Equinor (NYSE:EQNR) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Equinor ASA reported a strong Q3 2026 performance with adjusted operating income of $12.4 billion before tax, driven by high production, higher prices, and exceptional refining margins.
The company increased its production guidance for the year from 3% to around 4% growth, citing strong operations and high regularity across its portfolio.
Significant strategic initiatives include acquiring a stake in the Lackawanna Energy Centre in the U.S. and progressing the Bay du Nord project in Canada with Shell as a new partner.
Increased exploration activities were highlighted with new discoveries in Angola, awards in Angola and Brazil, and entry into Namibia.
Equinor approved a quarterly cash dividend of $0.39 per share and a fourth tranche of the share buyback program of up to $1.125 billion.
Renewable production grew by 26%, led by Dogger Bank, and Empire Wind is 80% complete with first power expected in the first half of 2027.
Cash flow from operations was $14.7 billion, and the company reported a net debt ratio decrease to 3.8%, expecting it to be around zero by year-end.
Management emphasized a focus on safety improvements and cost discipline amid foreign exchange and higher energy consumption costs.
The company plans to maintain a strong balance sheet and manage share buybacks in a non-linear manner, especially if oil and gas prices are above guidance ranges.
Equinor highlighted the tightness in the European gas market and its strategic approach to M&A, focusing on portfolio alignment and creating value through gas and power market integration.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Equinor third quarter 2026 earnings conference call. At this time all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your host today, Paul Claude Peterson, Senior Vice President, Investor Relations. Please go ahead.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you very much, Operator, and thank you all for joining in on the presentation of our third quarter results. I am here together with our CFO, Torgrim Reitan, who will take us through the results before we start the Q&A, and we will complete the entire session within one hour, as we used to do so. With that, I hand it to you, Torgrim.
Torgrim Reitan (Chief Financial Officer)
Thank you very much, Paul, and good morning, and thank you for joining us. Before I get to our results, you now see the photo of our Mongstad refinery. Mongstad delivered record results this quarter driven by excellent operational performance, capturing very strong refining margins. I will share more about MMP’s contribution as we now turn to the quarterly results. At our Capital Markets Day, we presented our plans to deliver more energy, growing cash flow and superior returns. During the third quarter, we progressed in line with our strategy. In the US, we signed an agreement to acquire a stake in the Lackawanna Energy Centre. This acquisition strengthens our position in an attractive US power market and complements our strong gas position in the area. Also, the Bay du Nord project in Canada is moving forward.
In October, we brought Shell into the project and we are very happy to have them as our partner. As we move towards a final investment decision early next year, we also added more exploration opportunities. In Angola, we have recently been involved in two discoveries. We have also been awarded attractive new acreage both in Angola and Brazil. In addition, we entered Namibia with plans to start drilling already this quarter. On the Norwegian continental shelf, we entered into a strategic exploration collaboration with Aker BP and Vår Energi, and our ambition is to mature and test up to 25 prospects with standalone potential over the next years.
This quarter we delivered a production growth of 2% and year to date we have delivered a production growth of almost 5%. So based on strong operations we are now increasing our guiding for the year from 3% to around 4% growth. With high production, higher prices and exceptional refining contribution, we delivered strong financial results. Adjusted operating income was $12.4 billion before tax. Cash flow from operations after tax was $8.1 billion in the quarter, bringing the year-to-date total to $21.8 billion.
Adjusted earnings per share were $1.20. This includes a negative impact from net financial items mainly driven by foreign exchange movements. The Board has approved a quarterly cash dividend of $0.39 per share and a fourth tranche of the share buyback program of up to $1.125 billion. This brings total share buybacks for ’26 to $3 billion, a number which we increased at our Capital Markets Day. Before we go deeper into our financial results, let us start with safety which is our highest priority. We have a long-term trend with strong improvements over safety results, but we see an increase in the number of incidents since last year. We are still seeing too many personal injuries and this remains an important focus for us. We will continue to work systematically so that everyone working for Equinor returns home safely every day.
Equity production increased by 2% compared with the same quarter last year. On the Norwegian continental shelf, production was stable. Natural decline was offset by new fields delivering around 70,000 barrels per day. The planned turnaround program is completed and well executed. The combined international production increased by 5%. This is driven by Aldura and Bacalhau, and we are happy to say Bacalhau is now producing at plateau. This more than offset the divestments of Peregrino and Argentina, as well as lower US offshore production due to planned turnaround activity.
Renewable power production increased by 26%, driven by Dogger Bank. Empire Wind is now around 80% complete. Most of the remaining project scope relates to offshore turbine installation which is expected to start next year. This is a bit later than planned with first power during first half of 2027. However, there is no change to total capex, and the recognition of the ITC will remain as previously communicated with the majority in 2027. Now to our financial results. Adjusted operating income for the group was $12.4 billion before tax, almost twice the level from the same quarter last year. While commodity prices are cyclical, it is important to focus on what we can control: stable operations, laser-sharp execution and cost discipline. E&P Norway, with stable production, and E&P International, with growing production, each benefited from higher realized prices. International results were also affected by the timing of liftings.
In E&P US, higher realized liquids prices were offset by turnaround activity at Caesar Tonga and a $105 million impact related to the Titan Asset Retirement Obligation. MMP delivered well above guidance driven by strong refining performance. Strong results from LNG also contributed positively, while the result was negatively impacted by shipping derivatives. Power delivered a result close to zero. Net impairments of $485 million impacted our net operating income, and this includes impairments at Stutfield, partly offset by a reversal at Martin Linge.
Then a few words about costs. We have momentum behind reducing underlying cost by 10% this year. However, we are somewhat behind due to factors we don’t control such as foreign exchange effects and higher energy consumption costs. Cost discipline remains important also in periods of higher commodity prices. So now to cash flow. This quarter, cash flow from operations was $14.7 billion. During the quarter we paid two tax instalments in Norway totaling $6.2 billion. In the fourth quarter we expect to pay three tax instalments totaling 93 billion Norwegian kroner. In August, we increased our tax payments for the second half of 2026 due to the sustained high price environment. This will even out tax payments between second half ’26 and first half ’27. However, prices have continued to increase and we currently expect tax payments in the first half of 2017 to be higher than second half.
In 2026, organic capital expenditure was $3.3 billion. In the quarter, we received a cash dividend from Adura of $225 million. The strong financial results have further strengthened our balance sheet. We ended the quarter with cash and cash equivalents of $24 billion. Our net debt ratio decreased to 3.8%. At current forward prices, we expect our net debt ratio to be around zero at year end. But, and this is important, this does not include the effect of the six-month tax lag in Norway.
If we adjust for this and assume that tax payments in 2026 fully reflect the 2026 earnings, the year-end net debt ratio will be somewhat above 10%. So finally to our outlook for 2026. We continue to expect organic capex of around $13 billion. I mentioned that currency effects put some upward pressure on costs. This is also the case for capex. On the other side, we see some schedule effects, including for Empire Wind, as I mentioned, that pushes some capex into next year. As I have covered, we are increasing our production guiding to around 4% for the year.
Then turning to capital distribution. For 2026, we are delivering in line with what we have said at Capital Markets Day. We also put forward a new framework for capital distributions that will be implemented next year, and I would like to take this opportunity to remind you on how this will work in practice. Cash dividend remains our first priority. We expect to increase the quarterly cash dividend by more than 5% on an annual basis. We did that last year, we did it this year, and this is what you should expect going forward as well.
We also introduced a framework for share buybacks of $2 to $4 billion per year when oil prices are between $60 and $80 and European gas prices are between $7 and $11 per MMBtu. In February, we will announce the first of four tranches for 2027 and not set an annual number as we did in the past. With realized prices within the range in the previous quarter, each tranche will be from $500 million to $1 billion, summing up to a total of $2 to $4 billion per year.
Within the price range, you should expect the buyback level to be fairly linear. So if prices are in the middle of the range, you should expect buybacks also in the middle of the range. However, as it looks now, prices could be outside of the ranges. And if prices are above, and particularly if they stay above for an extended period of time, we have the opportunity to do more. But in this scenario, you should not expect a linear relationship. We want to avoid being too cyclical in our buybacks.
So we will use high price environments to strengthen the balance sheet and ensure that we can continue investing in profitable projects while honoring our dividend commitments, also in a low price environment. And of course, we will come back to you on this topic in February. So for now I hand the word back to you, Paul, and I look very much forward to your questions.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Torgrim. We are then ready for the Q&A, and we have a good list already. But let me remind you that if you want to sign up for a question, you can press star 11. The first question will be from Chris Koopeland from Bank of America. Chris, please go ahead with your question.
Chris Koopeland (Analyst at Bank of America)
Yeah, thank you very much, and for providing the additional clarity, Torgrim, on how you’re going to treat the share buybacks going forward. I have two quick questions that I want to tackle up front. Firstly, maybe you can go into a bit more detail around the source of the increased production guidance for the year and go into a little bit more detail on how the declining Norwegian fields are doing relative to expected startups and ramp-ups internationally.
And then as a second question, I realize your slide pack doesn’t repeat what you’ve presented before, but I remember a CFFO guidance for the year at close to 30 billion at your higher commodity price deck. And it looks to me like both Brent and TTF, if not Henry Hub, are today significantly above that high commodity price deck that you used at the time to get to 30 billion. So maybe you want to give us a little bit of a rule of thumb or an update on where you stand in terms of your full-year expectations, also reflecting the fact that you’ve changed your tax cadence, your tax payment cadence.
Thank you.
Torgrim Reitan (Chief Financial Officer)
Thanks, Chris. Very good questions, I must say. So let me start with production. So the production for the year 2026 has overall been stronger than what we have expected. So this comes from, you know, strong operations and very high regularity, you know, across the portfolio, and also that, you know, the decline on your home schedule is to the very lower end on what we guided at. We also have, you know, Bacalhau now at plateau contributing well towards the end of the year.
So we are comfortable in sort of updating our production guidance for the full year. So this is on the back of good execution and good operations. Then I just want to use the opportunity to also talk about 2027 because 2026 is a rather, you know, extraordinary year as such because we have a lot of production ramping up on the back of the Norwegian tax package and also international start-up. So I just want to use the opportunity to talk about 2027 because that is not going to be fully in line with the production in 2026.
It is going to be higher than 2025 and sort of very much building up toward the growth towards 2030. You know, the particular things to mention about 2027 is that Bacalhau is now on plateau and will contribute significantly. Rosebank and Jackdaw in the UK portfolio will be producing and also Yggdrasil in Norway. So those are the new elements in 2027. So 2027 is going to be also a very good year operationally and production-wise. But of course 2026 is an extraordinary year.
Your second question, Chris, was related to cash flow from operations. So at the Capital Markets Day we gave a guidance for 2026 or 2030 at $25 billion, and that was based on, as far as I remember, $80 Brent and 15 gas, and prices are above that. We are now looking at around $29 billion in cash from operations based on the current forward prices. As such, just want to remind you there is a significant tax lag coming out of these high prices. So we will pay quite a bit of the taxes associated with this high revenue in 1H27.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Chris. We are now ready for the next question, and that will be Henri Patrico from UBS. Henri, your mic is open. Please go ahead with your question.
Henri Patrico (Analyst at UBS)
Yes, hello everyone. Thanks for the update. Two questions. The first one actually a follow-up on the production outlook question. It seems like for 2026 part of the performance is coming from your investment decline very much at the low end of your expectations. So with extraordinary performance for 2026, to what extent should we expect perhaps a faster decline in 2027 after Johan Sverdrup? And then secondly, thank you for the comments on the shareholder returns.
To follow up on that and understand: you mentioned that it shouldn’t be linear as we go above $80 per barrel, so I take that as a slower increase in the buyback compared to the range between 60 and 80. But is there a point at which you have such a high net cash position that we would see higher shareholder returns, or would you like to continue to deleverage and build up that cash position?
Torgrim Reitan (Chief Financial Officer)
Okay, very good, Henri. So thank you very much. So on production outlook and decline in general on the NCS, it is broadly as expected. We have a lot of activity into sort of, you know, fighting decline, and that is working very well. Johan Sverdrup has consistently delivered better than expected since we started, both on plateau production and our ability to manage decline. People have done a fantastic job in managing water management and drilling performance and reaching the very, very high recovery rates in the field.
Year to date we see an 11% decline in Johan Sverdrup. As you might remember, we said between 10 and 20 in the beginning of the year. So towards the end of the year we will still be in the lower end of this range. Next year you should expect a higher decline than that. That is not special in any way. This is the way the reservoirs behave. But it will be higher next year than this year. Then on the share buyback and what to do when we are outside the framework. So in a capital allocation framework, there are priorities to this. One is the cash dividend — we talked about this. The second one is reinvestment into our portfolio. The third one is having a very strong balance sheet, and the flexible part is the share buyback. So there are two things I would like to say in this behalf. When it comes to the net cash position of $24 billion, yes, it is a high number.
We have been running with a very high cash position for many, many years actually. And the way we manage this is in an active manner, so the cost of carry is actually very limited. So the cost of carrying this cash is very, very low. So we’ll continue to run with a significant cash position. Second point I would like to make and repeat is that let’s not sort of — you know, current net debt ratio is 3.8%, of course very low. We just need to adjust for the tax lag that distorts this picture quite a bit in a high-price environment. So we expect that to be somewhat about 10% by year end. So that is the number I would like you to think about when you think about the strength of our balance sheet.
Last point I would like to make is that we intend to run with a very solid balance sheet. You know, a great company needs to be able to maneuver cycles in a good way, building balance sheets in a high-price environment to ensure that we can sail very fast and effectively through lower-price environments and create shareholder value also at that point in time. So that’s the intention that we do have.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you. We are moving on to the next question. Alejandro Vigil from Santander, please. Alejandro, the microphone is open.
Alejandro Vigil (Analyst at Santander)
Yes, thank you for taking my questions. Well, the first question is about your outlook for the European natural gas market into this winter season, if you can elaborate a bit on the moving parts here. And second, in terms of — also related to the strong balance sheet — how you see the M&A opportunity, particularly looking at the big gap between European gas prices and the U.S. natural gas prices, if there are additional opportunities there for your M&A strategy.
Thank you.
Torgrim Reitan (Chief Financial Officer)
Thank you very much, Alejandro. So first on the European gas market. The prices in Europe are high, you know, above $30 per MMBtu and well above $90 per megawatt-hour. So I think that illustrates a very tight situation at the outset. I’ll put a few comments around this. One is that the storage situation is currently at 73% in Europe. That is low. That is the lowest since 2011. And what that leads to is a vulnerable situation with very little flexibility for events and all of that, and you see that reflected in the price.
The second thing I would like to mention is, you know, El Niño, the weather phenomenon that many believe will lead to a warmer winter. That will be helpful for a tight energy market in Europe, but on the other hand this is a well-known element that is already priced into the market, so it is there. The third thing I would like to bring forward is Asian demand. We see actually a fairly solid demand for LNG even at the current prices. So that’s also something to note.
And of course the last one is everything around the Strait of Hormuz and LNG. Very, very few cargoes are passing the strait. There’s a significantly different risk related to an LNG ship than a crude tanker. So we expect the flow of LNG to be very, very limited until there is a solution to the conflict and it’s safe to travel. So this leads to a situation where it will be a vulnerable situation. It is a tight market. A cold spell will drive possibly significant volatility into this.
But we do believe that Europe will manage, and we will do our utmost to deliver as much gas as we can. Last point I would like to make on this topic is that we keep our exposure very much to the front. So 70% of our gas exposure is on a day-ahead basis and 30% on a month-ahead basis. Reason for that is that we want the flexibility that that gives and we want exposure to the volatility as such. So in a volatile environment here, you can rest assured that the revenue finds its way to the P&L. Your second question on M&A opportunities. You know, M&A is a very natural part of the way we run our business. It is an integral part of high-grading the portfolio and delivering on the strategy. And you have seen over the years a very active environment but pretty balanced when it comes to acquisitions and divestments. So going forward, you should also expect us to be active in this field. A few data points: everything we do will be very much linked into the strategy that we put forward in June.
There will be a very, very close alignment with that, and you might take some guidance from what we have done in the past to actually predict the future. And if you look at what we have done over the last period, we have done several transactions on the Norwegian Continental Shelf — we will still continue doing that. We made two acquisitions into Marcellus with equity over the last few years. And thirdly, we made an acquisition in the U.S., a gas-fired power plant in Lackawanna.
It sort of ties the gas position, the gas market and the power market closely together. We do believe that those markets are going to be more integrated going forward, and we do think that in that space we have a role to play. So that’s the thinking I would like you to take on when it comes to M&A. Thank you.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Alejandro, for those questions. Next one on my list is Michele Delavigno from Goldman Sachs. Michele, please go ahead.
Michele Delavigno (Analyst at Goldman Sachs)
Thank you very much and congratulations on a very strong and busy quarter. Two questions I wanted to ask. The first one is: what is your current premium in terms of crude realizations in Norway compared to the Dated Brent and to the one-month-forward Brent? It looks like you are in a period of very, very strong realizations. And secondly, could you update us on Empire Wind — when you expect the start-up and if you still expect to receive the full $2 billion of tax assets through 2027.
Thank you very much.
Torgrim Reitan (Chief Financial Officer)
Thanks, Michele. Great. So on the NCS, we do see that there’s a big demand for NCS oils in Europe. So we are selling all our oil into the European market from the Norwegian Continental Shelf. We are mostly selling it on dated contracts and less so on the futures markets. And in general we receive a premium for many qualities. A couple of examples: Johan Sverdrup, on average $2 premium to Brent; and Johan Castberg, up in the Barents, which has a very nice quality, $8 premium as such.
And then there will be single cargoes with higher premiums, of course. So in general, sort of good prices, short sailing distances — which is important, because shipping is a challenge many places in times like this. On Empire Wind: despite the stop-work orders and all of that, we have been able to progress this and develop this, and it hasn’t really slowed us much down. We are now 80% complete on Empire Wind, and we intend to start with installation of the turbine — it’s the top side of the wind farm, if you like — just over Christmas. We expect first power during the first half of this year — yeah, I mean first half, apologize for that, first half.
Point being that when we get first power we are entitled to the investment tax credit that you asked for. We’re going to capitalize some of it based on our own operations but mostly selling them and capitalizing on them. The season for that is typically in the autumn, where companies are aware of their tax position. So the timing is actually very good for capitalizing this. There are some $2.5 billion in investment tax credits. The phasing of this: we expect $2 billion in ’27 and the remaining in ’28.
So this is exactly what we have guided earlier as well. So this is on schedule for cash-flow-wise and investment-wise. Yeah, very clear.
Michele Delavigno (Analyst at Goldman Sachs)
Thank you.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Michele. Next one on my list is Theodor Svenilsson from Sparbanken Markets. Theodor, please go ahead.
Theodor Svenilsson (Analyst at Sparbanken Markets)
Thank you for taking my questions, and congrats on a very strong quarter. Two questions. First, Torgrim, you mentioned the Lackawanna power plant. I’m just curious about your appetite for increasing downstream exposure generally, and particularly in Europe. Should we expect you to do anything more on the downstream side in Europe? Second question that is a follow-up on the previous question on the oil and gas market: how do you estimate the potential for demand destruction in Europe at the current TTF gas prices? Thank you.
Torgrim Reitan (Chief Financial Officer)
Thanks, Theodor. I struggle a little bit with the first question. Was that related to Lackawanna? Theodor, if you could repeat, you broke up a little bit. So if you could repeat the first question, please.
Theodor Svenilsson (Analyst at Sparbanken Markets)
Sure. Sorry about that. Yeah, the first question is related to your appetite for increasing downstream exposure.
Torgrim Reitan (Chief Financial Officer)
Yeah. Okay. All right. Thanks, Theodor. So, you know, the first one, you know, downstream exposure is—I mean, we will never go into sort of end-user activities and all of that. That has never been part of the strategy and we have no intention to do that. However, we are clearly interested in opportunities that can create value on a portfolio level in the company across power and natural gas. So you saw the acquisition in the US related to Lackawanna.
We have a few other gas-fired power plants in the portfolio and we do believe that that is an important part of the strategy going forward. I mean, we will clearly always be very cautious about how quickly we move forward in these areas, but we do believe over time that these two markets are moving closer and closer together. Then on the second question, which I do think was around the high gas prices in Europe and potentially demand destruction—clearly something that we monitor closely. And what you mentioned is sort of the long-term negative effect of high prices both within oil and natural gas. So, you know, we need to be prepared for that; there is some of that.
On the other side, what we do see is a significant increased appetite for long-term gas contracts related to Norway, and customers that now clearly see natural gas as sort of a long-term fuel for them, and on sort of a state level that natural gas is going to be a very important part of the energy security agenda for states. So we see actually an increasing appetite for long-term gas in addition. So that is also an aspect we need to bring with us.
Theodor Svenilsson (Analyst at Sparbanken Markets)
Thank you.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you. Thank you, Theodor. Next one is Martin Rat from Morgan Stanley. Martin, please go ahead with your question.
Martin Rat (Analyst at Morgan Stanley)
Yeah, good morning. Two remaining. I wanted to ask about MMP, because the overall results of 893 million were broadly as expected, even a little higher. But the components I thought were really quite confusing. So crude, products and liquids were negative, but then there is this big lump of more than 500 million in Other. Can you talk a bit about what sits where—what this loss in crude, products and liquids is, what that is; is that impacted by trading or shipping derivatives?
And also on MMP, if this guidance of $400 million a quarter—we’ve been above that now for quite a few quarters—what stock we should still put in that guidance. And the second thing I wanted to ask—of course we’re all trying to figure out the balance sheet gearing, quite a rapid pace. We can see forward prices on the screen and project forward, figuring out where, of course, the incremental—what the use of all the funding will be. And in that context I came across some renewed commentary recently about Tanzania LNG, and I was wondering if that is indeed on your radar. And then I was wondering if you could give us an update on your plans there.
Torgrim Reitan (Chief Financial Officer)
Okay, thanks, Martin. So let me take the MMP first. So the Other part—that is actually amongst other refineries. Then on CPL, you’re absolutely right: the CPL, the crude business, has actually done very well in the quarter. And the reason why they are showing a negative result is related to shipping derivatives. And just let me explain that a little bit. The way we run our shipping fleet is that we have long-term, you know, TC contracts on them which are actually significantly below current markets for shipping.
Then we swap some of it to floating, and that is sort of the derivative effects that you book for one quarter. So the underlying situation is that the crude has done very well, and we operate with lower shipping rates than many. And last point on MMP: I mean, in the current market situation there are good opportunities for them to make money in general as such. But we have no… Yeah, so—right. And then on the second question on Tanzania. So Tanzania is, you know, very significant gas discoveries many years ago that we, together with partners, have matured. There are no new news on Tanzania. It is an option. We haven’t brought that into our plans or guiding in any way, and we do see that as a long-term optionality for the future.
Martin Rat (Analyst at Morgan Stanley)
Thank you.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Martin. Next one is Fergus Neave from Redburn. Fergus, please go ahead.
Fergus Neave (Analyst at Redburn)
Yeah, hi, morning everyone. Thank you very much for taking my questions. Two, please, if I might. First, could you talk us through the new acreage in Brazil, Angola and Namibia that you mentioned at the start of the call, and the forthcoming exploration plans in those new acres through 4Q and into 2027? I think you mentioned that you had started looking at an option in Namibia. And then secondly, with Shell joining the Bay du Nord project, you mentioned we’re still on track for FID in early 2027. I was curious if you could comment on what milestones still remain to get to that FID stage now that you’ve brought the new partner on board. Thanks.
Torgrim Reitan (Chief Financial Officer)
Okay, very good. Thank you, Fergus. So in Brazil we have, over the years, built a larger and larger portfolio of exploration opportunities. So there are two new exploration licenses this year. It’s called Ruby and Rudo Crucita, if you are interested. We have 100% ownership in the first one and 70 in the second one, and we operate both of them. Then in Namibia, we farmed into an exploration opportunity together with Chevron. The plan is to spud that well during fourth quarter—in the quarter we are in—and clearly we have to wait to comment more on that.
On Shell on Bay du Nord, very happy to have Shell on board as a partner. So they are buying into the concepts and all of that, and there’s nothing that stops us from moving forward as planned, which is a final investment decision early part of next year. So this is going to be clearly a significant investment, but also a very important contributor in the 2030 cash flow for us.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Fergus. We are moving on with Vidar Lingvar in Danske Bank. Vidar, please, you’re ready for your question.
Vidar Lingvar (Analyst at Danske Bank)
Thank you so much for the answers today and thank you for taking my questions. Two from me, please. First, I’d like to ask about this thing. What kind of breakeven or Capex range per barrel do you need to see to add the content selection to go ahead with the FID next year? And are the consortium looking to bring in other partners at this point? How is the appetite in the market for that? Any comment around that would be appreciated. I’ll pause here for the next one.
Torgrim Reitan (Chief Financial Officer)
Thank you very much, Vidar. So on this thing we haven’t issued any breakevens or Capex range. We have worked that project significantly and costs have come down and it has improved quite a bit. But we have still some work to do. We plan for a, you know, pretty soon—and a final investment decision maybe in a year’s time or something like that. Partnerships are going well, so there is no intention to do anything with that.
Vidar Lingvar (Analyst at Danske Bank)
All right, thank you, appreciate that. Second question, if I may, on the tight reservoir collaboration with Aker BP. It’s been a long-awaited collaboration. What sort of volumes do you target from these reservoirs over time? I understand it’s early days but anything you could share there would be appreciated. And how will costs be shared?
Torgrim Reitan (Chief Financial Officer)
Yeah, that’s too early to comment on. You know, the Norwegian regulator has put out a number there—I think it’s 2.8 billion barrels—which is a Johan Sverdrup–size type of thing. But the reservoir is of course very, very different than Johan Sverdrup. These are tight reservoirs that fracturing technology needs to be used. So our job is now to qualify technology and see if there is an opportunity to look into this. This is sort of long-term optionality.
I just want to leave that with you.
Vidar Lingvar (Analyst at Danske Bank)
Thank you. Would that be like a hard cap?
Paul Claude Peterson (Senior Vice President, Investor Relations)
Sorry, Vidar, but I need to move on with my list. You can raise your hand again and we will take the question if we have time toward the end. The next one on the list is Jason Gableman from TD Cowen. So Jason, please go ahead.
Jason Gableman (Analyst at TD Cowen)
Yeah, hey, thanks for taking my questions. I wanted to go back to Canada and Bay du Nord. With the change in the fiscal policy there and the additional tax deductions you could take on the project, does that kind of change the potential scoping of this project? Does it create additional expansion opportunities? And does it change how you view your participation in Northeast Canada more broadly?
Torgrim Reitan (Chief Financial Officer)
Thanks, Jason. Yeah, you know, it’s quite interesting to see the renewed attention to the Northeast of Canada. So clearly we see that the federal and the provincial governments are very supportive to develop this area, and we also see other companies showing more and more interest in this. What we will do here—we will not change the concept in any way. We are on the way to a final investment decision and we will deliver that. So that development is only based on part of the discoveries that we have.
We have a series of other discoveries in the licenses around that are nice tie-ins when Bay du Nord ultimately gets off plateau, and there is more prospectivity around this. So this is maybe a little bit Johan Castberg–type of approach, where we take a major investment based on one reservoir, and then clearly there are further optionality around that. So really looking forward to opening up a new area in the northeast of Canada.
Jason Gableman (Analyst at TD Cowen)
Great. And my follow-up is on Rosebank. We saw Jackdaw get the positive government approval to go ahead. Any read-through to Rosebank? Have you heard anything from the government since the Jackdaw decision? And if it doesn’t get government approval, does that change the potential distributions you could get from the Adura joint venture?
Torgrim Reitan (Chief Financial Officer)
First of all, we clearly expect that there will be a positive decision on Rosebank. We just have to remind ourselves that this is a project that was discovered almost 20 years ago. We started investing in 2023 and the ship is now out there west of Shetland with people working on board, and this is going to be 4% of the UK’s gas production when in production and is going to be a significant part of the tax revenue helping the government to fund their budgets.
So clearly we expect that to happen. The field is on schedule to start production next year, first half next year, so that is clearly our expectations.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Jason. I move forward. I still have a good list of questions. Ahmed Ben Salem from ODDO, please. Ahmed.
Ahmed Ben Salem (Analyst at ODDO BHF)
Yeah, thank you for taking my questions. I have two if I may. First, how sustainable do you see the current production growth beyond ’26, especially in ’27 and ’28? And second, given your strong balance sheet, how are you thinking about the trade-off between organic investment potential, M&A and further buybacks?
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you.
Torgrim Reitan (Chief Financial Officer)
Okay, thank you very much. So production in 2027 is going to be—we expect it to be not fully in line with the production in 2026. 2026 was an extraordinary year with a lot of ramp-ups and start-up. But clearly 2027 is part of the production growth all the way to 2030. So it will be higher than 2025 and building up to the production in 2030 as such. So we announced a production growth at the capital markets day all the way to—this is very much in line with that.
Your second question on the balance sheet. When it comes to capital allocation, you can go back to the framework that we talked about at the capital markets day. First priority is cash dividend, more than 5% growth per year. The second one is reinvestment into our business around $12 billion. And we are a strong believer that we want to be consistent through-cycle when we invest and we think there’s most value to have around that. The third one is to run with a very solid balance sheet and the fourth is share buyback as the flexible tool.
So that is an order of priority. So organic investment is very important. M&A is always an opportunity and it is a very natural part of the way we run our business and develop a business. So you should expect there to be M&A activity also going forward. Some divestments and some acquisitions.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you very much. Next one on my list is Matt Lofting from J.P. Morgan. Matt, please go ahead. Your mic is open.
Matt Lofting (Analyst at J.P. Morgan)
Thanks, Bård, and thanks, Torgrim. A lot of my questions have been covered. I’ll perhaps just put one to you, following up on capital allocation. You talked earlier, Torgrim, about not wanting to be too cyclical around buybacks. Understandably, you reference the M&A piece. When you look at organic investment opportunities, the company obviously raised modestly the budget earlier in the year for 2027. Do you see any further opportunities to utilise some of the additional cash flow that’s being generated by further accelerating asset developments, particularly perhaps in Norway, where you’ve got the opportunity to help secure European energy systems and capture cash flow in doing so? Thanks.
Torgrim Reitan (Chief Financial Officer)
You know, Matt, thank you very much. So in Norway—let me focus on Norway. Clearly we are stepping up our investments through the program that we call NCS 2035, where we now reduce the time from discovery to production by 50% and actually also the cost of the developments by 50%. So actually, underlying investments in Norway, we have increased that a little bit compared to earlier. So there are more projects coming, more production coming and all of that.
Point being, this is a machine that keeps running and we cannot adjust that program on fluctuations in the price. We just need that to run consistently as such. And that is also good for the whole supplier universe around this, because we don’t want to create inflation in certain parts of the cycle and then too much capacity in other parts of the cycle. So we do believe steady, predictable delivery all the way to 2035 as such. And then of course, if there is a significant discovery, clearly we are going to look for bigger things as well. We will continue that on top of all of this, naturally. But first we need to make the discoveries.
Matt Lofting (Analyst at J.P. Morgan)
Of course.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you, Matt. We then move to Alistair Sime from Citi. Alistair, please go ahead.
Alistair Sime (Analyst at Citi)
Yeah, thanks. Paul, Torgrim. I just wanted to come back to the Lackawanna Energy Center acquisition and just, you know, I know at the capital markets day you gave a bit of a presentation about the North American energy business. But can you just talk us through how that opportunity came about? Why was it prioritized versus other things you could have done? Thank you.
Torgrim Reitan (Chief Financial Officer)
Thanks, Alistair. Yeah, so we have for quite some time always looked at how we can create even more value out of our U.S. gas position. And clearly what we currently are doing, we take our gas in kind, we market and trade it ourselves and transport it ourselves. We have benefited clearly from that. And then we do see that there is more value to be had in the intersection between the gas markets and the power markets. And we know that clearly there are other companies looking for companies like ours to see if there are closer collaborations that can be had.
So I think that’s where the two companies met, that we saw that we had complementary assets and skills that together can actually create more value for the both of us. So this is Invenergy that operates this plant—a very solid and reputable operator in the U.S.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you. We then move on to Paul Redman from BNP Paribas. Paul, please go ahead.
Paul Redman (Analyst at BNP Paribas)
Hi there. Just two questions. First one was just back to distribution program, and thanks for a little bit more context. You highlighted the fact that the buyback is unlikely to be linear and announced on a quarterly basis going forward if prices are above $80 a barrel and same on the TTF price. But how will we think about that increase? Does it come down to percentage of cash flow from operations? Is there any basis in which that upside to buyback will come through?
And then my second question, I think you mentioned earlier that you expect cash flow from operations on the forward curve to currently be 29 billion for the year. Just wanted to kind of remind myself of that climax. When I run sensitivities, I think I get a little bit higher. So I’m taking a high case plus sensitivities on top takes me to over 30 billion. But maybe I’m wrong somewhere on my maths.
Torgrim Reitan (Chief Financial Officer)
Okay, no, thanks Paul. So on the first one on the distribution, we are not using a percentage of cash from operations. Instead we have put forward this framework that gives you a pretty linear approach when prices are within these bands which are more normal situations. And then we are not able to give you more guiding than what I’ve said on when prices are above. But clearly it gives us an opportunity to increase the share buyback, but you shouldn’t expect a linear approach to that.
And clearly we don’t want to be too cyclical here. Instead we want to see to it that we build balance sheet in a high price environment, enabling us to create value and being consistent in low price environment. And then we do intend to run with a very solid balance sheet through all of this. Then on the last one, there might be some differences of time when you have picked the forward prices and all of that. So there’s lots of uncertainty here and I’m not in a position to know exactly what this is, but maybe you want to have a chat with investor relations afterwards.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you. We are, of course, the follow-up of that, Paul, but now we move on to Nash Kiwi from Barclays. Please go ahead.
Nash Kiwi (Analyst at Barclays)
Nash, good morning. Thanks for taking my questions. I have two, please. The first one, just to clarify on 2027 distribution, Torgrim—given what you said on buyback—should we assume that you literally rule out a special dividend? In other words, all the incremental distribution will come from buybacks? Then my second question is on safety. Page three of the presentation caught my eye. I wonder, could you help us understand the safety data this quarter, whether there were any common underlying issues and how quickly you expect the mitigation measures to be implemented. Thank you.
Torgrim Reitan (Chief Financial Officer)
Okay, thanks Nash. On your first question on distribution, share buyback is going to be the flexible part of the capital distribution. So that’s what we want to use. The second question—I struggle a little bit to hear you—but I think you talked about safety and whether it was all some sort of major things. There were no incidents with major accident potential as such. So clearly we watch this space very, very closely. I just want to leave you with that there has been—even if there is a negative trend this year—if you look back over the years and take serious incident frequency, that has gone from 6 in 2001 when we IPO’d to 0.25 at the current point in time.
So this is a tight ship that we are running, but all the weak signals we can get hold of, we use them to improve our business as much as we can.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Thank you. We will take one last question, and that will be Jono Lysen from ABG Sundal Collier. Jono, please go ahead.
Jono Lysen (Analyst at ABG Sundal Collier)
Thanks for that, and I’ll limit my question to one. So this is the question. Over the last few months several investors have asked me: what are Equinor’s competitive advantages that make them a better owner of gas-fired power plants onshore, or around Pennsylvania, than other players? And to be honest, I struggle to give investors a good answer to that. Could you tell me what should I tell investors? What are Equinor’s key competitive advantages of owning gas-fired plants onshore in the U.S.?
Torgrim Reitan (Chief Financial Officer)
Thanks, Johan. So a few points. It starts with the gas position that is very long when it comes to gas in the Northeast U.S. Second point, we have a very large trading and marketing operation out of Stamford and know the PJM market very well also from that point of view. From the gas side, we have a very strong balance sheet and we are a long-term partner for others in this space. So clearly, if you are really thinking broadly here, this is an area where massive investments are going into data centers and AI, and those companies are typically looking for partners that can manage the whole energy space as such. And we are one player in this, and we do believe engaging also into an opportunity like Lackawanna makes us more able to take out the margins out of that part of the industry. So yeah, that’s my two cents on that. Thanks.
Paul Claude Peterson (Senior Vice President, Investor Relations)
Okay, thank you very much, Johan. We are one minute above the hour, so with that I would like to thank you all for calling in and thanks to the analysts for your questions. As usual, the IR team remain available if there are any follow-up, so please don’t hesitate to reach out. Have a good rest of the day everybody.
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