mic coming.

My question is to the extent that it can be answered by the various different business units, but of the particular CapEx reduction targets that are in place, can you give us a sense of how much of that is cost deflation? You've sort of given in some parts of these presentation, for some of the operating projects, how much of that is related to the market deflation. But overall, how much are you now baking into the numbers you've given us for, say, 2016 and beyond? Eldar Sætre: So maybe I should start on that one. First of all, looking at a cost improvement program of $2.5 billion that we have stepped up now. Most of that is structural improvements, and -- but there are some. It's very difficult to carve out all components of market impacts when we measure them. So there are some. There are around 600 that Margareth showed you in terms of market impacts for 2016, let's say 200 to 300 is most likely incorporated -- Margareth Øvrum: Half. ... Eldar Sætre: ...or half is incorporated into the $2.5 billion. And some of that goes also -- goes into the CapEx program. I would say when it comes to CapEx program in terms of market impacts, there is not a lot. There is some impacts related to, I would say, drilling a well, maybe on modifications, not a huge impact. As Margareth said, the major impact from the market side will come as we rollover these contracts into new -- the new projects, our new projects. So for instance, when it comes to the ongoing projects, like Mariner, Aasta Hansteen and so on, they are basically based on contracts that have been in place since these projects were launched. So I don't know, Margareth, if you going to add to that. Margareth Øvrum: Maybe could I just add one thing, yes? Well because for instance, for the multidiscipline equipment packages for Johan Sverdrup we got very, very good prices. But prior to the bidding process, we issued much leaner requirement, technical requirement. And when you get the prices, is it due to the leaner technical requirement? Or is it due to the market side? And it's a combination, so it's not a strict answer, just for your information and so it's easier to understand. But of course, the market-to-market or the market deflation is coming in when it's payable and, of course, when we have rolled over the contract portfolio. Eldar Sætre: From the U.S. position to we have [ph] the covenant? Margareth Øvrum: You have already locked in.

Yes, no. Well, yes. I mean, it's -- the improvements are mainly coming from more drilling efficiency. We drill much faster rate and we get more out of each reservoirs. And then there are some cost improvements, but it's limited onshore. It's mainly linked to performance and activity. We ran 9 rigs last years, in last year in our operations. We are down to 5 now, and we are likely to go down to 3 rigs across the 3 plays during the year. So that's mainly activity and performance. Eldar Sætre: Would you like to add something, Hans Jakob?

Yes, a more specific one is in fourth quarter, in DPI, we had a 22% reduction in the OpEx, SG&A and more than -- and less than $100 million is related to price-driven production fee and diluent.

Okay. Rolf [ph] and then Hamish.

If I think about Statoil over the last 5 years, one of the trends has been a sort of internationalization, right? Moving out of Norway and going more and more to far-flung interesting places. I don't think I -- roughly in my head, had something like a 60-40 split of CapEx internationally versus in Norway upstream. Looking at some of the ideas you presented today and the profitability and the costs and particularly the deflating breakevens, do you think there's a Norway-ization coming ahead? Is it reverting back to putting much more of the incremental CapEx back into that core business rather than international? And is that the right thing? I mean, that's a question for everyone on the stage. Eldar Sætre: I think I'll try to cover it first, if some people may want to add. It's a corporate-shaped type of question as well. The Norwegian continental shelf has been and still is and will be the backbone of our company for long time. There is no doubt about it. We are -- the CapEx program that we presented for this year, approximately half of that is going to be Norwegian continental shelf. So despite as we are sort of reducing our overall CapEx, at the Norwegian side, we are pretty much maintaining the CapEx level. So right now, we are in a position where we have a lot of opportunities on the Norwegian continental shelf coming from the exploration efforts that Tim talked about earlier. But that's more -- and the Norwegian continental shelf, our knowledge, our competence. I learned at business school that to leverage your competitive edge is a good idea. So we would like to do that to the extent possible. But it will just take us that far. And we will like to grow and extend the company, and that means we will have to continue to look outside the Norwegian continental shelf to leverage our competence. And we see a lot of opportunities, with Tim has showed you this on the exploration side. We have a project portfolio also outside of Norway. So there's no change in strategy as such, but the opportunity set at hand now puts a lot of emphasis on the Norwegian continental shelf. Strategically, our company would like to grow definitely based on a growing international portfolio. Would anyone like to add? Lars Christian first.

Yes, I mean, we are having in, In Salah southern fields coming on-stream this year, In Amenas compression project. Next year, it's Hebron, then it's Mariner. And we are very close to putting sort of start of Peregrino Phase 2 into execution. So I have several projects. The good thing in that I like is that we compete the 3 DPs with good help from Margareth. And best project always wins. And that is the way it should be. Eldar Sætre: I think Norwegian continental shelf would like to [indiscernible] the competition.

Well, as Lars Christian says, we are competing for good projects. And really, when it comes to Norwegian continental shelf is work on the concepts together with Margareth's organization to make them as robust as possible. And we have several examples. Margareth touched upon them, and by working with the solutions concept, driving down cost by almost 50%. So it's really to make them as robust as possible, either you're on the Norwegian continental shelf or internationally. Margareth Øvrum: But Eldar, well he was the backbone, what am -- what are we, then? We must be the brain and the body.

So could we [indiscernible] Margareth. So Torgrim, your comment.

Okay. I don't feel privileged, so I have to compete everyday with the rest of the team. And I'm actually very glad to see that both offshore and onshore, we have assets and programs that really compete on equal terms with the rest of the company. But we are not done yet. We have a big job to do and we are not satisfied. I'm sure that we can prove ourselves to be an important part of Statoil's future and I'm very confident that we are going to be a very important contributor. Eldar Sætre: Okay. I think we are heading for the next question.

Hamish?

Actually I'm going to just focus on the U.S. because I think it was the most exciting slide, actually, of the day. Torgrim's Slide 6, 50% growth potential and the cash margin doubling at $50 oil. And so just first of all, on the cash margin, I wondered if you could maybe tell us, you talked about the oil price required for that, could you give us some insight to gas? Because there's quite a large element of your U.S. portfolio with gas, if I'm not mistaken. And shall I ask the other bit on your volume growth, or do you want me to wait? Eldar Sætre: Sure. Torgrim.

So just on the volume growth, I wondered if you could maybe specify little bit on what basins you think will be the biggest contributors to that, and where the CapEx would be in theory if that potential was fully realized. And can you just confirm that's an organic target?

All right. That's the best question I have ever had. So first, let me start with the cash margin. This is on a $50 WTI basis. And in that price, we have weighted in our gas production and a gas price, meaning that our realized price is actually significantly below the WTI. A bit technical here, but it's a very important assumption. And we also use local prices in our realized price while Jens is getting the market prices. So all realized prices are actually approximately half of WTI. So when I say $50 WTI, my revenues is actually close to $25 to $30 in that environment. And it is in that environment that we are generating a positive cash margin of more than $10 by 2018, and that is after tax because we are not in a tax position in the U.S. And that's why we -- the U.S. business will be so important for the growth in the cash flow and operating cash flow for Statoil for the years to come. When it comes to the production mix, it will be more liquid. We are currently running around 50% gas today, that will be down to some -- no, 43% liquid today, that will be up to 50% by 2018. This requires a limited investment program to make this happen. We have taken down CapEx significantly, and it is a level that we are spending this year approximately over the next 3 years. And there's a potential to grow substantially more. We will double the offshore production from 40 to maybe around 80 by those 3 years. And onshore, we will focus our investments into Bakken mainly and also some into Eagle Ford, while we are keeping a low production growth within our Marcellus assets. Yes. Was there more in the question?

I think that was it Torgrim.

[indiscernible] forecast.

Yes, it is organic. All organic.

All organic. Okay. We're going to go from over there to over there. And Anish?

It's Anish Kapadia from Tudor, Pickering. Also wanted to focus somewhat on the U.S. business. It seems like some of your peers are focusing a bit more on short-cycle CapEx versus longer-cycle CapEx in this environment. I just wanted to see if you could contrast the risk-adjusted returns and capital allocation in your portfolio between longer-cycle projects, such as offshore; and some of the shorter-cycle projects, such as the U.S. or infill drilling. And then just on the U.S., I just wanted to get a better idea in terms of that outlook for U.S. onshore. So in terms of getting to that 50% growth in U.S. onshore, how many rigs do you think you need to run in the U.S. from that 3 that you're expect to be running now? And what's the amount of CapEx that you're planning to spend in the U.S. over the next few years? Eldar Sætre: So you will give it a try Torgrim? Long questions, many questions, try to be brisk.

Yes and not get carried away I guess. So when it comes to the onshore part and the short-cycle part of it, it's actually very useful to have a solid chunk of that in the current environment because you can adapt. And the environment, you can actually -- the changing environment, you can actually have -- head into your earnings pretty quickly. And so that's sort of a very good part of it, and we see that's happening. But there is generally a good mix of long-term investments in there, actually much higher in the current program. They are like 2/3 offshore and 1/3 onshore. So it will take a limited number of rigs over the next few years to deliver this growth. We have quite a few wells behind pipe waiting for completion to happen over the next years.

Okay. Mike, I'm going to have one more question from the floor, and then we'll open it to the telephones. Michael?

Michael Alsford from Citi. Can I just go back to the CapEx? I guess one of the other drivers, I guess, is the currency. So could you maybe talk a little bit about how much of your spending is in NOK? What you are assuming in terms of your NOK rate in your CapEx numbers? I just referred to the Johan Sverdrup slide, and I think the CapEx reduction looks like it's still on the PDO number of NOK 6 to the dollar. And I'm just wanting to get a sense is whether there's more potential for CapEx come down given where the krona sits today, and whether you're changing your approach to maybe hedging the currency going forwards. Eldar Sætre: Hans Jakob?

Yes. You're right. In the Sverdrup numbers, from 123 nominal to 108.5, there is a significant portion of currency, but money is money in a way. So moving forward, and you're talking about the exchange rate for 2016, it's 8.50.

Okay. Can I open up for questions from the phones, please?

We will now take our next question from Teodor Nilsen from Swedbank.

Actually, yes, another question on [indiscernible] on the U.S. business. You showed on Slide 5 that the onshore CapEx has declined by 38% from 2013 to 2015. What was actually the onshore CapEx per barrel, the absolute number in 2013? And how much of the decline going forward do you expect that will be market driven, i.e. lower supply prices?

Thank you, Teodor. Quick answer is that the 38% improvement is very limited part of that, that is market driven. We don't assume any further market affect in the targets we have put forward.

Next one [indiscernible].

And then on the CapEx in 2013 per barrel, the starting point?

Well, we won't go into that very, very detailed per barrel basis. But it's a 38% improvement from the level in 2013.

We will now take our next question from Anne Gjøen from Handelsbanken. Anne Gjøen: I have a question related to tax. Normally, you would give a tax guiding, but I understand that this is very difficult nowadays, particularly, internationally. But let's say, roughly like $40. And in Norway, I would assume it's not that difficult to give some indication on tax rate. Is that possible? Eldar Sætre: Yes, it is. Hans Jakob?

Yes. Thank you for the question. We paid NOK 66 billion in the taxes for the full year, NOK 19 billion in the quarter, 89.5% effective tax rate and 75% for the full year. So this indicates the variations that you would see. We have indicated that MMP would be in the range of 55 to 60. We have indicated DPN around 70. And we've also been quite clear that international is more exposed to variations as a subset of the lower prices. Anne Gjøen: Okay. But said -- it said that there was a fair assumption if we assume closer to the oil price that we have today.

Yes, we have not changed our communication around this, but the variations around profitability and the prices around the international business is really creating the most risk related for being very specific on this.

Another question from the phones, and then we'll come back to a couple to wrap up on the floor.

There are no further questions on the phone lines.

Okay. Then we got another couple of questions. I got Lydia and another one down here. And then we'll start to wrap up. Thank you very much.

I'll try to put the mic back [ph]. Can I ask a couple of questions on Norway, if can come back to that one? And particularly, the field cost slides that you showed, I think it was Slide 4. Just I think you mentioned in the presentation that the field cost was 40% of the OpEx number. I was just wondering what the other 60% actually is, and what's happening on that bit. And then within that slide, you also show '13 to '15 field cost down 19%, but with subsea costs down 45%, the external cost down 35%, et cetera. So given those numbers, what isn't going down quite so much? What is the sticky part there? And what can you do about that? Eldar Sætre: Okay. You got the question, Arne Sigve?

Yes. When it comes to the field cost, as you said, it's the 40% of the total OpEx. And apart from that, we have insurance, we have taxation on CO2 issues, for instance, and other issues. We also have well cost, modification cost linked to OpEx activities. So it's really, as I tried to convey to you, is to really also focus on those elements going forward. And the field cost is very important, but focus on those elements. And Eldar alluded to the climate issue. We worked, I think, pretty systematically with issues that can reduce taxation on CO2 emissions, which will be profitable. And we are working with those issues. We are working with other issues, and I think Margareth has very well conveyed what we are doing on the well cost. So it's those elements that we are focusing in addition to the field cost. And when it comes to the sticky part, of course, there are commitments that we have to comply with when it comes to cost, as such with regards to we have contracts that we have to stick to and be compliant to and other issues that really is also -- regard as fixed cost when it comes to not only activity-related cost.

Okay. One more question and then...

I am going to ask 2, actually, if you don't mind. Just -- so one, just in terms of the NCS. The OpEx reductions that you are seeing, can you just help me understand? It seems to me if I make some simple assumptions just on the FX, there's quite a bit of FX improvement in there. So I was just trying to understand how much of that OpEx reduction the NCS is benefiting from the weaker NOK. And then on Sverdrup as well, I think some of your partners have spoken about potential debottlenecking and perhaps increasing the first phase of Sverdrup. Just wondered if that's possible. And then I think, Margareth, you made one point on market effects in 2017 for Sverdrup potentially accelerating. I assume that's in the 108 number, but I just wanted a clarification on that, if you don't mind. Eldar Sætre: So on the foreign exchange part of your operating costs, Arne Sigve? Maybe you think about it. And Johan Sverdrup, Margareth? Margareth Øvrum: Yes, we are working hard on Phase 2, and there are further phases for Johan Sverdrup. And we have been looking at different alternative. The base alternatives as of today is a new production platform with the production connected to the fuel center. And the production platform is much leaner than it used to be in the PDO. But at the same time, we are looking at debottlenecking and increasing the capacity of the Phase I. So that's true.

When it comes to -- if I understand your question correctly, when it comes to on the currency issue on field cost or operating cost, mostly are though -- are selling to Norwegian kroner. Just a small, small portion may be in other currency, but mostly on Norwegian kroner.

Okay. With that, ladies and gentlemen -- oh, there's one last one. Neill Morton, just under the wire there.

It's Neill Morton at Investec. I just wanted to go back to some of the cost reductions you were achieving. You showed quite remarkable reduction, for example, at Castberg. I guess my question is really you talk about sort of a leaner concepts and simplification, et cetera. That's been driven by a change in mind-set, which has been driven by the fall in the oil price. But if oil prices are cyclical and they go back up, why doesn't that mind-set change and costs go back up? But alternatively, if you in industry can change its mind-set, but doesn't imply that could the -- oil prices don't go up? Eldar Sætre: So I will cover that question. I will not allow that to happen. It simply cannot happen. In this industry for so long time, I've seen it happen before. This time, it will not happen. I know the heat will be turned on, so I know there will be pressure. So the market out there and rates and so on, there will be the pressure on rates. But what you apply those rates on is that -- that is sustainable. We're going, really, this time, making sure that we are integrating, institutionalizing the improvements into our system, into the way we are organized, into how we structure our requirements and the culture that we work on, on sustainable and continued improvement. So it's not going to happen. We will not allow it, but I know that there will be pressure on this. But that's the whole idea. Get down there. Find ways of working, new approaches. And I believe a subject like standardization. We haven't talked about that. I think there's a huge potential in the industry, but it's basically an industry. So we can standardize within Statoil, but…

It's a very good question. And this is something that is discussed internally a lot, how to avoid this from happening. And Eldar has been internally as clear as he was now on this is not going to happen. And part of the way we're thinking is let's assume this project to be marginal regardless of price. Let's assume it to be marginal. Let's improve it and then we develop it. And then if the oil price is $60 or way higher, I mean, it just means that we make more money. So that's kind of the instilled mind-set.

Just a quick comment. This a cultural journey, as Eldar says. And there has been lots of improvement initiatives around Statoil in the previous period. But what I see by introducing the step program corporate-wise, it has really been a muscle to drive this culture forward. And that is what we will now make sustainable even if we have a shift in the market.

Okay. I think that's a great moment to round off with the questions. So before Eldar just can get some concluding remarks, I just like to, on my behalf, thank everybody for coming, and thank all the corporate executive committee for coming through and being able to meet investors and analysts today. Eldar? Eldar Sætre: So thank you, Peter. And thanks to all of you for coming. I know it's busy times. And I really appreciate that you took time that you have shared with us. So allow me to just give you a personal reflection, actually. I've been in the industry for even longer than Margareth. So it's more than 35 years now and I might be starting to forget things, but I don't think so. So -- and honestly, to be -- what we are experiencing now, what we are trying to do in the company and we are well on the way is really the biggest transformation I've seen, really changing the nature of the curves, turning them downwards and really moving them and wanting to do even more. That's the biggest transformation I've ever seen. So we could stand here, all of us, and talk about numbers, even more numbers the whole day. But what I would say to you, and this is something I feel very strongly about as a CEO, is that what really matters if we're going to make all these changes, it's that the organization, all the people, 22,000 people, are with us. That they are engaged. That they are energized. That they can bring up the ideas. They want to improve. They collaborate. And that's exactly what I see. I spend a lot of time out there. I see exactly these things happening. We are addressing the cultural components of our…