Equinor ASA (EQNR) 2006 Q1 法說會逐字稿

Ladies and gentlemen, welcome to this first quarter 2006 earnings presentation. My name is Lars Sorensen, and I'm the Head of Investor Relations. In addition to welcoming the audience here in Oslo, I would like to welcome the audience listening in and following the presentation via the Internet.

In the event of an emergency, we've got emergency exits there and up there, and you basically move straight out into the street and the meeting point is in the front of the main entrance. No fire drills are planned for today, so if the alarm goes it’s real.

This morning, at 8.30 Central European Time, the presentation material and other first quarter earnings materials was published both through Oslo Stock Exchange and on our website, statoil.com. Then I would like to direct your attention to the first page of the presentation set, where we have a disclaimer concerning the forward-looking statements and the non-U.S. GAAP measures used in the presentation.

With these words, I would like to pass the microphone to Statoil's Chief Financial Officer, Eldar Saetre, who will present the first quarter result. Eldar, the word is yours.

Thank you, Lars. Good afternoon and good morning to those of you listening in from the U.S. It’s a pleasure for me yet again to be able to present a quarter with record results for Statoil. Market conditions were favorable, both on the upstream side and on the downstream during this quarter. Oil and gas prices have been record high, and FCC margins and methanol prices was also up compared to the same quarter last year.

Short term, we do not see any major changes to the current strong oil market. Although there seems to be enough physical volumes available, the oil price continues to receive strong support from the prevailing political uncertainties. However, we do recognize that the higher the oil price climbs, the higher is also the likelihood of an adjustment at one point in the future and the more forceful it could be.

Not only the market conditions but also our operational performance showed progress during the quarter. Production is record high and we are also starting to see improvements, or indications of a permanent improvement, in our most important, as you’ll see, indicator. This is good news in itself, but it is also an indication that the underlying quality of our operations is improving.

We have added new acreage to our portfolio and have developed our business opportunities further, both on the Norwegian continental shelf and internationally. In general, we are on track to meet our targets for 2007 and in an excellent position to sustain profitable growth in the years to come.

Production has been at a record 1.237m barrels per day of oil equivalents this quarter. This has given an EBIT of NOK31b and a net income of NOK10.3b, yielding a return on average capital employed of 29.5%.

We sold 7.9 bcm of gas last quarter at an average of NOK2.02 per standard cubic meter. Of the sold volumes, 7 bcm was Statoil equity gas from the Norwegian continental shelf. In addition comes volume from our international E&P business of approximately 39,000 barrels a day of oil equivalents, or equivalent to 0.6 bcm of entitlement gas.

Our exploration activity has been stepped up significantly this quarter, both on the Norwegian continental shelf and internationally. We have completed seven exploration and appraisal wells in the quarter, and also two exploration extensions. All this is by end of April and this has yielded six discoveries. 10 wells are being drilled at the moment, as we speak. Five of those wells are on the Norwegian continental shelf and five international. And we have secured all of the planned drilling program for both 2006 and 2007, both on the Norwegian shelf and internationally.

Let me then present our 1Q numbers. The EBIT increased by 44% from the same quarter last year, to NOK31b, while the net income grew by 52% during the same period. As I have already mentioned, much of the improvement is coming from oil prices increasing 39% and gas prices 53% measured in Norwegian kroner. But also, as I indicated, the overall operational performance has improved, enabling us to benefit from the current strong market conditions.

Oil and gas production increased by 4% and this is mainly driven by gas production -- growing gas production on the Norwegian continental shelf, and the step up that we have seen in our international productions.

The earnings per share was NOK4.74 in the quarter, equivalent to $0.72 per share.

As usual, we have had portfolio adjustments and other items with one-time effects influencing our EBIT. But none of these are material for the consolidated accounts, and also they more or less eliminate each other on aggregate.

Not surprisingly, also our return on capital employed is reflecting the strong results this quarter. The rolling 12-month return is moving upwards and came at 29.5%. The normalized return on capital employed decreased to 10.7% over the period. This reduction is due to factors that we explained quite thoroughly last quarter, but I will repeat the main reasons very briefly.

In the current high price environment, we have taken the opportunity to initiate development of more small-scale projects, and that also includes IOR projects. But even more significantly, we have chosen to increase our overall exploration activity, and that’s considerably. This creates longer-term value but, at the same time, increases capital employed and exploration costs, and reduces the normalized returns.

In addition, we now see PSA effects coming into our numbers somewhat faster than we expected. Now, this is reducing the entitlement volumes and increasing the depreciation. Overall profitability increases, as you can see from the actual numbers, while the normalization method takes away the effect of the high oil prices and not the effect of higher cost and lower volumes.

For these reasons, we are likely to undershoot our 13% normalized return on capital target for 2007, as we have explained last quarter, while we still expect to deliver a competitive actual return on capital employed going forward.

Then, if you come to our financial items, the net financial items for the first quarter contributed with NOK1.6b, as opposed to a loss of NOK1.7b in the same quarter last year. This change is primarily due to currency adjustments related to our short and long-term U.S. dollar debt. We have all our long-term debt in U.S. dollar, and the U.S. dollar weakened by NOK0.19 per dollar from the end of fourth quarter last year.

The total currency adjustment on debt resulted in a positive P&L effect of NOK1.5b this quarter, while it was negative at NOK2.6b in the same quarter last year. Interest and other financial income for the quarter increased by 60%, to almost NOK500m, from the first quarter last year. And this is mainly due to the increased short-term interest rate.

Financial expenses increased from a slightly positive number in the first quarter last year to a negative NOK350m this quarter. And this is also mainly due to the increased interest rates.

As you all can see, Statoil is in a very robust financial position, like most oil companies these days. But keep in mind that the tax payment in April of NOK29.5b and the dividend liability of NOK17.8b, to be paid at the end of May, will increase the net debt accordingly.

If the oil and gas prices stays at present level, we expect the development that we have seen over the last years to continue going forward. This increases the need for continuously considering the balance between our financial flexibility and the competitive return to our shareholders.

The Board of Directors of Statoil has decided to launch a share buyback program. The AGM, to be held in two days, will be asked for a mandate to buy back up to 7.9% of our total outstanding shares. Within this mandate, Statoil asks for authorization to repurchase up to 50m shares in the open market and, at the next AGM, to redeem a proportion of the state’s shares that secure the present state ownership.

I would also like to underline that it is not our intention to utilize the full mandate, and that we look upon the share buyback program as a supplement to our cash dividends. And the reason for initiating this share buyback program is to ensure efficient distribution of capital. It will add an important means of being able to continuously adjust to an appropriate capital structure.

Then I will move on to our most important value driver, the production. As I have already mentioned, our oil and gas production of 1.237m barrels of oil equivalents per day in this quarter is a record high for -- highest ever for Statoil. The production this quarter is also affected by the impact of high oil and gas prices on some of our PSA production sharing contracts, estimated to have an impact of approximately 15,000 barrels a day, compared to a $30 oil price since 2005.

The 4% production increase from the first quarter of last year is mainly driven by high gas off-take and the growing international production. At this point, I would also like to underline that we maintain our guiding for 2006 of 1.2m barrels per day on average, and our target for 2007 of 1.4m barrels a day.

For the second quarter, we expect to see approximately 50,000 barrels per day of turnaround effects on the total production, of which approximately 44,000 is expected on the Norwegian continental shelf.

A few comments also to the cost of producing these barrels. Continued cost discipline, even in today’s environment, is a high priority for us and our cost per barrel is still very competitive compared to our peers. The actual rolling 12-months production cost, according to FAS69, was NOK22.9 per barrel. The normalized production cost is slightly higher at NOK23. The slight cost increase that we see this quarter is mainly due to replacing the very low cost level per barrel that we saw in this first quarter last year, combined with an overall industry cost pressure gradually also affecting our operating costs, both on the Norwegian continental shelf and internationally.

We will continue to implement our ongoing improvement initiatives, and we will grow the production. The target of NOK22 per barrel, therefore, still stands. But we recognize that, with the industry cost pressure prevailing, the target will be even more challenging to reach.

Let me now provide some comments to each of the business areas, starting with E&P Norway. Within the Norwegian Exploration and Production, the EBIT was at a record NOK23.3b for this quarter, which is up 41% compared to the same period last year. The main reason is the significant increase in both oil price and internal transfer price of 39% [sic - see presentation].

Total lifting was up 1%. This includes an increase in gas lifting of 11% and a decrease of oil lifting of 7%. The reduction in underlying oil production was somewhat lower at 5%, while total oil and gas production from the Norwegian shelf increased by 2%.

The total E&P Norway production was at 1.047m barrels a day for the quarter. The production was negatively influenced from the fact that the Visund field was closed down due to a gas leakage in mid-January. The design failure that caused this leakage also resulted in minor shutdowns of other fields, like Kvitebjorn, Heidrun and also the hydro-operated Oseberg field.

A few other highlights from NCS should also be mentioned in this quarter. At the Kvitebjorn field, close to Gullfaks in the Tampen area, the partners decided in February to upgrade their estimated recoverable reserves by 50%. This upgrade represents 29 bcm of additional gas and 70m barrels of condensate, and Statoil has a share in this field of 43.5%.

During the quarter we also acquired 25% from BP in the Luva license, northwest in the Norwegian Sea. Statoil now owns 75% of this license and will consequently also take over the operatorship. Luva already includes a gas discovery and this area is expected to be an important gas development area in the future. We expect the next drilling on the Luva license as early as next year.

Statoil was awarded five new licenses in the 19th licensing round, four of those in the Barent Sea, of which we are operator of three, and one in the Norwegian Sea. We have secured drilling rigs to carry out this work program from the 19th round, and plan to start drilling the first well already next year.

A few more details then on our ongoing exploration activity. We have had activity in nine exploration wells and two extension wells on the Norwegian shelf this quarter, and have been operating six of these wells ourselves. Four exploration wells and two extensions were completed by end of April, of which the Goliat and the Troll Brent-2 were discoveries. In addition, the Gudrun has been included or concluded a discovery, confirming that the development of this field is realistic with at least 150m barrels of oil equivalents recoverable reserves.

Five wells are being drilled as we speak. These are the Kogge, Apollo and Valemon in the North Sea, and the Morvin and Edvarda in the Norwegian Sea. Altogether we maintain 15 to 20 wells -- completed wells as an estimate on NCS for the activity of this year. Rigs have been secured for the planned activities, as I have mentioned, for both 2006 and 7, and we are now working our planning and securing additional capacity for the years beyond 2007.

Then to our international E&P business, starting with some business highlights. The international production has continued at a high level of 191,000 barrels a day this quarter. This is 13,000 barrels a day lower than in the previous quarter, due to the PSA effects. The production year-on-year is up 18%.

We have continued consistently to develop our Gulf of Mexico position. In the first quarter we have farmed into the Tucker prospect, where we have a 20% interest. In addition, we have acquired 25% stake in both the Claymore prospect and the Grand Cayman prospects. And drilling is actually ongoing on all of these three prospects now, as we speak.

During the second quarter we finalized three exploration wells internationally, all in Angola. Two wells in Block 15 concluded successfully, and the Urano-1 in Block 31 was announced a discovery last Friday. Also, internationally we are involved in development of a series of important projects.

The In Amenas in Algeria will come on stream during second quarter, and the Shah Deniz phase one is entering its final stages of development, together with the SSE pipeline, which will take the Shah Deniz gas to Turkey from October 1 this year. We are also drilling an important exploration well on Shah Deniz in Azerbaijan.

Then to the numbers for the international business. In the first quarter this business area contributed with NOK3.5b, which is up NOK1.9b and more than a doubling compared to the same quarter last year. The main reason for this increase is that the price of oil rose by 47% in Norwegian kroner and the oil lifting increased 41% in the same period. Gas entitlement production was somewhat down, mainly due to the PSA effects from the In Salah field in Algeria.

Now, moving on to our natural gas business area. Natural gas delivered record first quarter results of NOK3.4b, and this is again more than a doubling of the operating results compared to the same quarter last year. The increase in earnings is mainly due to 12% higher equity gas volumes. The realized gas price rose by 53%, while the transfer price paid to E&P Norway increased by 38%, and thereby strengthening the margin for this business area.

Natural gas in the first quarter of this year. Gas sales were 7.9, including sales of third party LNG and also other volumes, but excluding the entitlement gas from the Norwegian continental shelf. Now, this is up 16% from first quarter last year. It is important to notice the usual seasonal swings in the gas off-take, especially when estimating the total production sales for the coming quarters of this year. Gas off-take typically decreases during the summer months, as the gas demand for heating in Europe declines.

The average gas price in this quarter is a record NOK2.02 per standard cubic meter. This is up more than 50%, mainly driven by increasing prices on fuel oil, gas oil and also the U.K. NVP gas market price. The main part of Statoil’s gas portfolio is still long-term take or pay contracts, based on pricing in supplementary products.

The U.K. NVP gas market has been priced significantly higher than the product-linked contracts during the first quarter, and we have been able to benefit from that to some extent, as most contracts into the U.K. are NVP based.

Finally, also a few comments to our manufacturing and marketing business. In this segment, our focus on improving profitability and operational efficiency continues, and so does the portfolio high grading. Earnings from our oil trading have been good also this quarter, resulting in an operating result of NOK400m. These results include a negative impact of approximately NOK400m, due to inventory adjustments and so-called FAS133 effects.

The methanol prices are at record levels and, even though this business area is a small one, good progress on earnings are made in this area. The refineries have realized good margins and also in our marketing business we see some improvements, both on the market shares and earnings. This is partly due to better market conditions in some of our markets, but also a result of the ongoing improvement program.

Let me then repeat our targets and guidance. Production in 2006 is expected at 1.2m and in 2007 at 1.4m barrels, given the stated price conditions. The exploration activity will be increased to approximately NOK6.5b for 2006, and you can see this being supported from the increase in our current -- in our high activity level at the moment.

CapEx will be NOK110m to NOK115m for the period ’05 to ’07, and estimated at approximately NOK40b for this year. The production cost target for 2007 is maintained at NOK22 per barrel, although becoming more challenging. And finally, our normalized return on capital target of 13% is kept and, as we have said previously, we are likely to undershoot this target.

To sum up, we have produced 1.237m barrels of oil equivalents, which is a 4% increase year-on-year and the highest production in Statoil’s history. And we are well on our way to meet our 2007 production target. We have realized record results, mainly due to high oil and gas production and prices, providing a return on capital employed of 29.5%.

Exploration expenditures have increased significantly and was at NOK1.7b for the first quarter. We have completed nine exploration wells by the end of April, including two extensions, resulting in six discoveries. With the rig program secured and based on current plans, we maintain our estimate of 30 to 40 wells being completed this year, 15 to 20 in Norway and 15 to 20 internationally.

For the second quarter we will continue our high exploration activity, and on the production side we will have extensive turnaround, influencing production with some 50,000 barrels a day on average.

This concludes my presentation. We look forward to seeing as many of you as possible at our Capital Markets Day in Stavanger in June. We will then update you on how we deliver on our strategy, targets and ambitions in more detail, and also give an update of our ongoing improvement initiatives.

More details and more information about this program can be found on our website or by contacting our Investor Relations. I would now be very happy to take any questions you might have, either from the audience or through the Internet.

Thank you, Eldar. I would now invite the audience here in Olso to ask questions to Eldar Saetre. And also on the Internet, you’ve got this feature where you can actually post questions directly to my PC and I will read them aloud here in Oslo. If I could ask you in -- presently in Oslo to wait for the microphones, so that everybody can hear also on the Internet what the question is, it would be much appreciated.

With us here today, we also have our Senior Vice President for Planning -- Corporate Planning and Control, [Thorgen Reiten], and he will be happy to answer questions as well. So please, the first question from John Olaisen, please.

Thanks a lot. My question is regarding the 2006 production guidance. You’ve got a target of 1.2m barrels per day, and that is based on an oil price of $60. Could you tell us what that would be with an oil price of $70, please?

That was John Olaisen asking that we’ve given guidance on the production target based on $60 per barrel, what would be -- production be, given the PSA effects, given an oil price of $70 per barrel?

Well, I think we have given you already a lot of guidance by stating the consequences of a US$60 on the PSA. And I don’t think we are going to provide you with a calculator to calculate PSA effects on any production level. So basically, there will be some effect, not a very substantial effect but some effect from a US$70 oil price. But, to be more specific than that, I am not able or willing to tell you today.

Bjorn Inge Tonnessen?

I’ve got a little detailed questions on operations. On -- it’s also about the PSA effects. You report the [inaudible] has been down, roughly half the production this quarter compared to the first quarter last year. That -- do you have any different contracts with Sonangol than your partner Hydro have, because they reported a much higher figure on gross production, 50% higher?

That was a question about the PSA contracts on Girassol, whether we have other contracts than our partners.

When it comes to the contractual set up, I am not familiar with any of the partners having individual contracts. There is one set of PSA contracts for all partners. And the relationship to Hydro’s volume, I really cannot comment on that. Focused on our own volumes for this quarter.

Then I will take a question from the Internet. It’s from UBS, Iain Reid. International E&P OpEx and [DBMA] per barrel are up by approximately 50% compared to first quarter ’05. Can you explain why?

There are basically two effects into this. On the DBMA, the main impact is coming from the PSA effects, really, and the fact that volumes are down and also the P effects on the reserves, because we closed our accounts last year at an oil price of approximately US$58 per barrel and that took down our PSA reserves. That means that our depreciation has to increase per barrel. It’s the same with CapEx. That needs to be depreciated on fewer barrels. So that increases our depreciation. And then we have an increase in the volume as such. So if you add the volume and the PSA effects through the reserve adjustment, that should explain the depreciations.

Indeed, on the OpEx, it’s pretty much the same explanation. We have an increase in volumes. We have also a slight increase in operations, where we prepare for new production and the volumes haven’t come in yet. And we have the PSA effects coming in. So the PSA increased volumes as such, and also some additional operational preparations that comes into the numbers for this quarter specifically.

There’s a question up there, please.

Yes, [Ivor Rowland] from [Petolisen]. With these increased exploration efforts that you have at the moment, could you please tell us how this is affecting your reserves replacement ratios?

That was a question about how the exploration effort that we are doing at the moment, how that is affecting our reserve replacement ratio.

Well, basically it will have no impact short term on our reserve replacement ratio. It could have an impact to the extent that we are doing some, I would guess, platform-based exploration drilling, and you could perforate and start producing immediately and add the reserve base. But basically, if there is a new discovery, this discovery has to be appraised and we need to see development plans and we need to have those development plans approved. And first at that time, and there is a long lead time before we can do that, we would be able to start booking reserves. And then we will gradually add to the bookings through the lifetime of the field.

So, short term, there are more or less no impact. But the whole reason why we are doing it is obviously that longer term there will be huge impacts. So hopefully, it will add to our reserves but, short term, no significant impact from exploration as such.

I’ll take another question from the Internet. It’s from Huw Williams, Cazenove. Could you please make some further comments on the situation in Venezuela, specifically with respect to Sincor -- Sincor 2 and to Plataforma Deltana, that is, the current status of your negotiations with the authorities with respect to licensing and taxes? Yes, that’s basically the first part of the question.

Well, in Venezuela I think we have been in Venezuela for 10 years now. We had two assets. We divested one of those, the LL652. So we have our -- the most important asset is now the Sincor project. That has been a very good asset for us. We definitely have a long-term view on Venezuela and that is reflected in our strategy.

Obviously, we also would prefer to have stable conditions and a stable framework when operating in any country. That has not been the case in Venezuela and we don’t appreciate that, but at the same time it’s a situation that we try to deal with as good as we can. And when it comes to the Sincor 2 project, there are no real news on that. We have had discussions with the authorities and -- but beyond that, there are no news that could be communicated.

On the Plataforma Deltana, we hopefully will be able to start drilling the first well, [inaudible], the first well at the end of this quarter, or early in the third quarter. And hopefully we will also be able to do the second well during this year and also hopefully start the third well. So that is basically what I can say. We have the rig in place, and hopefully now the operations will be carried out successfully.

Morten Normann.

I have one question regarding the tax rate in international. Can you explain why the tax rate was 42% this quarter versus 31% last year? And what do you think about the level going forward?

That was a question from the Kaupthing Bank about the tax rate in the international business. It has been above 40% in the first quarter. And it’s basically the same question that Rory Stewart from Simmons & Company has asked. So could you please elaborate on what is the reason for the tax rate in international and what is the views on the tax rate going forward in the international?

I think -- will you try to elaborate a little bit on that, Thorgen, as good as you can?

Alright. I think, if you look at the corporate level, you will see that from the last quarter we have actually had a decrease in the corporate -- or increase in the corporate tax rate. When you take away the [inaudible] gain, you have actually a decrease in the corporate tax rate. And that is due to that actually the income [inaudible] is larger this quarter than last quarter and that does relate [inaudible] depreciation but that will come up on the overall level.

When you consider an international tax base, as such, I think it’s very important to bear in mind that of course the tax regimes across the world is very different as such, and that the tax rates vary and the contracts vary as such. And from last year to this year, it is an increase. But I wouldn’t go into the details -- give a detailed explanation but I wouldn’t expect that to be a trend that you should [prolong it in any way].

We’ll take another question from the Internet. It’s from [Neil Morrison] from Man Group. You talk about using share buybacks to help maintain an appropriate capital structure. What, in your view, is an appropriate capital structure for Statoil?

Well, I’m not going to give you any specific number for that. It’s basically a situation that we have to consider at any time, and to take into account the need and the competitive situation on the financial flexibility and having a competitive return. Now, as you see, we have also -- we have launched a share buyback program. And the main purpose of that is to give us an additional tool and additional flexibility, so that we can work on a continuous basis, consider our capital structure and not be so mechanical on that.

So that’s the basic intention, but providing any specific guidance or rules of thumb as to when and how -- what is an appropriate or optimal capital structure, I am not going to do that.

There’s a question from [inaudible].

[Inaudible]. Have you any communication from Gazprom on the delay of the Stockman award? And, if not, is it just dead air and does that mean that you are out of the game? So, really, I am sure you are in contact with Gazprom regularly. Can you give us any indication about the reason for the delay?

That was a question whether we can give any indications on the Stockman project and Statoil’s position there.

I am sure you can more or less anticipate the answer to your question. Basically, we have the same information that you have. And that goes that there have been some delays and that Gazprom will conclude, has been said, during May. And, beyond that, what is the reasons for these delays and what could happen beyond that, I wouldn’t speculate and I don’t have any information that could enlighten us on that, really.

There’s another question from the Internet from Iain Reid, UBS. How much gas did you sell in the U.K. this quarter and can you indicate how this might develop in future quarters?

Well, I think the quantities that have been sold into the U.K. varies a little bit from month to month, because we have -- and quarter to quarter, because we are doing trading and sourcing activities in the U.K. market, so it is not only reflecting the longer-term contracts. And, as you know, most of our volumes is related to the continental Europe and in the U.K. some of our contracts are long term, some are linked to supplementary products, some are long term linked to the [embassy] and some are pure short-term volumes. But to give an exact percentage on the U.K. volumes as such, or the mbp volumes, I am not in a position to do that.

This is a question from Anne Gjoen from Handelsbanken.

Thank you. You had a cost increase [inaudible] operation, operating cost internationally, because of prepayments and new production, as you mentioned. Is that also something that we would see in the coming quarters?

That was a question about the international E&P, whether the cost increase we’ve seen in the first quarter regarding the start-up of new fields, whether that’s something that will be prevailing in the next quarters to come.

Yes, I mentioned this item. It’s not the main exploration -- explanation on the cost increase in international. That’s related to the PSA volumes. But there is an element of this. Basically, it will vary from year to year. And as we are moving into a period where we get close to start up of new fields, then this would tend to increase. And at this moment, we are getting very close to the start up of the In Amenas field in Algeria. The Shah Deniz and the pipelines are being prepared in Azerbaijan, and also the Dalia field is being prepared for production this year.

So there is a substantial volume of new capacity coming in, and we have to carry the operational -- preparation costs for this at the moment. And that will be [inaudible] when we get these fields into production. So I cannot -- basically, you should look at the number of new fields that is coming into play, and the timing there is until these fields are actually in production.

[Inaudible question - microphone inaccessible].

There’s a follow-up question. Is it mostly PSA effects also on the follow-up costs?

Well, the most important -- if you look at the total effect, that is the most important one. But if you look at absolute numbers, obviously the volume of the production increase. But if you look at the relative numbers, it’s the PSA effects, it’s the preparational cost and also a general cost pressure that we actually feel also on the international side, and also not only on the developmental side, on drilling, but also on the operational costs.

Okay, a question from Michael Young, Fidelity Investments. Could you describe in more detail the recent 150m barrels discovery on the NCS? I guess it must be the Gudrun discovery that we’ve mentioned.

Well, it’s too early to provide any details. The Gudrun discovery has -- is an old discovery, so what we really needed to do was to make sure that there was sufficient volumes to really substantiate and justify development of this project. That’s what would happen now. So we added volumes to it and this has given us more confidence, actually quite a lot of confidence, that we now will be able to develop the Gudrun field. And this will be more or less on a standalone basis. So we needed really quite substantial volumes to substantiate and justify a development. And we are working hard now on looking at how this could be developed and finding the best way of developing and producing these reserves.

[Inaudible].

Another one on the discoveries in the North Sea. You also very briefly mentioned that Troll Brent 2 resulted in a discovery. I assume that’s an exploration extension. Is that a follow-up on the Hydro did last year, so it’s an oil discovery? Can you confirm that? And can you elaborate more on what this is?

[Inaudible] more explanation on the Troll extension discovery that was made.

Basically, you gave the information that I am prepared to give and it’s oil, it’s [inaudible] what was done last year and it’s now been confirmed. And that’s what I can say. I have no further information on that.

There’s a question from Huw Williams, Cazenove. If we can give a little bit more information about the marketing [values] this quarter and how they actually impacted on the results for marketing.

So, I understood the question to be the markets --

Marketing [inaudible], the downstream [inaudible].

The retail part or --?

The retail part, the marketing part at least.

Okay. Well, because we have had good results on the overall side, and I mentioned the [inaudible] prices, refining margins in particular. On the retail marketing side, we have not seen significant improvements but we have actually seen some improvements. And the main improvements we have seen is in -- actually in Denmark. Also seen improvements in Ireland and minor improvements in some of the other countries. The most challenging market that we are in at the moment is actually Sweden, where there’s a quite fierce competition at the moment. But the overall picture is, in general, improvements in market conditions with the specifications that I gave, and also supported by the ongoing improvement program.

Any more questions from Oslo? No. And no more questions on the Internet. So basically, thank you very much for today. It’s been a pleasure seeing you. Thank you.