Earnings Call Transcript - EQNR Q3 2025

Operator, Operator

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Equinor Analyst Call Q3. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the call over to Bård Glad Pedersen, Senior Vice President and Head of Investor Relations. Please go ahead.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Thank you very much, operator, and welcome to everybody who has called in for the analyst call for Equinor's third quarter results. Torgrim Reitan, our CFO, is here with me, and he will take you through the results before we open for the Q&A. As usual, we will close this session within 1 hour. So with that, Torgrim, I hand you to take us through the results.

Torgrim Reitan, CFO

Okay. So thank you, Bård and good morning, and thank you for joining us. Before we get to our results, I have a look at the Bacalhau, which came on stream in October. It is the first presold project in Brazil, developed by an international operator. We reserved more than 1 billion barrels and production capacity of 220,000 barrels per day. This will contribute significantly to our international growth. The results and cash flow we report today are driven by strong operational performance. Production is up 7% from third quarter last year. Johan Sverdrup delivered close to 100% regularity and Johan Castberg is producing a plateau with a premium to Brent of around $5. The adjusted operating income was $6.2 billion before tax and net income was negative $0.2 billion, impacted by net impairments, mainly due to lower long-term oil price outlook. Year-to-date, our cash flow from operations after tax has been strong at $14.7 billion. Our adjusted earnings per share was $0.37, impacted by negative results from financial items and a one-off effect related to decommissioning of Titan. Energy markets continue to be volatile. Geopolitical unrest, tariffs and trade tensions continue to impact pricing and trading conditions. We are prepared for this. We have a solid balance sheet, strong production and a robust portfolio. In addition, we take forceful action to manage costs. These efforts are visible in our results. Costs are now stable year-to-date compared to last year, and this is in line with what we had at the Capital Markets update in February. Operating costs for our Renewables business have decreased by around 50% compared to the third quarter last year, and we expect it to be down by 30% on an annual basis. This is driven by less business development and reduced early phase work. On the NCS, we have stopped 2 early phase electrification projects that were not sufficiently profitable, and this reduces costs now and CapEx going forward. By this, we are demonstrating that we can beat inflation and we can keep costs flat even if we are delivering strong production growth. At Bacalhau, we started production from the first producer and ramp-up will continue through 2026. On the NCS, we had 7 commercial discoveries. I want to highlight Aker BP's important discovery in the Yggdrasil area, where we have a material ownership position. Let me also mention Smørbukk Midt. It was discovered and put in production during the third quarter, and we expect payback within 6 months. As you know, we participated in Ørsted's rights issue. It was executed at a significant discount, and overview of the underlying value in Ørsted supported our participation. The cash flow impact of around $900 million will be in the fourth quarter, impacting our net debt ratio by around 2 percentage points. Following this decision, we will now seek a more active role by nominating a candidate for the Board. We believe a closer industrial and strategic collaboration between Ørsted and Equinor can create value for shareholders in both companies. Then to capital distribution. For the quarter, the Board approved an ordinary cash dividend of $0.37 per share and a fourth and final tranche of the share buyback program for 2025, of up to $1.266 billion, including the state's share. With this, total capital distribution for the year will be around $9 billion. Safety remains our top priority. This quarter, we continue to have strong safety results. However, we had a tragic fatality at Mongstad, and safety work needs to continue with full force. Learnings from the accident will be implemented. In the quarter, we produced 2,130,000 barrels per day. This is 7% up from last year, and we are on track to deliver on our guiding 4% production growth for the year. On the NCS, production was even stronger with 9% growth. Johan Castberg, a new field on stream of developments in Brent, and strong performance at Johan Sverdrup are important contributors. NCS gas production was impacted by planned maintenance and the prolonged shutdown of Hammerfest LNG. U.S. onshore gas production was up 40%, capturing higher prices, and U.S. offshore was up 9% from last year. Internationally, outside the U.S., production was down due to the temporary stop at Peregrino and the divestment in Azerbaijan and Nigeria. We produced around 1.4 terawatt hours of power this quarter, driven mainly by the start-up of new turbines at Dogger Bank A and contributions from onshore renewable assets. At Empire Wind in New York, all 54 monopiles are now installed and the project execution is progressing well. In October, Maersk informed us of an issue concerning its contract for the wind turbine installation vessel that is planned to be used at Empire Wind in 2026. We are working to solve this quickly. Now over to our financial results. Liquids prices were lower than the same quarter last year, while average gas prices were higher, particularly in the U.S. Adjusted operating income from E&P Norway totaled $5.6 billion before tax and $1.3 billion after tax. These results were impacted by production roles, but also increased depreciations due to new fields coming on stream. Our E&P International results reflect lower production but also lower depreciation. Peregrino and our assets tied to Adura IJV are classified as held for sale. As such, we no longer depreciate that. Our E&P U.S. results are driven by increased production, but these results were impacted by a one-off effect related to decommissioning of the U.S. offshore Titan field of $268 million. It has very limited cash flow effect in the quarter, but we are now booking expected future operating costs related to this. For M&P, we are changing our guiding and expect to deliver average adjusted operating income of around $400 million per quarter. The upside potential is larger than the downside risk to this guiding. The updated guiding is mainly due to changed market conditions. In addition, it reflects that we have previously divested some gas infrastructure. Our renewables results reflect high project activities but also significantly lower business development and early phase costs. In our reported financial results, we have net impairments of $754 million. The main driver for these impairments is lower long-term oil price assumptions. Our E&P International business booked an impairment of $650 million tied to our assets being transferred to the Adura IJV due to lower price assumptions. More than half of the impairment is due to no depreciation on the assets held for sale. In the U.S. offshore assets, we had impairments of $385 million, mainly due to lower price assumptions. In M&P, we have a reversal at Mongstad of $300 million due to higher expected refinery margins. This quarter, cash flow from operations was $9.1 billion, repaid to NCS tax installments totaling $3.9 billion. Next quarter, we will have 3 installments of around NOK 20 billion each. We distributed $5.6 billion to our shareholders, including the state's share of buybacks from last year of $4.3 billion. Organic CapEx was $3.4 billion, and our net cash flow was negative $3.6 billion. We have a solid financial position with more than $22 billion in cash and cash equivalents. Our net debt to capital employed ratio decreased to 12.2% this quarter. At current forward prices, we expect the net debt ratio at the end of the year to be in the lower end of the guided range, 15% to 30%, the same as we have said at earlier quarters. Finally, we maintain our guiding from CMU in February, both in terms of production and CapEx as well as capital distribution. So thank you. And then over to you, Bård for the Q&A session.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Thank you, Torgrim. We have a good list already. So let's get going. And first one on the list is Irene Himona from Bernstein.

Irene Himona, Analyst

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

Torgrim Reitan, CFO

Thank you, Irene. First of all, the unit depreciation charge on E&P Norway is up. That is driven by new assets onstream this quarter, particularly Johan Castberg and also smaller developments coming onstream. So these will sort of depreciate over time. You should expect a gradual reduction going forward on that basis. The second one is related to Ørsted. Yes, we participated in the rights issue. That is a recommitment to our shareholding, and we would like to use the opportunity to clarify more around how we think about the ownership position. We do want to take a more active role as a shareholder with also Board seats in due time. It’s important to say that the offshore wind industry is leading through its first real downturn with a lot of challenges. We've seen that with Ørsted and in the share price development in Ørsted. In times like that, consolidation is typically what happens. We think that this industry needs consolidation. We believe that a closer collaboration between Ørsted and ourselves will create shareholder value for both our shareholders and Ørsted's shareholders. Our competence base very well complements Ørsted, and being part of the Board with a long-term industrial perspective in a company like this will benefit both parties. I also appreciate that there are uncertainties related to what this means. In the current environment, we are going to limit significant capital commitments into offshore wind. It is an industry that is challenged. We will continue to develop our assets in Empire Wind, Dogger Bank, and Baltic projects, but we will be very careful with further commitments into offshore wind. The same goes for our holding in Ørsted. The threshold to commit new significant capital is high for the time being. I wanted to leave that with you because I know it raises questions about what might happen here.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

The next question is from Biraj Borkhataria from RBC.

Biraj Borkhataria, Analyst

Just the first one on the MMP guidance. I wonder if you could dive into a bit more detail around the change in factors there. Also, you've gone from a range of $400 million to $800 million to a single figure. Is there a signal factor in there that either you see fewer opportunistic opportunities to trade or if you are just taking less risk given the changing environment? A follow-up on Ørsted, just trying to understand why you didn't consider a Board seat in the first place. It was not part of the discussion at the time around the CMU. What has changed?

Torgrim Reitan, CFO

Thanks, Biraj. First, on MMP guiding, we are changing our guiding to around $400 million on a quarterly basis. We see that the risk is asymmetrical here, meaning more upside than risk to the downside. This is a change because we previously provided guidance of $400 million to $800 million. It’s worth reminding you that before the war in Ukraine, the guiding was $250 million to $500 million. The market has changed rather a lot. On the gas side in Europe, the situation has normalized, both in terms of absolute price levels and volatility. The global market is driven significantly by political decisions, making it harder to trade optimally. We’ve also divested some gas transportation assets, which impacts our current strategy and results. We opted not to use a range going forward because we've seen overshooting with that method in the past. We want to ensure you have an up-to-date insight on MMP results, hence our approach. Importantly, this is not unique to Equinor; all companies are facing challenges in the trading environment. Regarding Ørsted, we believe that our long-term industrial experience can benefit Ørsted, particularly through Board involvement. The support offered will be crucial for the company throughout its cycles and development phases, considering our extensive experience in project management and risk management.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next one on my list, Teodor Sveen-Nilsen from Sparebank 1 Markets.

Teodor Sveen-Nilsen, Analyst

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

Torgrim Reitan, CFO

Thanks, Teodor. On your first question, in the current situation, it was also important to signal that we were a supportive shareholder in what has happened over the last few months. Taking a Board seat is significant for us. On Bacalhau, yes, Bacalhau started on 15th October. It is likely the most complex development that we have done, being over 2,000 meters deep in water. I’m proud to report that it has started. Regarding the ramp-up, there are 2 drillships on location currently, and there will be 19 wells being drilled on Phase 1: 11 producers, plus water and gas injectors. This ramp-up won't follow the pattern seen in Johan Castberg, as this will involve continuous drilling and completion extending into 2025 and beyond. It’s too early to specify an exact date when it will reach plateau production, but progress is good.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next one is Jason Gabelman from TD Cowen.

Jason Gabelman, Analyst

I am going to start also on Ørsted. It relates to potential outcomes, specifically talk of a joint venture formation between the two parties. There are speculations on cash that Equinor would need to contribute into the joint venture. In relation to your 3 offshore wind projects: How much equity capital have you spent in those projects thus far, and how much is left to be spent on those 3 projects? My follow-up question is regarding the global gas market. There's seemingly been a surprising amount of LNG projects sanctioned year-to-date. Given China's demand is slowing down and with thoughts on Power of Siberia 2 coming online eventually next decade, can you just update us on your outlook for the global gas market and whether it has shifted at all, considering the developments we've witnessed year-to-date?

Torgrim Reitan, CFO

Thanks, Jason. On Ørsted, I don’t want to speculate much on the potential outcomes now. There are various alternatives to consider. We are looking for ways to improve the free cash flow for Equinor and clarify the underlying valuation within offshore activities. We are also being cautious in making significant further capital commitments within offshore wind in the current environment. In terms of the 3 projects and remaining equity injections, I can provide some insights. Dogger Bank is well underway with production gradually starting up. There are some more equity that will be injected. Project financing remains leveraged in the high 70s. For Empire Wind, there will be significant equity injection in 2026, close to $2 billion, and the following year we expect to receive investment tax credits for a similar amount. Empire Wind will be cash flow neutral over the next 2 years before finalization. We also have Baltic 2 and 3 projects in Poland with high leverage and strong project potential, meaning that limited additional capital is needed. It’s essential to note we have 3 major projects in progress with relatively low remaining capital needs. Regarding the global gas market, in the short term, this winter, the market appears tighter than many think. We are currently at a storage level around 83%, 12 percentage points below last year. If we face a cold winter, it may significantly impact the market. If it’s a normal winter, we might see prices similar to last year. Short-term pricing is highly influenced by weather patterns. Looking ahead, we are expecting increased LNG supply, which is no surprise, as this was planned along time ago. The real question is how quickly these projects will come online, as there might be delays to watch for. We're still witnessing healthy demand in Asia, overall with about 3% growth annually. Additionally, U.S. gas prices have become more of a political topic domestically, especially as data centers and AI will heavily influence power prices. Utility bills in households are now becoming key election topics and could result in limitations on natural gas exports, which is something we are monitoring closely. However, our $2 per MBTU production cost, sold into an $11 market, demonstrates that we are very robust in this environment. Lastly, the potential sanctioning of Russian LNG, around 17 Bcm, is something to keep an eye on for European markets as well.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next question is from Chris Kuplent from Bank of America.

Christopher Kuplent, Analyst

I have some rather boring questions, Torgrim, regarding detail. Can you help us review what happened in the 9 months regarding your net working capital? The results look great. Additionally, could you combine that review with an outlook on where you think we are heading?

Torgrim Reitan, CFO

Thanks, Chris. Working capital is clearly a very important part of what we manage diligently. This quarter, working capital is down by $1 billion; the total working capital now is $3.7 billion. This reduction during the year was approximately $3 billion. The decline is closely linked to commodity prices and M&P-related reductions. While I won't provide an outlook on this, I would say the current levels reflect the market's structure and ongoing volatility. This is a fair level. During the energy crisis, we held massive working capital due to higher price levels, but volatility has since normalized. Regarding the discount to Brent, yes, Johan Castberg began operations over the summer. Johan Castberg achieves a $5 premium to Brent, which clearly impacts the overall discount.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next question is from Henri Patricot from UBS.

Henri Patricot, Analyst

Two questions for you. First, I was wondering if you could update us on the timing of the Peregrino disposal. Secondly, on Johan Sverdrup, you mentioned the field continues to produce at a very high level. Are you considering how that will evolve going into 2026 and to what extent we may see a decline next year?

Torgrim Reitan, CFO

All right. Regarding Peregrino, it was shut in during the autumn but came back onstream on October 17th and is currently producing more than 100,000 barrels per day. We have transacted and will divest our 60% ownership of the asset to Prio in Brazil. The transaction consists of two legs: we expect to close 40% of the 60% in the fourth quarter and the remaining 20% in the first quarter next year. The headline transaction value was $3.5 billion, with an effective date of January 1st, 2024. Expectation is that we’ll receive a little below $3 billion, with two-thirds of that in the fourth quarter and one-third in the first quarter. It’s important to us that we still have a long-term commitment to Brazil to redeploy resources to Bacalhau and Ria, effectively high-grading our Brazil portfolio. In relation to Johan Sverdrup, yes, Johan Sverdrup has maintained strong production this quarter, close to 100% regularity, which is a remarkable achievement. We have actively optimized the asset to enhance production and recovery rates. Currently, recovery rate stands at 75%, which is significant. Multilateral wells and water management efforts are ongoing here, with Phase 3 standardized for completion by the end of 2027. In 2025, we expect to maintain production levels similar to '23 and '24. However, production is projected to start declining, so we should anticipate lower production from Johan Sverdrup next year compared to 2025. But we will work diligently to sustain as high production as possible.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

The next question is from Michele Della Vigna at Goldman Sachs.

Michele Della Vigna, Analyst

I wanted to revisit your note about being capital efficient with offshore wind, given the increase in global power demand. I wonder if there are other areas in power markets where you see opportunities and might consider reallocating capital from offshore wind, which currently has lower returns.

Torgrim Reitan, CFO

We believe there is value to be found in the Power segment. We've established a new business area called Power. We are looking for opportunities that leverage our current portfolio and customer base; we have a significant presence with our gas positions in Europe and the U.S. That said, I must emphasize that we do not plan on significantly increasing investments in this area right now. We face a period of lower prices, and remaining capital disciplined is critical. Any new capital commitments need substantial profitability and returns before we proceed.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next, one question from you to Peter Low from Rothschild & Redburn.

Peter Low, Analyst

I’d like to ask about the cash tax paid during the quarter, which appears a bit lower than expected. Seems you paid 2 NCS installments of $3.9 billion, yet the total cash tax paid in the cash flow statement was $3.8 billion. Were you receiving refunds from other regions? Can you possibly clarify this number?

Torgrim Reitan, CFO

Yes, thank you, Peter. There are a couple of points. We’ve had 2 tax installments in the second quarter, with 3 expected next quarter in Norway. There is a timing effect associated with falling prices, as we are still paying taxes based on earlier higher price environments. Also, internationally, reported tax levels are notably higher than what has been paid, particularly in the U.K. with the EPL and Rosebank investments offset against taxes in the U.S. as well.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

The next question is from Naisheng Cui from Barclays.

Naisheng Cui, Analyst

Just one follow-up on MMP guidance. You mentioned in your report that part of the reason for cutting MMP guidance was the divestment of gas infrastructure assets. Can you isolate that impact specifically?

Torgrim Reitan, CFO

Sure, that’s $40 million per quarter. We executed this divestment approximately 1.5 or 2 years ago. Initially, we didn’t feel the need to account for it when repeating guidance in our quarter reports. But since we’ve changed the guiding, we found it useful to mention.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next is Paul Redman from BNP Paribas.

Paul Redman, Analyst

I may be a bit early, but I wanted to ask about your distribution program for next year. Given the volatile outlook for oil prices and the lack of clarity on gas prices, alongside a reduction in debt this quarter and projections for a return in Q4, how should we think about the distribution program for 2026? Also, can you confirm whether you'll provide guidance for the four quarter results, or during the Capital Markets Day later in the year?

Torgrim Reitan, CFO

Thanks, Paul. There are compelling reasons to prepare for reduced prices, which we all know. Last year, we reduced investments by $8 billion for several years and have lowered costs. We will continue to do this to enhance free cash flow amid the current environment. Capital distribution is prioritized in our capital allocation model. You should consider the cash dividend as bankable. It is assured to be distributed. We also plan on share buybacks regularly, and it is an integral aspect of our capital distribution strategy. We aim to be competitive in our overall capital distributions, and we know our peers are using formulas related to cash flow. You should regard that kind of levels as competitive for us. Just to highlight, we understand the specifics of Norwegian tax which will always impact our distributions slightly. Regarding next year’s calculations and distribution scenarios, we plan to provide concrete updates during the fourth quarter results in February. Significant investments are necessary for Empire Wind equity at around $2 billion next year. Following that year, we expect to retrieve approximately the same amount via investment tax credits. Hence, we will consider our capital distribution for 2026 with this two-year perspective. It’s not feasible to stick to a single formulaable range, as there may be years we want to safeguard our balance sheet or lean on it. However, we promise to remain competitive and review the impacts of investment requirements. Finally, our current net debt is at 12%, and we expect to see a continuing decrease to the low end of our range by year-end. There are a few factors to consider: 3 tax installments, payment from the rights issue at $900 million in the quarter, and partial returns from the Peregrino transaction funds. Yet, we maintain guidance for net debt year-end, even after the $900 million spent on the Ørsted rights issue, driven by strong operational results and cash flow. So, that was a long answer but needed to address an important question.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

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

Martijn Rats, Analyst

I wanted to ask about the impairment charge. The long-term oil price assumption has declined but still reflects $75 a barrel. This drop has triggered $750 million of impairments, suggesting that several projects in your portfolio had breakeven costs well above $75 a barrel. Is this a correct interpretation? If your projects have breakeven costs below $75, a lower long-term assumption wouldn’t trigger an impairment, right?

Torgrim Reitan, CFO

Martijn, thank you for your question. Several qualifications must be made regarding this matter. First, for U.K. assets, we’re reporting impairments of $650 million. This isn't linked to the transaction with Shell but is driven by lower oil price assumptions, as you noted. An important driver for this impairment is that these assets are classified as held for sale. Consequently, they haven't been depreciated this year. Had they been depreciated normally, the impairment would’ve been significantly lower. The U.K. portfolio includes part of our acquisition with Suncor and its Buzzard field, which sits within the balance sheet at acquisition cost, impacting the asset value as well. Additionally, there are two assets in the Gulf of Mexico also suffering impairments, primarily due to pricing issues resulting from operational challenges for years. Overall, the majority of our asset portfolio remains strong and resilient against impairments.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next on the phone is JPMorgan's Matt Lofting.

Matthew Lofting, Analyst

I'd like to revisit Empire Wind. I believe you mentioned in your opening remarks an availability issue that emerged with the installation vessel with Maersk. Could you expand on the situation and whether it poses any risk to the future development progress of Empire Wind for next year?

Torgrim Reitan, CFO

Thanks, Matt. It's fair to say that Empire Wind has had a challenging year, with a stop work order that has been reversed. I must commend our team's efforts for catching up on lost time this critical year. We're now 55% complete; all monopiles are installed. The issue pertains to a dispute between Maersk and Seatrium, regarding the installation vessel, which is nearly finished. Maersk has canceled the contract. We’re evaluating the situation closely to either resolve this issue or find alternative solutions. The market is well-functioning, with numerous opportunities available, so we are confident we'll manage this successfully.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

We move on to James Carmichael from Berenberg.

James Carmichael, Analyst

On the U.K. and Rosebank, I was wondering what the latest status is on the approval process. Additionally, with clarity emerging regarding the fiscal outlook in the U.K., could you share your general thoughts?

Torgrim Reitan, CFO

On Rosebank, as you may know, the permit was previously withdrawn due to the requirement to manage Scope 3 emissions during the award process. We have recently submitted our response to the regulator, and they’ve already turned it into public consultation. This consultation is expected to conclude by November 20th. There is no definitive date on the decision yet, but we are collaborating closely with the ministries to expedite things. Regarding the fiscal outlook in the U.K., it’s reasonable to say there have been repeated tax changes affecting the market, which is concerning. We advocate for a stable fiscal framework to foster a conducive investment environment.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Next is Kim Fustier from HSBC.

Kim Fustier, Analyst

One of your Norwegian competitors has recently raised concerns that there may not be enough projects on the NCS within a year or two to sustain a healthy domestic supply chain. Given your shift from large greenfield projects to smaller brownfields, could you share your views on the NCS supply chain outlook and cost inflation?

Torgrim Reitan, CFO

We are currently experiencing a period of high activity, partly due to the tax incentive program established during COVID. Many of these projects are nearing production. Naturally, following this asset buildup, lower activity levels can be expected. Our approach as a company is to adapt to that situation. It’s worth mentioning a project we’ve initiated called NCS 2035, aimed at maintaining production levels on the Norwegian Continental Shelf until 2035. This future will include more smaller discoveries, quicker development timelines, and a necessity to operate at lower costs. We plan to drill 30 exploration wells annually, as opposed to fewer now, and aim to conduct 6 to 8 subsea developments yearly, exceeding our current output. Through these strategies, we expect to significantly contribute to maintaining activity levels on the Norwegian Continental Shelf, making us optimistic about our operations and collaboration with suppliers.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

We are fast approaching the hour. However, let's take one final question. That will be Steffen Evjen from DNB.

Steffen Evjen, Analyst

Just a quick reminder regarding the tax credit in the U.S. What milestone do you need to achieve for that credit to be paid? Is it the first power or construction completion on the project?

Torgrim Reitan, CFO

Yes, it is tied to production commencement, so first power is the key milestone.

Bård Glad Pedersen, Senior Vice President and Head of Investor Relations

Thank you very much. We are now at the hour. I would like to thank you all for calling in and for your questions. As always, the Investor Relations team remains available. If there are any outstanding questions, please give us a call, and we will do our best to help you. Thank you very much, and have a good rest of the day.

Operator, Operator

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