Earnings Call Transcript - EQNR Q2 2024

Operator, Operator

Thank you for standing by. My name is Angela and I'll be your conference operator today. At this time, I would like to welcome everyone to the Equinor Second Quarter Analyst Conference Call. All lines have been placed on mute to prevent any background noise. I will now like to turn the call over to the presenters. You may begin.

Bard Glad Pedersen, Head of Investor Relations

Thank you, operator. My name is Bard Glad Pedersen. I'm head of Investor Relations at Equinor. Welcome all to the analyst call for our second quarter results. As usual, I'm here together with our CFO, Torgrim Reitan, who will take us through the results before we open the Q&A. So with that, I hand it to you, Torgrim.

Torgrim Reitan, CFO

Thank you, Bard. Good morning, and thank you for joining us. I hope you are enjoying your summer. Let’s dive into the results. The second quarter shows good progress and confirms what we communicated at our Capital Markets Day. We are pleased to report solid financial results driven by continued strong operational performance. In this quarter, we achieved adjusted operating income of $7.5 billion before tax and an IFRS net income of $1.9 billion. Year-to-date, we have generated cash flow from operations after tax of $7.7 billion. Taxes in the second half of 2024 will be lower, and we anticipate cash flow from operations to be approximately $17.5 billion for the year. I will return to this shortly. Adjusted earnings per share were $0.84. Across our portfolio, we are making strategic advancements. On the NCS, we started production from the Kristin South area earlier this month, and the partner-operated Hanz field commenced production in April. Along with our partners, we made an investment decision for the field that will accelerate production and maintain high gas export levels, which holds a net present value of over $500 million for Equinor. We continue to improve our oil and gas portfolio. In Norway, we are aligning our ownership interests across licenses through a swap with Petoro, which will be vital for accelerating production and reducing costs. In the U.S., we concluded a swap transaction in Onshore Gas with EQT, enhancing longevity and resilience while lowering the breakeven for over a million tons in injection capacity annually. For Empire Wind, we secured a new higher strike price of $155 per megawatt hour earlier this year. We are progressing with the project, and our next external milestone will be the financial close. The competitive capital distribution is on track with what we laid out at our Capital Markets Day. For the quarter, the Board approved an ordinary cash dividend of $0.35 per share and an additional $0.35 as an extraordinary dividend. At CMU, we rolled out a two-year share buyback program to enhance predictability, totaling $10 billion to $12 billion with $6 billion allocated for this year. As part of this initiative, we will announce a third tranche of up to $1.6 billion starting tomorrow. For 2024, we expect total capital distribution of $14 billion. Safety remains our top priority, and our long-term safety trend is positive. Our reported safety performance has never been better, but we recognize this is an ongoing effort. In June, we presented the Internal Investigation Report regarding the helicopter accident in February, which we will use to further strengthen our protocols. We recorded around 3% production growth this quarter, aligning with our expectations. On the NCS, we had strong operational performance and good regularity, with total production up 5% from the same quarter last year, while gas production rose 13%, significantly driven by Troll and Oseberg, along with contributions from new fields like Breidablikk and Hans. Efficient execution of turnarounds minimized production disruptions. We have reduced the overall turnaround impact for the year to 55,000 barrels per day. For E&P International, production increased by 2.5%. The Buzzard field in the U.K. and U.S. contributed positively, although we experienced some offset due to turnarounds and lower production in Brazil. For E&P U.S., production decreased as expected, with setbacks in U.S. Offshore caused by the planned turnaround on Caesar Tonga. Our onshore gas production saw some curtailments in June, which we had signaled would occur as operators aim for higher value. Our renewables production has significantly increased compared to last year, primarily due to onshore power plants in Brazil and Poland. Offshore wind production in the U.K. also rose. At Dogger Bank A, 27 turbines have been installed, but we now expect full commercial production in the first half of 2025, affecting our production outlook this year. Concerning our financial results, liquids prices are higher year-over-year. In this quarter, we saw an uptick in European gas prices. As anticipated, storage levels in Europe are robust, but the market remains fragile, leading to substantial fluctuations with small changes. Future prices will depend on weather conditions, European demand, competition for LNG, and uncertainties related to transit through Ukraine, along with potential supply disruptions. E&P Norway results were bolstered by strong production, yielding adjusted operating income of $6.1 billion and $1.4 billion after tax. Our international E&P segments produced $963 million in adjusted operating income and nearly $700 million after tax. The Argerich well in Argentina was a dry hole and expensed during the quarter. The overlift in the second quarter generates approximately $250 million in adjusted operating income for E&P Norway and around $170 million for E&P International. Our MMP results were boosted by European piped gas and strong LNG trading, aided by successful power trading, though impacted by turnarounds at Mongstad and high activity in low-carbon solutions. Our operational renewable assets contributed $41 million this quarter, although the adjusted operating income remains negative as expected. We will maintain discipline and avoid overspending as this is vital for developing a profitable business. Since the second quarter of last year, adjusted operating expenses and selling, general, and administrative expenses rose by 11%, driven by higher production, overlift effects, inflation, and increased activities in renewables and low-carbon solutions. We note a 4% underlying increase in upstream costs, consistent with production growth. We continue to focus on capital discipline and cost control. Regarding cash flow, this quarter, our cash flow from operations was $1.9 billion after tax. We settled the final two NCS tax installments based on 2023 results, totaling $7 billion this quarter. In the second half of the year, we will pay three NCS tax installments: one in the third quarter and two in the fourth quarter, each amounting to NOK 31.3 billion, which is lower than in the first half of the year. We project cash flow from operations this year to be around $17.5 billion after tax. Although current gas prices are below our CMU price assumptions, oil prices remain somewhat higher, with the Norwegian tax system mitigating the lower gas prices' impact. For next year, we aim to achieve about $20 billion in cash flow from operations after tax. This quarter, we distributed a total of $2.5 billion in capital. Organic capital expenditures were $2.9 billion, totaling $5.7 billion year-to-date. After accounting for taxes, capital distribution, and investments, our net cash flow was negative, as anticipated, at $4.2 billion for the quarter. We maintain a strong financial position with $32 billion in cash and cash equivalents, while our net debt to capital employed ratio increased to negative 3.4% this quarter. It is important to note that following our AGM in May, the state's share of buybacks from last year was classified as financial debt, affecting the net debt ratio for the second quarter. However, we completed the $4 billion payment in July, which will influence cash flow in the third quarter. We expect a negative net cash flow for the year, consistent with our indications at the CMU, but anticipate a positive net debt ratio by year-end. Finally, our guidance for capital expenditures and oil and gas production remains firm. We have updated our renewables production guidance, expecting it to grow by about 70% this year, mainly reflecting progress on Dogger Bank A. Now I'll turn it back to you, Bard, and I look forward to your questions. Thank you.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Torgrim. We are ready to start the Q&A, and I see we have a good list of questions already, which is excellent. We will try to keep it within the hour since we started. The first question is from Martijn Rats of Morgan Stanley. Please go ahead.

Martijn Rats, Analyst

I was wondering whether the overlift in this quarter will be mirrored in an underlift in the next quarter or the quarter thereafter. Additionally, is this just a volume effect, or is there also a price/revenue element? Can you talk a little about that? Secondly, last quarter, you mentioned that European industrial gas demand was starting to show signs of life, something like up 5% on a weather-adjusted basis. However, with your comments now and other remarks you made this morning, perhaps that has reversed. Could you provide an update on that?

Torgrim Reitan, CFO

Thank you very much, Martijn. This quarter, we had an overlift situation both within the NCS assets and also internationally. I want to remind you that on the NCS, we had a similar underlift in the last quarter that corresponds to the overlift in the current quarter. There is no carry forward or effect from this; it fluctuates quarterly. The same applies for international E&P. This will bounce between overlift and underlift from quarter to quarter. In Norway, the overlift was seen across various assets, while internationally, it was primarily related to Angola and Azerbaijan. Regarding industrial gas demand in Europe, we are observing continuous growth. Currently, we're seeing approximately a 10% increase in industrial gas demand in Europe. This is encouraging, as the total industrial gas demand in that market is around 100 bcm annually, contributing to elevated demand levels. However, other drivers, particularly the demand from Asia, are arguably more significant for setting prices in Europe. This year, we observe an 8% growth in Chinese demand, which is crucial to monitor closely. The weather is also a factor, as this summer, the warm weather in Asia and China increases gas demand for power generation and air conditioning, directly impacting LNG demand. I'll also draw your attention to the transit of Russian gas through Ukraine, currently around 13 bcm. The Ukrainian government has indicated a desire to end this transit by year-end, making it another area to watch for demand-supply balances in the European gas markets.

Martijn Rats, Analyst

Wonderful. Thank you very much.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Martijn. The next question is from Teodor Sveen Nilsen in SpareBank 1 Markets. Teodor, please go ahead.

Teodor Sveen Nilsen, Analyst

Good morning, and thank you for taking my questions. First, regarding your production guidance for oil and gas, Torgrim, during the first-quarter presentation, you mentioned expectations of lower production, and we are seeing that in the second quarter. How should we view the total production guidance for the year being flat year-over-year? Do you still see any downside risk to that? My second question concerns renewable energy. I understand that there have been recent reorganizations in your Renewable business, and you may consider reducing the project portfolio somewhat. How will this impact your long-term target of 35 to 60 terawatt hours of production by 2030? That target appears ambitious, so any thoughts you could share would be helpful.

Torgrim Reitan, CFO

Thanks, Teodor. On the production guidance, this quarter, we have seen strong operational performance and our maintenance activities were very effective. Additionally, we closed the Equity transaction, which slightly boosts our volume. Regarding the downside we mentioned last quarter, this was mainly related to expected curtailments in U.S. gas production, which we still anticipate. However, our production remains robust, so we stand firm on our guidance. On the renewables and targets, we aim to build our renewables and low-carbon business atop our oil and gas operations, maintaining a $10 billion annual investment. It is crucial that these investments create value, are robust, and profitable. Capital discipline is the overarching principle guiding our business building. If needed, we will choose projects based on value creation rather than mere volume targets. The ongoing projects are advancing, and they will contribute clearly to growing our renewables production. We are still moving towards our stated ambitions, but we will intensely focus on cost reduction and target our investments where we see viable value creation.

Teodor Sveen Nilsen, Analyst

Okay, thank you.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Teodor. The next question is from Biraj Borkhataria from RBC. Biraj, the line is open.

Biraj Borkhataria, Analyst

Hi, everyone. Thanks for taking my questions. I have two. The first one concerns the Rosebank sale. Previously, you mentioned selling down your interest but postponed the sale due to government changes. Could you provide any clarity on fiscal changes, particularly regarding whether there could be retroactive changes in the U.K. oil and gas taxes? This would likely impact the economics for both you and potential buyers. The second question pertains to Empire Wind. Is there an update on project financing progress? Are you still anticipating financial closure by year-end? Thank you.

Torgrim Reitan, CFO

Thank you, Biraj. Regarding Rosebank, we acquired 40% of Rosebank along with other U.K. assets from Suncor last year, so now we hold 80% of that asset, higher than we prefer. Earlier this year, we indicated our intent to farm down part of our interest, and dialogues with other companies regarding these assets are ongoing. Concerning your question about the change in the U.K. government and tax uncertainties, we are significant investors in the U.S. and maintain communication with the government at all levels. They recognize the industry's needs and, following their election manifesto, have expressed a desire to create an attractive investment climate. They aim to facilitate growth and energy transition, suggesting they will tread carefully regarding tax changes, ensuring they remain business-friendly. In particular, capital allowances towards tax are crucial. Our interpretation of the manifesto indicates that they will work on changes that support a conducive business environment. Rosebank is an excellent asset with a low breakeven and is expected to start in 2027, making it vital for our cash flow at the decade's end. This was your first question. For your second about Empire Wind, as stated during the Capital Markets Day, this year marks significant derisking for the Empire Wind project. Several processes are underway, including negotiating a more favorable price with the State of New York, structuring project financing, and seeking to farm down a part of the asset. We recently secured an increase in the contract price from $118 to $155 per megawatt hour. Project financing is progressing, and we plan to achieve financial closure by year-end, which will be the next official milestone for this project. Additionally, successfully farming down the asset is critical, as we currently consolidate it 100%, reflecting in our CapEx guidance. To date, we estimate the CapEx impact of this project to be $1.2 billion this year and $1.5 billion next year. Successfully farming down this asset will lower our reported CapEx, as it will no longer be held on our balance sheet. So, the project is advancing according to plan.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Biraj. The next question is from Lydia Rainforth of Barclays. Lydia, please proceed with your question.

Lydia Rainforth, Analyst

Thank you, and good morning. I have two questions. First, regarding low carbon spending and its evolution, at some point, we need to acknowledge that our low carbon investments may escalate beyond what we can feasibly allocate. When might you reach that point, and could you clarify your stance on slowing down your current capital pace? Secondly, about cash returns. This year's capital distribution of $14 billion constitutes a significant portion of your market cap. With expectations of a decline next year and further reductions anticipated in 2026, could you provide guidance on expectations for 2026? Should we interpret that guidance as a baseline, or is there more to consider here?

Torgrim Reitan, CFO

Thank you, Lydia. I understand your concerns. Currently, the most mature project is the Northern Lights project, which enjoys government support and offers appropriate returns. We are also working on mature carbon capture and storage projects in the U.K. like Net Zero Teesside and NEP Endurance Storage project. All are advancing and providing appropriate returns. We are focused on CO2 pipelines from the continent to the Norwegian continental shelf, and while government support will be essential to lift those efforts, we believe this will foster a meaningful and beneficial return business. However, the hydrogen aspect has not advanced as quickly, and development work is still needed before we see a clearer roadmap for longer-term returns. Regarding cash returns or capital distribution, $14 billion indeed represents about an 18% or 19% yield. Next year, we anticipate that the cash return of $0.35 per share will increase by $0.02 annually, along with a standard share buyback of $1.2 billion and additional buybacks on top of that, together totaling $4 billion to $6 billion next year. When it comes to 2026, I can't provide specific details now. What I can confirm is that we will maintain the ordinary cash dividend and the $1.2 billion in standard share buyback. Additionally, we plan to leverage capital distribution to improve our debt-to-capital ratio. We will articulate further specifics during our Capital Markets Day in February. Capital distribution remains a key priority for us as leaders, requiring a competitive approach.

Lydia Rainforth, Analyst

Brilliant, thank you.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Lydia. The next question is from Yoann Charenton from Bernstein. Johan, please share your question.

Yoann Charenton, Analyst

Yes, good afternoon, Torgrim. I have three questions regarding M&A activities overall. First, how many assets are classified as held for sale as of June? Second, in relation to Rosebank, can you quantify its impact on the group's CapEx this year? Lastly, regarding any updates on the timing for closing announced deals but not yet finalized, particularly with Azerbaijan?

Torgrim Reitan, CFO

Thanks, Johan. Currently, the only asset classified as held-for-sale is the Azerbaijan asset. We also conducted a neutral value swap with Petoro this quarter across various licenses, one element of which is classified as held-for-sale. Regarding Rosebank, our CapEx remains firm at $13 billion, and this figure adequately reflects our planned divestments. For closing the Azerbaijan assets, we have signed agreements with Nigeria and Azerbaijan, and while I cannot provide a specific timeline, they are progressing well and getting closer to completion.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Johan. The next question is from Peter Low from Redburn. Peter, please.

Peter Low, Analyst

Thank you. Firstly, can you offer insights into the issues that have delayed the Dogger Bank project, which led to a reduction in power output guidance this year? Secondly, can we receive an update on your major upcoming oil and gas project startups, particularly Castberg? Is that still on track for first oil this year, and what about Bacalhau’s start next year?

Torgrim Reitan, CFO

Thank you, Peter. The operator of the Dogger Bank development is SSE, and they should provide an in-depth explanation on this matter. Currently, 27 turbines are either fully or partially installed, with seven turbines in production. The pace of progress is somewhat slower than planned due to a very windy summer; however, we expect to achieve full production in the second half of this year. Regarding major projects, Johan Castberg has moved from the yard on the West Coast of Norway and is in the fjord undergoing commissioning work, with plans to sail to the Barents Sea in August for production, expected by the year's end or in Q4. The estimated production for 2025 is approximately 80,000 barrels per day. Bacalhau is also progressing well; the vessel is currently in the Singapore yard, and subsea work in Brazil is ongoing, with first oil expected in 2025. Additionally, Rosebank is another significant project, along with two longer-term projects, Raia in Brazil and Sparta in the Gulf of Mexico, both expected to start in 2028. We have five substantial greenfield developments in motion, and they are progressing according to plan.

Peter Low, Analyst

Thank you.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Peter. The next question is from Kim Fustier from HSBC. Kim, please proceed.

Kim Fustier, Analyst

Hi, Torgrim. Thank you for taking my questions. I have two. First, I wanted to see if there's been any progress on Wisting and Bay du Nord, both of which were previously put on hold but seem to have shown some development in engineering procurement lately. Secondly, I noticed you've acquired a small lithium project in the U.S. It's a relatively modest acquisition, but can you comment on your seriousness regarding lithium? One of your U.S. peers seems to be quite committed to it. Any insights into that would be appreciated. Thank you.

Torgrim Reitan, CFO

Thank you, Kim. On Wisting and Bay du Nord, we've indicated that both require more development work before readiness. We've achieved good success pushing back projects to refine them further. Both projects are progressing; Wisting is headed toward a final investment decision in 2026. The Bay du Nord project is also progressing, and we hope to advance it to concept select relatively soon. There is an ongoing drilling program in the area, which may help substantiate further volumes. Concerning the cost and contracting environment offshore, I would note that the market is generally tight, and we are seeing inflationary pressures. However, for sanctioned projects, we maintain good control. Non-sanctioned projects have more exposure, but as a major investor and operator, we can manage this on a portfolio basis and limit inflation exposure. Regarding lithium, yes, we made an acquisition in Standard Lithium earlier this year. We see synergies between this project and our current activities, especially regarding subsurface operations. We regard lithium as an interesting commodity for the future and are taking an early, albeit small, position in this sector.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Kim. The next question is from John Schj. Olaisen from ABG. John, please.

John Schj. Olaisen, Analyst

Good afternoon. Thank you for your time. I have two quick questions. First, can you elaborate on the dry well in Argentina in Q2? Was the outcome so disappointing that you may cease exploration in that area, or do you plan to drill more wells there? Secondly, regarding the Renewable business, the equity accounting approach means that only a small portion of the underlying net debt is shown on your balance sheet. Can you provide an indication of the size of the balance sheet relating to the Renewable business?

Torgrim Reitan, CFO

Thank you, John. The Argerich well was dry; it was a frontier exploration well, naturally leading to lower discovery expectations. The license for Argerich is CAN-100, covering significant acreage. We have not concluded our plans yet and will analyze our next steps accordingly. We've conducted seismic coverage and have a reasonable overview of the area. Regarding the Renewable business's net debt, it stands at $3.54 billion at quarter's end.

Bard Glad Pedersen, Head of Investor Relations

Thank you, John. Next on the list is Henri Patricot from UBS. Henri, please.

Henri Patricot, Analyst

Thank you. Hello, everyone. I have two questions, please. The first relates to MMP and its low carbon projects. Should we expect an increasingly negative impact on earnings in MMP due to these developments? Was this quarter's performance particularly weak? Can you offer predictions for the next two quarters? Secondly, regarding Dogger Bank, the delays to Phase A lead me to wonder about implications for Phases B and C. Should we anticipate further delays, potentially affecting the project's full capacity launch?

Torgrim Reitan, CFO

Thank you, Henri. The MMP result of 521 is within the guided range, and MMP has continually delivered strong results since we introduced the increased guidance. LNG trading and gas trading specifically performed well this quarter. However, other sectors within MMP performed around expectations. The Mongstad refinery accounted for limited results this quarter due to maintenance. Once operational again, it typically contributes a meaningful portion to MMP's earnings. Moving to low carbon initiatives, we have accounted for early-stage business development costs in our guidance. These costs relate specifically to projects, not administrative expenses. As for Dogger Bank B and C, we expect these will follow sequentially with a one-year gap. While we are not influenced by current delays affecting Dogger Bank A, we project Dogger Bank B will achieve first power in the first half of 2025 and full power in the first half of 2026. Similarly, Dogger Bank C is expected to reach first power in the first half of 2026, subsequently achieving full power in the first half of 2027, maintaining the timeline we previously communicated.

Henri Patricot, Analyst

Thank you.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Henri. The next question is from Michele della Vigna from Goldman Sachs. Michele, the mic is yours.

Michele della Vigna, Analyst

Thank you very much, and congratulations on your solid performance. I will keep it brief with two questions. First, an update on Johan Sverdrup. We have seen another strong production quarter. When do you anticipate the field will start to decline? Has the timeline for this changed for next year? Secondly, regarding disruptions in the offshore wind supply chain, especially in the U.K., are you facing difficulties acquiring necessary vessels, or is this considered normal business variability?

Torgrim Reitan, CFO

Thank you, Michele. Johan Sverdrup production is proceeding as planned. We raised the production plateau level to 755,000 barrels per day earlier this year. We anticipate this production will begin to decrease by year-end or early next year. Managing well drilling and water handling are key components of our operation, with two new wells drilled this quarter. We’ve planned a further drilling campaign next year, focusing on multilaterals. Phase 3 of Johan Sverdrup will enter the concept select phase in Q4, with a slated start by late 2027. Concerning your query on the offshore wind supply chain, although there are some challenges, we are managing our ongoing projects effectively. Overall, we have what we need, despite the recognition of supply chain challenges within offshore wind.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Michele. Paul Redman from BNP Paribas, you are next. Paul, please go ahead.

Paul Redman, Analyst

Yes, can you hear me?

Bard Glad Pedersen, Head of Investor Relations

We can hear you now. Thank you, Paul.

Paul Redman, Analyst

Perfect. Quickly, in regard to turnarounds, you've projected 125 mboe/d for Q3 '24. In comparison, what was the planned maintenance for Q3 '23? My other question is about value over volume in renewables. If there are areas where you believe you could slow capital inflow, would that imply a reduction in the planned CapEx, or would it signal a reallocation into other business parts? Thank you.

Torgrim Reitan, CFO

On turnarounds, we do anticipate 125,000 barrels per day in Q3 this year. In Q3 last year, that number was 38. I can't speak to planned unplanned maintenance-specific impacts but recommend reaching out to Investor Relations for clarifications. Regarding value versus volume, our current intention is to invest $10 billion in our oil and gas operations, which remains firmly prioritized within our capital allocation process. If changes are necessary, we are currently following a guiding model and are not considering alterations to our CapEx guidance. Progress is in keeping with our expectations, and any changes we do consider typically affect earlier phase activities and not ongoing projects.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Paul. The next question comes from Christopher Kuplent from Bank of America. Christopher, please proceed.

Christopher Kuplent, Analyst

Thank you for the update. I only have one question. Torgrim, could you update us on the macro conditions prevailing when these new tax installments were established for the second half? Thank you.

Torgrim Reitan, CFO

Typically, this is closely aligned with forward prices from early spring. I don't have the exact figures, but checking the forward prices from early June should provide a good estimate for our calculations.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Chris. Moving on to Jason Gabelman from TD Cowen. Jason, the mic is open.

Jason Gabelman, Analyst

Yes, thanks for taking my question. Just one quick one: Next year, you forecast $2 billion in shareholder distributions. Please discuss the factors determining the low and high ends of that range. Is it influenced by commodity prices, or perhaps by aspects like the Empire Wind farm down? Are there critical items that could sway the balance towards the low or high end for next year?

Torgrim Reitan, CFO

Thank you, Jason. For next year, the anticipated shareholder distributions range from $4 billion to $6 billion; these figures aren't tied to any farm downs or the Empire Wind project. Parameters such as balance sheet strength and macro outlook will be the primary considerations influencing this range at that point.

Bard Glad Pedersen, Head of Investor Relations

Thank you, Jason. We are fast approaching the hour, but let’s take one final question from Matt from JPMorgan.

Matt, Analyst

Thank you for the update. I just wanted to clarify your full-year operating cash flow generation, as the run rate in the first half appears somewhat low, below $8 billion pre-working capital compared to the forecast of approximately $17.5 billion for the full year. Clearly, tax cash is expected to be lower in H2, but you’ve also noted a heavier turnaround impact, particularly in Q3. Where do you anticipate that run rate gap will begin to close in the second half? With lower gas prices, where does additional cash generation come from?

Torgrim Reitan, CFO

Thank you, Matt. You are correct in noting the first-half cash flow from operations at $7.7 billion compared to the expected $17.5 billion for the full year. We see a reasonably stable cash flow from operations before tax throughout the quarters. The tax payment shifts are the main reasons for this difference. U.S. production increases in the second half possess a favorable tax structure, which will help elevate after-tax cash flow. This contrasts maintenance expenditures on NCS, which incur a considerable tax burden. Therefore, tax payment timing and associated cash flow variations will explain most of the dynamics here.

Bard Glad Pedersen, Head of Investor Relations

Thank you, and thank you all for calling in and for your questions. We have surpassed one hour. As always, let me remind you that the Investor Relations team remains available for any follow-up questions. Thank you, and have a great rest of your day.