Peter Hutton - Senior Vice President, Investor Relations Eldar Saetre - President and Chief Executive Officer Hans Jakob Hegge - Chief Financial Officer Margareth Øvrum - EVP, Technology, Projects & Drilling, (TPD) Torgrim Reitan - EVP, Development & Production USA (DPUSA) Tim Dodson - Executive Vice President Exploration John Knight - Executive Vice President Global Strategy & Business Development Lars Christian Bacher - Executive Vice President, Development & Production International (DPI).

Brendan Warn - BMO Capital Markets Theepan Jothilingam - Exane BNP Paribas Mehdi Ennebati - Societe Generale Lydia Rainforth - Barclays Marc Kofler - Jefferies Haythem Rashed - Morgan Stanley Hamish Clegg - Bank of America Merrill Lynch Anders Torgrim Holte - Danske Bank Teodor Sveen Nilsen - Swedbank Anne Gjøen - Handelsbanken Halvor Nygård - SEB John Olaisen - ABG Biraj Borkhataria - RBC Europe Ltd.

(Broker) Anish Kapadia - Tudor, Pickering, Holt & Co. International LLP Rob West - Redburn (Europe) Ltd. Tom Robinson - Deutsche Bank.

Good morning, ladies and gentlemen, and welcome to Statoil’s Capital Markets Update. And what I know is a very busy day for you all. I'm very pleased that we will be able to run you through a series of presentations to look thorough our outlook over the next four years, and also comment on the quarter results that you've seen presented this morning.

We’ll be starting with presentations from Eldar Saetre, our CEO; Hans Jakob Hegge, our CFO; Margareth Øvrum, EVP for Technology, Projects & Development; and Torgrim Reitan, EVP for DPUSA.

And I'm delighted that we have many members of the executive committee here who will also be able to answer questions both in the session itself and after the session more informally in the gathering area outside. Safety is central to everything that we do in Statoil.

And with that in mind I'd like to just read a very short announcement about safety specifically for today. If an emergency situation should occur while we are here, the evacuation signal is a voice system announcement. Please note we only evacuate the building should the voice announcement say to do so.

Then please use the signposted fire exits within the venue, follow the signs and messages from the guards, exiting is at ground level and the assembly point is situated on Bartholomew Close. So with that I'd like to move directly into the capital markets update itself, and I'd ask Eldar to join us on stage. Thank you very much..

Thank you, Peter, and good morning, everyone. It's great to see you all. This is the third time that I have the pleasure of welcoming you to our capital markets update here in London. But it is the first time I do so without looking back at the yet another year of falling oil prices. So let's make that a new tradition.

2016 was a challenging year for the industry, a fact or so reflected in the fourth quarter and full year results for Statoil, which Hans Jakob will get back to soon. But there is also saying that you should never waste a good crisis. And I am proud to say that Statoil is emerging from this downturn as a stronger and much more competitive company.

We have reset our cost base. We have transformed our opportunities at and sharpen our strategy to be even more value driven in everything that we do. So in short, we are now well positioned to capitalize on the opportunities of a world class portfolio. Last year, we achieved a lot, but we also experienced the worst thinkable.

We had one contractor fatality during construction work in South Korea. And on the 29th of April, we lost 13 of our colleagues when a helicopter crashed on its way to Bergen. For the year as a whole, our serious incident frequency came in at the 0.8 which is an increase from the two previous years. I'm not satisfied with this development.

Over many years, we have improved our safety results, and now we have to get back on a positive trend. And we are fully committed to doing so. We have already taken several steps to reinforce safety measures throughout our company.

And it starts with me and all our leaders being crystal clear that safety or people at the integrity of our assets and operations is and remains our top priority. I take pride in the fact that we have a track record for delivering. We promised U.S. $2.5 billion in yearly efficiency gains by the end of 2016. We delivered three U.S. $3.2 billion.

Since 2013, we have taken down operating cost and SG&A by 30%. The breakeven price for what I like to call our next generation portfolio is now at U.S. $27 per barrel. CapEx for 2016 came in at around U.S. $10 billion, well below the initially guided U.S.

$13 billion mainly due to increased efficiency, strict prioritization and also very disciplined project management project execution. We sanctioned five new upstream projects last year, and one in offshore wind, and added a billion barrels of resources to this portfolio.

Looking then at the energy markets; we see still both the traditional commodities cyclicality, as well as longer term structural changes. The oil price is clearly showing signs of recovery on the back of expectations of a tighter market balance and also the recent OPEC agreement. We expect oil prices to rise for to a level of U.S.

$75 by 2020, but we also see significant uncertainty and continued volatility. In addition to OPEC policies and discipline, how much and how quickly the U.S. onshore response is one of the key questions obviously in this equation. When it comes to natural gas, short term prices are under some pressure.

Medium to longer term however, we see a stronger gas market emerging. Declining European production, indigenous production markets gradually absorbing new LNG capacity and clearer policies reflecting the need for natural gas to replace coal in power generation. All these components support this view.

And Hans will give you more details and more detailed outlook at our gas seminar in London in four weeks’ time. Looking then towards 2014, we see an energy system in transition. New renewable energy is rapidly becoming more competitive and will continue to be the fastest growing source for new power generation.

Technology and innovation are driving this development and we do not expect this to slow down, despite some uncertainties on International Corporation and also global climate policies. Still in 2014 significant new capacity will be needed to meet demand for both oil and gas regardless of which energy scenario you tend to believe in.

And the winners will be the producers that can produce and deliver at low cost and with low carbon emissions. High value low carbon is also the core of our sharpened strategy. We will shape our future portfolio guided by a set of strategic goal at principles. The first one is about cash generation at all times.

To me this downturn has truly demonstrated the value of resilient cash flows from our operations. Sufficient cash generating capacity also in a low price environment is critical to secure a financially robust future. You can call it low cost strategy for high value.

The last few years have also underscored the importance of the Norwegian continental shelf to us in this respect.

As a large operator, we have been able to effectively implement significant cost improvements across the entire NCS portfolio, bringing operating cost down to an impressive ten year low and increasing production efficiency consistently by 6% to 7% - 6.5 percentage points adding around 75,000 barrels per day almost for free.

Now CapEx flexibility is the second guiding principle for us. Thanks to the efficiency program, a high share of operated assets and also our position in the U.S. onshore. Statoil was able to reduce organic CapEx by 50% over two years, while also increasing our production capacity.

The flexibility to adjust spending when you want to do it, and not when you have to do it is highly valuable, supporting our financial management and increasing our capacity to create value through the cycles. Torgrim will give you a more detailed update on our progress in the U.S. later today.

Thirdly, we remain a cyclical industry and this offers opportunities to create value for companies with the capacity to act counter cyclically. And I will revert to this point soon in my presentation. And finally, as we move towards the low carbon future, carbon intensity and efficiency will increasingly be a competitive advantage.

Our emissions per barrel is around half of the global average. And carbon efficiency will also be a factor for us when shaping our future portfolio. Statoil will develop our business supporting the ambitions of the Paris climate agreement and we're proud to be ranked number one in our industry on carbon resilience by the Carbon Disclosure Project.

And then as I will get back to we are also building a profitable business within renewable energy. Let me then turn to our improvement efforts. Our target for cost improvements by 2016 was annual efficiency gain of U.S. $2.5 billion measured against 2013. We delivered U.S. $3.2 billion.

This is a total reset of our cost base, but we are not done improving. In fact, we are already chasing the next billion. So on top of the 3.2 billion, we will get further impacts from already initiated improvements and market effects and that is in particular related to project developments.

And then the next phase for us is to go from an improvement program or project mode to a culture where we continuously improve and we are well on our way. We are learning from other industries and using the full toolkit from the lean methodology and standardization to technology, innovation and digitalization.

So in sum, this adds up to an additional ambition for 2017 of U.S. $1 billion. A question that we often get is how sticky these cost improvements will be when markets recover and the heat of this industry. We’ve seen it before is turn back on.

So my response is that we will make them stick and we also believe there is a significant potential from simplification based on that standardization and based on that or so industrialization related to our industry and our company.

80% to 90% of the improvements that we have achieved are related to efficiency, doing things differently, not market effects, no deferring activities. As an example, we cannot control global regrets, but we can control how long it takes to drill our wells and now we get almost 70% more meters per day compared to 2013, 70%.

These are real achievements doing things differently which will actually be even more worth in a potential future market with higher rates. Then, ladies and gentlemen, here we see our next generation portfolio.

These are projects that were sanctioned since 2015 and plus or non-sanctioned projects all to be in production by 2022, a portfolio with an average breakeven price of U.S. $27 per barrel. It is truly a radical transformation.

And in fact during my 36 years now, instead all, this is the most profitable opportunities that I’ve ever seen and while investments and breakeven are down resources are up. We’re looking at 3.2 billion barrels of oil equivalent in the recoverable resources and 65% of this is oil.

So by relooking solutions from all the way from the reservoirs to the markets, you’re getting more for less. In 2019, we will see first oil from to Norwegian, Johan Sverdrup where the breakeven price for phase 1, has been further reduced to below U.S. $20 per barrel. This has always been a world class project and we have made it even better.

An impressive achievement we are proud and Margareth just can’t wait to give you more details on this specific project, but she can also give you other examples of how we have improved in relation to other projects.

For our post 2022 projects, we also see significant improvements and we continue to bring down breakeven for this part of our portfolio as well. In a cyclical industry, timing matters, between 2012 and 2014, we completed divestments of around U.S. $13 billion.

This helped us in building a robust balance sheet, supporting our capacity to act counter cyclically also during the downturn. As one example, we have awarded U.S. 30 billion in contracts since 2015, capturing market effects, enhancing performance based contracts structures and also offering obviously much needed work to a hungry supplier industry.

On the exploration side, we added close to 25,000 square kilometers over acreage last year. We deepened our positions in prolific basins like Norway, the U.K., Brazil, East Coast Canada and added Frontier options in countries like New Zealand, Mexico and The Republic of Ireland.

In 2017, this year, we plan to drill around 30 wells, including several high impact opportunities. That is 7 more wells than we drilled last year while keeping spending at the same level of around U.S. $1.5 billion. So let’s then look in somewhat more detail on how we are developing our new energy business.

As an energy company, Statoil considers renewable energy as a fully integrated part of our business of our strategy. Industrially, this is an opportunity to leverage our core competencies to create value in new areas. The Dudgeon offshore project is a good example in the U.K. with 67 turbines being installed as we speak.

It is really a challenge that place to our strength in project execution in Logistics and Marine operations and other areas. Financially, renewables offers an attractive risk reward proposition. So far in our projects, we see real returns in the range of 9% to 11%.

With costs coming down quickly, renewables are set to be cost competitive especially in power generation and with subsidies gradually being faced out, developers increasingly need to take on market exposure market risk. And this will also have an impact on return expectation of the competitive landscape in this industry.

Strategically, renewables diversify our portfolio adding longevity and also cash flow resilience. And to illustrate - to illustrate the long term potential in New Energy Solutions, we are indicating a range of 15% to 20% of our CapEx in 2030 to this area. The growth profile will be back loaded starting from a yearly level of around U.S.

$500 million last year and growing assuming that we are able to access and mature sufficiently attractive and profitable opportunities. Looking at the broader portfolio, Statoil is pursuing a distinct and value driven strategy. On the Norwegian continental shelf, we have a unique position and we will leverage this position further to maximize value.

As a major contributor to our next generation portfolio and with further exploration potential, the NCS remains the backbone of Statoil. In our international business, we will focus, we will deepen and we will continue to explore.

Brazil is already a core area for us, having access to Carcara discovery last year on top of Peregrino Phase I, Phase II and Pow and also building on our strategic partnership with Petrobras. In the U.S., we will continue to improve to operate and to add acreage to our highly flexible U.S. onshore position.

In addition, our ambition is to add and to develop wanted to core areas both offshore and onshore. With the same long term potential from further capitalizing on our legacy positions and through active, exploration and business development.

For midstream and marketing, the job is still to secure flow charts by accessing premium markets and also to increase value - increase value creation by strengthening our asset backed trading based on a capitalized approach. So allow me then to summarize what you’ve heard this morning. We have reset our cost base.

We have transformed our opportunity set for the future and continue to chase improvements, continuous improvements. We are ready to invest in our next generation portfolio currently at U.S. $27 per barrel and we have the financial capacity to execute on this set of opportunities. With plant, CapEx this year at the around U.S.

$11 billion, we will be cash flow positive at the U.S. $50 oil price. We remain committed to shareholder value creation and capital distribution. The Board will propose to the AGM to maintain the dividend at point U.S.

$0.2201 per share in the fourth quarter offering a scrip option through third quarter 2017 and maintaining keeping share buybacks as a part of our toolbox. And you should expect the dividend to be maintained at the same level for the first three quarters of 2017.

Finally, we are sharpening our strategy as an energy company, towards 2030 being even more value driven in everything we do. That's the core of who we are and how we are positioning Statoil to capitalize on high value opportunities. So thank you very much for your attention. And now I'll leave the floor to Hans Jakob Hegge, our CFO..

Thank you, Eldar. And ladies and gentleman, good morning. It's good to see you all. 2016 has been a tough year for the industry and for Statoil. The low prices have impacted our results, but we have delivered solid operational performance taken down costs delivered U.S. $3.2 billion in annual efficiencies and radically transform our portfolio projects.

At the same time we have maintain financial flexibility and our firm commitment to capital distribution. We are in a strong position to capitalize on our high value opportunity set. Let me start with our 2016 numbers. Impacted by the lower prices we delivered adjusted earnings of U.S. $4.1 billion down from U.S. $9.6 in 2015.

Our net operating income was U.S. $80 million for the full year compared to U.S. $1.4 billion in 2015. Heavily impacted by net impairments of U.S. $2.3 billion dollars, this is mainly due to the changes in our long term price assumptions. Still we deliver a solid cash flow which I will come back to.

We delivered strong operational performance, higher production efficiency and increased our well capacity. Our production was above guiding despite the high turnaround activity. We deliver annual efficiency effects well above our ambition. OpEx SG&A is reduced by 13% in 2016 and 30% from 2013.

We have demonstrated strict financial discipline improve the breakeven or next generation portfolio and reduced organic CapEx for the year. In short, we are getting more for less as we have increased the production. Adjusted earnings for the group were at U.S. $1.7 billion down a U.S. $100 million compared to the same quarter in 2015.

Achieved liquid prices increased by 14% gas prices were up in the U.S. and decreased by 14% in Europe. Our cash flow from operations was strong up U.S. $1 billion compared to the same quarter last year. Losses in countries were limited tax yield gave an effective tax rate of 102%.

Development & Production Norway delivered strong adjusted earnings of around U.S. $2 billion on par with the fourth quarter last year. Strong deliveries on production operational performance and cost contributed positively. OpEx SG&A is down 15% in underlying currency. And the regularity is at the record high level well above 90%.

Development & Production International delivered an adjusted pretax loss of U.S. $681 million. The negative result is impacted by expensed previously capitalized exploration higher turnaround activity in Angola and Nigeria and some quarters specific elements. In the quarter the cash flow from more international operations was around at U.S.

$17 per barrel after tax. This is the same level as from the Norwegian continental shelf. U.S. offshore production continues to grow. These are high value barrels generating significant cash flow with low cash cost and no tax. Our mid and downstream business delivered solid results driven by strong marketing and trading. Adjusted earnings were at U.S.

$514 million up 22% from the same quarter last year. And the quarter we had more volumes in transit to capture higher margins. During the quarter we produced close to U.S. $2.1 barrels per day an increase of 2%. We are delivering our strong production for the full year even with high turnaround activity.

And we have increased both our total well capacity and the production efficiency. Through the year we have utilized the flexibility in our Norwegian gas machine and moved volumes out of periods with higher prices. In the year with limited contributions from exploration we maintained our resource space above 20 billion barrels.

Increased recovery rates contributed to our reserves. Under three year average organic triple are was 90%. In 2017 this year has started well.

Last week we announced our second discovery and two years of the well amount came on stream we made our new gas discovery containing 20 million barrels to 50 million barrels which can be put on stream immediately adding considerable value.

Our financial position remains robust with a strong positive cash flow of 900 million in the quarter of the two tax payments, dividend and organic investments. The free cash flow for the full year was negative $3.1 billion after net acquisitions of 1.1 billion. Adjustable $50 per barrel we would have been cash flow neutral.

Strict capital prioritization and efficiency improvements have reduced organic CapEx with $3 billion in 2016. The payments, impairments, currency and the increase in working capital gives a net debt ratio or 35.6%.

And the scrip program has reduced the dividend paid in 2016 by $900 million and the take up rate for the shares issued in the quarter was 46%. We have delivered $3.2 billion in annual improvements.

This is well above the increased ambition we out lined last year of 2.5 billion and we have captured affects all across the dimensions we have been tracking since the start of the program. 80% to 90% of the 3.2 billion is a result of efficiency gains and will have lasting effects. Let me explain the key elements behind these results.

Close to a third 1 billion is within our unit production cost. We have already were top quarter performer compared to our peers. Costs are down and production efficiency is up. So let me give you one example from Oseberg field center, one of the largest installations on the Norwegian shelf. From 2014, we have reduced costs by more than 30%.

As we have prioritized strictly, simplified processes and do more work ourselves and the production efficiency is up from 85% to 95%, and we have similar improvements across the portfolio with even tougher target set for 2017, 900 million is the result of increased drilling efficiency Since 2013, we have brought down the cost by 27 million per well, a reduction of 35%.

Modifications on brown field cost is reduced by 45%, and in addition, we have reduced our SG&A by 30%, optimizing our staffs and services and more efficient business follow-up. This is a continuous hunt for further efficiencies while maintaining a high focus on strengthening safety. The persistent demonstrated by organization is truly inspiring.

Now let me shift to the outlook for the next years. As Eldar has already presented our sharpened strategy for high value and low carbon, and in my presentation, I will elaborate on why we believe our next generation portfolio is highly competitive and a strong investment proposition.

But before doing that, let me show you how we will continue to improve our business capturing the lasting effects. So this year, we raised the bar with an additional $1 billion in cost savings, realizing the forward impact of improvements already made and continuously improving all parts our business further strengthening our cash generation.

We’re working hard to lock-in these improvements from the efficiency program and capture further market effects. We will continue to drive performance every day, learning from the best and together with our partners and suppliers, implement best practices to increase value and reduce costs.

Reducing the drilling cost even further will be important going forward and Margareth will tell you more about this later. Simplifying and standardizing processes U.S. onshore will be equally important and you will hear more about that from Torgrim in his presentation.

OpEx, SG&A has been significantly reduced and we see further potential to simplify our processes and become an even leaner and more agile company. Let to be no doubt that we are on a journey of continuous improvement making that a core part or DNA. This is cultural change emotion.

We have radically reshaped and improved our portfolio, getting more for less and average breakeven is now at $27 per barrel. At $50 per barrel, the internal rate of return is 20% and the portfolio payback is quick by 2023, again at only $50. This underlines the resilience or portfolio at lower prices.

The portfolio contains 3.2 billion high value barrels with an average production of 360,000 barrels per day from 2020 to 2022. As the CFO, I am pleased to say that we are challenging also the best projects to become even better and the organization delivers. Let me give you two examples to highlight what we have done.

Peregrino Phase II in Brazil, now has a breakeven below $45, a reduction of more than 30%. It started with spending the necessary time optimizing and simplifying the concept. They also capture market effects in the contract awards. And now we are realizing the effects of the increased drilling efficiency and strong project execution.

We aim for a production start-up in 2020. CapEx is reduced by close to 1.5 billion and production is increased extending the life of the field towards 2040. Clear stock is another example, this one from the Norwegian continental shelf. Here we have reduced the breakeven on this subsea tieback from $58 to below $20 per barrel.

And these are not unique examples. We clearly see that there is a powerful learning effect when your leverage it across the entire portfolio. So the improvements we are made will also have an impact on the project with start-up well into the 20’s such as the Carcara field, a deal made in a low price environment capturing value from cyclicality.

And value remains the priority and our improvements have increased our production. The strong growth in 2017 is related to increased efficiency and start-up and ramp up of field such us Gina Krog, Aasta Hansteen and Hebron, as well as increased activity U.S. onshore and lower turnaround activity.

From 2018 to 2020, we have several major start-ups capturing significant value in the upturn. The list includes Mariner Stampede of Stockholm’s stand and Johan Sverdrup. This contributes to our cash generation which I will now address.

Last year we said that we could continue with our investment program and the cash flow neutral at $60 in 2017 and $50 in 2017 with the debt ratio in the mid-30s. Today we are cash flow neutral at $50 of the cash dividend with the stable debt ratio.

The improvements have made this possible and the CapEx reduction in the outlook period is substantial, around $10 billion without reducing the flexibility in our portfolio. And the balance sheet remains strong with a capacity to maneuver. And we have a single A rating on a standalone basis with the stable outlook.

We continue to be comfortable with debt ratio in the 30s. With the current assumptions we would back within our long term ambition of 15% to 30% towards the end of the outlook period. Now let me give you just a bit more detail on how we manage our financial framework to capture high value opportunities.

Our commitment to create attractive sustainable shareholder value is at the core over strategy. We have position ourselves with a great set of opportunities and we are investing in world class projects such as Johan Sverdrup. These are projects with strong returns and radically improved breakeven.

We see a double digit return on average capital employed at $70 by 2020. For the next generation portfolio is well above 20% when the projects are producing. We are growing our cash flow from the existing operations and sanctioned projects improving cash margin.

And we will continue to demonstrate financial discipline, managing short term challenges, while continuing to high grade our portfolio. We will still have a long term perspective on investment and return.

And our dividend policy remains firm and the Board will propose for the AGM to maintain our dividend and continue our script option and share buyback remains apart or toolbox. Moving on to guidance. We planned for around $11 billion in CapEx for 2017. And exploration spend of around $1.5 billion.

Value is our priority when increasing our production and you can expect a growth of 4% to 5% from 2016 to 2017 and around 3% annual growth from 2016 to 2020. We continue our efficiency improvements raising the bar to deliver $1billion in additional savings this year. Let me sum up in three points. First our track record is strong.

We have taken the on cost faster and deeper and radically improved our projects. Second, we have maintained financial flexibility with a firm commitment to capital distribution. And finally, we are in a strong position to capitalize on our high value opportunities set. Thank you for the attention. And now I give the word to Margareth..

Thank you, Hans Jakob, and good afternoon, everyone. Look at this, this is the world biggest spar, this is 200 meters long and 50 meters in diameter and if you look at the person in the white circle that is Eldar. So our job is to develop and to deliver the competitive solutions which will shape our company’s future.

This responsibility includes the development and execution of all Statoil purchase it is drilling and well procurement as well as research and technology globally. No small task, but you know I have the best job in the world. Eldar and Hans Jakob they already presented some excellent figures from projects.

I will explain how we have achieved these figures. In 2016 has been the most energizing year in my career. Not only because my boss is pleased with our figures, but because I've seen what we are capable of. And as Eldar said, yes been in this company for 36 years, I am more a younger I've been there for 35 years.

We keep on delivering on all of our targets and I believe it is because of who we are. I've never witnessed and more creative and result driven force. First of all we have our world class project portfolio. We make even the most complex challenges profitable also with low oil prices.

We continue to reduce breakevens an increase of value of our project significantly. This gives us opportunity to act counter cyclical and re-sanctioned projects. Secondly, we seek the real game changers through innovation and technology. In the following, I would like to support my statements through facts, numbers and examples.

After all I’m an engineer, so I like more figures than words. So our mantra is every single dollar saved today is a dollar we can use to create values tomorrow. It applies to the quality and project execution just as march to the maturing of future projects. To the left side you see the cost development in our sanction project.

In 2016, we reduce expected forecast to 90% compared to the sanction estimate. Some is capture market effects, but more important we deliver below cost because of our execution performance. And let me give you a few examples. The Gullfaks Rimfaksdalen, we delivered more than U.S.

$125 million below estimate four months ahead of schedule, due to efficient reeling efficient per in campaign and the quality in execution. And currently we are more than $250 million below the estimate on the direction been farm in UK due to highly efficient in campaign and also the use of industry standards $250 million below.

Obviously I will revert to you on slide group soon. As you can see we managed to save cost and reduced our estimates. This means that we can sanction new profitable projects, award contracts in a favorable market and create value for the company.

Last year we sanctioned four Statoil operated project, Peregrino II in Brazil, Utgard, Byrding, Trestakk Norwegian Continental shelf. Below this sanction project, you see some of the exciting opportunities ahead both short and more longer term. The first seven projects are planned for sanctioning within the next two years.

Currently, these are the ones we have mature the most and have the lowest breakevens, but I can assure you we were card to make all of them as profitable as possible. On this state last year I promised you and known sanction portfolio with a breakeven below U.S. $40 per barrel. I just wanted to remind you of this because we have over delivered.

The graph on the left hand side shows the exact same selection of project we showed you last year. The dark grey area marks improvements in breakeven since then and again the color shows where we currently are. And we have not only reduced the breakeven, we have introduced stricter CO2 intensity targets and increased the value of these projects.

The CapEx has been reduced by 43%, the resources at the same time have been increased with 12% and the NPV is increased with 12% even with a reduced oil price assumption of the 20% to 30%. Actually, if you had kept the prices fixed, the NPV would have been increased between 70% and 80%.

I also wanted to comment Lars Christian, Arne Sigve and Torgrim what they have achieved on production efficiency and reduced operating costs in particular, these learning also improves our projects. Some of this is a result of competitive pricing and we are on track with regards to expected market effects.

However, the main contribution our improvements which will sustain even if the market shades us.

We chase every element on this challenge how can we simplify the concept? How can we standardize on previous projects? How can be utilized existing infrastructure more wisely? How can we use new contract types or models that increase performance? How can we use technology and so on? I believe in setting the impossible target, targets which require radical changes.

In 2015, very few people believed it was possible to reach a breakeven target of U.S. $50 per barrel. But one year later, the portfolio was U.S. $41 per barrel. And today, the breakeven in the next generation portfolio as you have heard from Eldar is 27.

This demonstrates, we can make the impossible possible and we will work just as hard in the execution of Phase II to beat these figures.

We see this positive development in all types of projects globally but regardless of how good this project numbers or the portfolio number gets, we will not sanction a single project until we have made it as profitable as possible. And let me be very clear. The prerequisite is a strong safety culture.

Improvements that do not support over safety work have no place on the improvement that end up. I promise facts. So let me go into more detail on two over the giants Johan Sverdrup and Johan Castberg. Johan Castberg is the largest oil discovery in the in the Barents Sea with the selected FPSO concept, we reduced the breakeven from U.S. $18 to below U.S.

$45 per barrel last year. Since then the scope has been matured further and the current breakeven price is below U.S. $35. Such improved numbers do not just appear on their own. This is the result of a project team willing to challenge conventional way of thinking and collaborate closely with their suppliers.

And CMU last year, we have optimize the field layout, we have reduced the number of wells but still we have increased the recoverable resources and we have further reduced the seabed intervention costs. We have challenge the supplier industry to find new subsystem solutions and they have responded.

Together we have simplified requirements which will result in less weight, lower complexity, less documentation and lower cost. We are now as standard package specification which we can implement across the whole portfolio. The estimated cost reduction is approximately NOK 40 million per well.

Johan Sverdrup is an extraordinary project in size in CO2 intensity as well as in the achievements. The project teams’ commitment is a testament to our mantra. Every single dollar counts and it really proves we are on the journey from improvement programs to a continuous improvement culture.

Sverdrup has always been a very profitable project still they keep up the intensity and continue to hunt for ways to reduce cost and increase the value. Sverdrup is a phase development and we have now completed 40% of Phase I. 24 million recovers are completed and most importantly without any serious actual incident.

In August, we communicated CapEx reduction or NOK 24 billion compared to the PDO estimate. Since then, we have reduced with an additional NOK 2 billion.

And this is a result of the best ever drilling campaign, quality in execution, limited scope changes and the chase for every single dollar, such as optimizing the use of floor material giving up NOK 30 million in savings. In Phase II, the CapEx is reduced with NOK 30 billion to NOK 45 billion since the PDO of Phase I.

By setting tough targets, efficient collaboration across disciplines and the use of experience from Phase I, the project has reduced the number of process trains from two to one, reducing the number of wells from 42 to 28 and complete 40% of equipment from Phase I. Copy paste is good for us.

Even we had the radical cost improvements, the resource range has been further improved. Now it is ranging from 2 billion to 3 billion barrels in resources for the full field and we have increased the production capacity for both phases to 660,000 barrels a day. So as you can see, the updated breakevens are below U.S. $20 for Phase I, below U.S.

$30 per barrel for Phase II and for the full field below U.S. $25. I’m not sure anyone can beat these figures. Reduced drilling cost is also a significant contribution to the improved project breakeven figures. In some cases drilling amounts to half of the project price. We continue to deliver groundbreaking improvements within drilling in the well.

And compared to 2013, we have increased the meters per day by 69%. We have reduced the days per well by 42% which gives a cost reduction or 35%. And as you can see on next journal benchmark, it's a Rushmore benchmark on the bottom left. We are significantly lower on cost per meter real down over peers.

So in short we deliver more wells to a much lower cost. This is a result of our continued focused on simplified well designed is focus on standardized wells operational efficiency, and what we call the perfect well approach which means setting targets based on the best section drilled ever and driving towards these targets.

It embeds the continuous improvement culture we pursue in terms of both safety as well as performance. It is our methodology, we have successfully stolen from Torgrim and the U.S. onshore operations. It is also adopted by our projects with a driver now is common cost targets with our suppliers.

Within all areas not just within drilling and well, we have to work closely with our suppliers to succeed. We do not feel their shopping cart with goods and argued the price when we are at the cash year. We collaborate to bring the price down before we get to the cash year.

Together we work to simplify to reduce the interfaces and find new contracts models that will promote the win-win situation. One example is the integrated drilling and well contracts on Sverdrup and Mariner or how we have bundle the marine operation together with the subsea on the today’s stock.

I believe we have more to gain for instance by introducing lean optimizing low districts working with suppliers to reduce the nonproductive time. And as I stated we hunt the real game changer that can take our competitive edge to a new level. We seek high value low carbon solutions.

One example is our roadmap towards the remotely operated factory and unmanned field development. It is a specific example of what we can achieve by utilizing digitalization and it will radically reduce our carbon footprint.

So picture of the big platform, the standard platform, big heavy and complex and then imagine the benefits of having several smaller standardized building blocks as you can combine allowing for better field utilization and optimization. I simply call it the mix and match solution. And everything is operated from shore.

We combine subsea with unmanned topside technology to find the optimal solution for each project. It will improve the robustness of our project portfolio by making even the smaller field developments profitable. And early assessment on the warmer warming projects shows a potential CapEx through reduction of $1 billion.

We see this as a future development solution for several of our fields. It may seem like a science fiction, but you know we are getting close. Believe me many thought they ask a Subsea Compression was realistic, but it has been running for one and a half year now it 100% uptime.

At the CMU in 2014 we presented the Unmanned Wellhead Platform or as I like to call it the subsea on slim legs. As our future long target it is already under construction and it will be installed this summer three years later on Oseberg Vestflanken.

Currently we are developing the Unmanned Production Platform and the next step will be the unmanned and remotely operated factory aimed for frontier areas and deeper waters for instance like the Barents Sea. World Records for size belongs to history we still think big, but we build small.

This fits perfectly into the new strategy, it requires less cash, increase CapEx flexibility and in able to act counter cyclical and has a significant lower carbon footprint. And based on our technology track record, I am sure we will succeed. To summarize we will continue to mature and develop a competitive and carbon efficient project portfolio.

We will maximize the value creation through continuous and sustainable improvements. And we will use our innovative capabilities and technology to fuel radical changes even though the yawn what we have achieved so far.

I believe in the future or this industry and I know we have both the confidence and the determination to shape competitive solutions for the future. And then I would like to give the word to my very good colleague the flexible cash generated Torgrim Reitan. Thank you.

So thank you very much, Margareth, is a fantastic colleague I have now. So good afternoon everyone and it's good to see you and it's good to be here in London to give an update. Last year, we discussed your plan to transform the U.S. business. It is a portfolio of high quality assets and it provides a strong fit with the sharpened strategy. The U.S.

portfolio is flexible it can respond to lower prices and it will capture value in an upturn. But like many others, we invested significantly in the U.S. in the high price environments. And as a consequence of the falling prices we have made impairments and we have negative earnings currently.

With that said, we have a first class portfolio and organization, I have confidence that we have the ability to make this business work at low prices. And some of you may remember I will remember this plan has three pillars. First, we want to make money at lower prices. That is measured by net operating income or 90 to 50 ambitions.

So in 2014 $90 per barrel to have positive earnings, in 2018 we'll make money at $50. Second, we are going to improve our operations by 20% to 25%. And lastly and maybe my favorite we are going to double the cash margin in $50 environment. So today I'll give you an update on all of this and show you that our plan is working.

So let me first update you on my portfolio. Onshore we have an attractive portfolio in three core areas. Last year we increased our share in Eagle Ford and we took over operatorship from Repsol. We divested non-core Marcellus acreage and offshore we have had significant production growth of high value barrels.

And in December we won two blocks in Mexico, first deepwater be drowned. The U.S. and the broader part of the Gulf of Mexico is an important part of Statoil and a significant part of our company, and it is our task to make it work. And hard work is what it takes for us to contribute to the targets that is laid out by Eldar and Hans Jakob.

So how are we doing? We will bring our earnings breakeven from $90 to $50. In 2016 we ended about $66 so we are well underway. And you know $90 to $50 that is based on our earnings. And the impairments we took two years ago drove most of the improvements from 2014 to 2015.

Since last capital markets day we have taken both impairments and we have also made reversals. And the net effect of those is very minor. So let's instead talk about you know the real improvements. Unit production costs that came down by 34% in 2016 and along this row $4 on this chart.

Our onshore recovery rate is up 41% over the last year and offshore production grew by 45% and this was driven by new wells and also improving regularity of 94%. And you know these new offshore barrels they are of high quality with a strong cash flow.

But they come with a DD&A rate, so as an example Julia has a DD&A rate of $60 per barrel that means that it contributes positively to the cash margin, but actually contributes negatively to the $90 to $50.

These are lasting improvements both to get to $50 we must improve our recovery rates even further Stampede needs to come and due to startup safely and on time and production from existing fields need to ramp up ass plans. We need to continue cost reductions and our efficiency gains and we need to improve on a regularity onshore.

With this progress and what we plan to do we can't get $250. So let me discuss our operational targets. Last year gave me confidence in our ability to transform what we do. In fact, we have already surpassed two of the four 2018 targets onshore development cost and operational cost per barrel. And we are closed on the third one the administration costs.

So let me give you some concrete examples of what we have achieved. In the Eagle Ford unit of production cost is reduced by 36% since we took over the full operatorship of that assets and drilling efficiency has improved from 19 days to 15 days and know as we applied or perfect well approach mentioned by Margareth.

And furthermore we have successfully reorganized, we have reduced cost and our business has load ability to scale up to a higher activity level.

Then we have reduced CO2 emissions significantly in Bakken operations and we are at the forefront in working to limit methane emissions and you know we aim to be the most carbon efficient oil and gas producer nothing less.

So based on this we will set new targets for 2018, in 2016 we have benefited from low supplier cost and the high graded drilling program. Going forward, we assume an increase in supplier cost and we will also drill several pilot wells and test future development areas.

We have allocated a pad where we will work together with Margareth and her team to test new technology and new concepts for drilling on completion.

And within onshore there is a short time from improvement to cash flow and then you have seen your Margareth team's ability to deliver, so I’m really looking forward to the way we are working together with Margareth. With the increasing supplier costs and these pilot wells we need to deliver further improvements to meet new targets.

This is ambitious, but we are convinced that we can do it. Despite all of these prominent - these improvements we are not satisfied, we cannot be fully satisfied. We systematically use benchmarking to uncover new potential.

We have access to third party data for thousands of wells, so we can compare our performance to others in the areas where we operate. In most areas, I would say that we compare well I would even say very well. And that is in within the areas of recovery rates and drilling performance. In other areas we need to improve.

We are lagging on the regularity onshore. And we're still not good enough on the operating cost. Over the last years, we have spent five times as much money on CapEx than on production cost so focusing on recovery and drilling has been the right thing to do. Now the time is right to focus even more on the day-to-day operations.

So we can do better and is that is what motivates us to improve each day. So our growth certainly needs to be profitable. We need to grow with quality. Overall target was to double the cash margin from $5 to $10 while we grew production by 50%, more than 50%.

Our new target is $12.5 per barrel and this is exciting and it comes from better performance onshore it comes from higher production and improved the regularity offshore and it also comes from lower costs.

And you know while our new fields offshore do not help much on the $90 to $50 due to the high DD&A rates in their initial phase these offshore barrels contribute a lot to this warm through the cash margin. So we still expect to grow our around 50% our production by 50%, but let me be very clear.

I do not have production targets and my people they does not have that either. So we focus on safely producing value, nothing less than that. Then you know we aim to be a cash generator for Statoil. And we have been in an investment phase for many years and so far we have spent a lot more money than we have made.

In a couple of years we will have a positive free cash flow at $50 oil. And at higher prices the cash flow will be substantial as you can see from the left side off this chart. And then you know the CapEx flexibility that we have that is gold for Statoil. Our future investment options are increasingly attractive.

We have improved the well economics significantly, and we know have more than a thousand well targets with a breakeven less than $50. And we're optimistic that we can get many more wells into this category. Our plants tell us that we know are building a sustainable business at lower prices. So let me summarize.

We have still negative and negative net operating income. However the plan we introduced last year it is working. We are on track to make money at $50 in 2018. Our operational improvements are progressing and we are setting new efficiency targets at $50 oil we would have a cash margin after tax of $12.5 per barrel. So the U.S.

portfolio it is flexible, it can respond to lower prices and it will capture value in an upturn. And then we are reducing our carbon footprint as we go forward. All of this is very much in line with the strategic principles that Eldar outlined earlier today. It is still early days for the U.S.

business as of today we have only produced 11% of our economic resources. And oil portfolio has a large potential and our business is scalable. My team an myself our job is to make money and to create growth options for Statoil and we are prepared to add acreage when we see the right opportunities.

And with our assets, the capabilities and people, the next chapter of the U.S. journey will be a very exciting one. And I’m feeling that I’m already now looking forward to update you when we have progress this journey even further. So, thank you very much.

I look forward to your questions and to discuss with you and then I’ll leave the word back to you Peter. So thanks..

Thanks, Torgrim. Thanks everybody. I am pleased to say that we are right on schedule. A little bit choreography now, I invite Eldar and Hans Jakob back on the stage to take your questions.

We’re going to have roving mikes for everybody in the audience and also mikes on the tables where we’ve got the executives as well as, so who will be able to do those. So you want to come through there and stand on that one. We aimed to take questions for around 50 minutes. I know this is a long session. There’s a lot of important messages.

We think are good ones that we want to get through and give an opportunity to discuss. I know I have something of a reputation for being fairly disciplined in terms of our approach to the questions. I’m going to reinforce that discipline.

I’d like to keep it to one question preferably in one part and with a promise that if we get through those in the some spare we will go around again. But this is something where we want to give everybody an opportunity to ask those questions. So we’ll do this one 50 minutes max and they’ll also be plenty of opportunities afterwards when we say.

The first time I saw was Brendan..

Thanks, Peter. So it’s Brendan Warn from BMO Capital Markets. Just coming back from the last set of results and probably just looking forward just this whole deferral production value and the cash flow. Can you give us sort of an idea of the amount or can you quantify that value for me? I’m now like to ask part B of that..

You can ask the part B if it’s related..

And I guess for Torgrim, I mean in the past we’ve heard about the onshore business was said the U.S.

going to 500,000 barrels a day, a lot of additional promises, where the push backs going to be or where the I guess the more difficult parts your portfolio that you are dealing with and in terms of future divestments of your current portfolio?.

So, in terms of deferrals, I assume you are referred to the gas flexibility that we have in our upstream portfolio and then we should confidential. So it is important for us to utilize that flexibility to create value not to run off the production volume targets or anything like that and give them that consistently over a long time.

I think in net, the net position now that we have deferred some volumes I think it corresponds to around 20,000-25,000 barrels per day in volume. So not as significant deferral but this is something that goes up and down depending on how we look upon the market at any point in time highly valuable and we use that flexibility..

Torgrim is preparing the business to stay where we feel comfortable owning the right to do that. He’s pretty much there now. We are we are ready to bolt on odd acreage to this business. It is a highly valuable component of our overall portfolio the flexibility of it, the cash resilience and so on.

So in terms of how we would like to do that? Divesting, investing that is something that we will look at whatever opportunities is at hand and there were no more specific comments on that. But I think to the question Torgrim, you might add some comments. There is a microphone there I think..

I think this is working. So thank you, Brendan. First of all, 500,000 barrels per day in production target. Those type of targets are long on. We don’t use those types of targets. We are focusing on value and we see production as a vehicle to create value.

So we have changed our targets from being a top line target production to be a bottom line target earnings and making money. So that’s sort of that we can just disregard a 500,000 barrels per day. Then on the difficult part of the portfolio, I would say it’s very encouraging to see that the underlying profitability of the portfolio is changing.

Deepwater Gulf of Mexico has been seen as a very challenging part in the current price environment and I’m very glad to see that also those projects are improving significantly. We have over there improvements in sort of maybe not as impressive as, as Margareth talks about but still very impressive.

And I would say for incidence development that shale is developing and we are joining is now looking at breakevens in them in the low 40’s. Onshore, the more difficult part in the onshore portfolio I would say Bakken, I mean the Montana part is sort of still there. It needs to be worked.

We haven’t focused a lot on it and that’s why we’re joining Margareth in that area to see how much we can actually get that all in. But it will take research, it will take technology and it will take a bit of stamina in long term to make that work but I think ultimately we will get there. I can talk about the Eagle Ford and Marcellus as well.

Marcellus I would say Ohio part of the northern Marcellus and Utica is coming across as a very promising. The well rate scare and always of quarter northern Marcellus and the gas fantastic breakeven but they exposed to local prices as you know. Those assets are actually free cash flow in the current price environment. So they are working..

Okay. Take next question from Theepan..

Thank you for taking the question. It’s Theepan from Exane BNP. I just want to talk between the balance between investment and levels of investment versus the balance sheet. My question is how should we think let’s take oil prices don’t necessarily go up as quickly to the sort of $75 outlook but in the next couple of years are around current prices so.

How do you see what a sustainable level of investment is particularly given the good work that you’ve done improving breakevens against deleveraging the balance sheet and essentially initiating a buyback program? Thank you..

So investing in new capacity high quality asset is definitely a priority for us that is how we create values and also can distribute capital to our shareholders and so on. So we have a high quality portfolio and it is a priority while maintaining the commitment to capital distribution. We can do both.

We have indicated through the presentation that you gave the current clearing level is sustainable in the mid-30s at oil price of U.S. $50 per barrel. And if the oil price should turn out to become 70 or 75 that we have assumed as a long term presence, this will significantly improve our debt ratio and our financial capacity.

So it is - we have the capacity to invest in the current opportunity set but it will always be value driven. If we don’t have sufficiently attractive high value opportunities at hand that will have an impact on how we prioritize in this environment.

In terms of priorities and capital distribution, we are very firm on the scrip program, we extend that in line with what we indicated last year, there is no changed in that plan. The board has the discretion to make adjustments but there is no plans to extend it or shorten it.

So that’s basically what you should expect that we will move forward with that. In terms of buybacks that is an option that we keep as a mandate ask every year the AGM to give us that mandate and we will keep that. As long as we have a scrip program in place, I don’t think you should expect this through to introduce any share buybacks.

And beyond that I think priority would still be to in terms of gearing a debt ratio, we’re very comfortable in the 30s, but we would still say that we have an ambition of a long term addition of getting into the range of 15% to 30%. So that will still be kind of a priority to get into that range.

But overall all these priorities are something that will be looked upon not any point in time given the quality of our opportunities set and outlooks that you're looking at any point in time..

Okay. And then I'm going to swing over right at the back to Lydia and then I can give an opportunity to bring the microphone this side. So Mehdi next..

Hi. This Mehdi Ennebati from Societe Generale. I will ask a question regarding the non-sanctioned portfolio breakeven. So I just would like to compare April with April because last year you’ve highlighted during the CMU 2016 that’s the breakeven will be U.S.

$41 per barrel for the non-sanctioned protect starting at by 2022 highlighted that now we are let's say close to U.S. $27 per barrel, but this takes into account a year once, so I just would like to compare April and April so excluding Johan Sverdrup how did you manage and to decline this U.S.

$41 per barrel just in order for us to measure your thoughts. And just would like to come back to the slide number 23 and this is why in fact I am asking the question, you provide the breakeven of wage project and we can see a project which is at U.S. $10 per barrel breakeven, I want you to know if this is once at phase 1? Thank you..

So it's a very good point. We have tried to be very prudent defined in my presentation exactly what is the 2027 the next generation portfolio kind of a brand what is that. It is not the same portfolio that Margareth talked about last year for two years which were at U.S.

$41 that was a portfolio not included - including Johan Sverdrup, it was basically a non-sanctioned project at the time of the previous CMU, but still in production by 2022 and Statoil operated project only. That portfolio, Margareth you have to correct me would have a breakeven price of around U.S. $30 per barrel, the same portfolio U.S. $41, U.S.

$30..

So it from U.S. $17 to U.S. $41 to U.S. $30..

So what I would like to show you now is what I call the next generation portfolio the whole portfolio opportunity set with the next generation mindset, which includes Johan Sverdrup it also includes partner operated projects which actually has a higher breakeven than our portfolio, but still we include that that gives you a feeling for our whole portfolio which financially will have an impact for the company.

So the difference is basically the partner operated components which is in there and Johan Sverdrup mainly, which is in the portfolio that's the precise difference between those two portfolios. Then on - you have the figure in your presentation, so is U.S. $10 the breakeven for Johan Sverdrup is not.

And we won't tell you which project is this, but there are a great project which is at very low probability - high probability and low breakevens..

Lydia, any additions..

Thanks. It’s Lydia Rainforth from Barclays.

If I could ask a question about the cost savings numbers and obviously you’ve increased the target today billion dollars and beyond in 2018, is not now a stretch targets in terms about cost saving number that you have and possibly from Margareth you have made those cost savings look relatively easy and I know they haven’t been what else do you think is up biggest challenge going forward with those?.

Okay, so if you take the first questions stretched or not. And then Margareth prepare for the next one right..

Well, I think it's been very encouraging to see that how over delivered by $700 million and you're absolutely right Lydia it's not been easy, it's been hard work and across the entire organization. So it's many contributions to that. And that's why we've had confidence talk about the culture of continuous improvement.

Is it a stretch target, it is a tough target and it's for this year and we expect to see within facilities related to sanctioning project, but also further market effects that we have talked about in the past..

So the market effects at the one billion is the around to hundred-ish of the total billion..

Yeah and just for the record, I mean we’ve talked last year about U.S. $300 million to U.S. $400 million in market effects it's actually turned out to be a bit higher so more around U.S. $450 for the last year..

Including in the U.S. $3.2 and the additional one is around U.S $200.

Margareth?.

What are the most challenging, first of all I would say we have to deliver on it, so it's depend on where execution cover built it which I was approved today that has been a very good.

But of course if the price is getting up again, we have already said that 10% to 20% of the savings are related to market and market capital safety, if the price is getting up again, you just have to fight that.

But I would like to say once again that we have tried really to reduce the cost side by sustainable reduction by simplification and standardization and what we can do if the price is going up again if first of all we can ensure we have sufficient competition and there is various forms of completion if you can have different suppliers or you can have the different concept for instance a platform towards a subsea solution.

So this is one way we can act, at the same time I think it's also very important that we collaborate with our suppliers to if you could elaborate where you are here we can probably the best solution. So maybe that was the long answer but yeah..

Thanks Margareth. We're going to do three questions from this side of the table and then we're going to take some questions that we've had on the phone. So picking up with Marc..

Great. It’s Marc Kofler from Jefferies. I just wanted to ask a question which I guess is reasonably similar to the previous question, but on the capital spending and the going to this year particularly in the context of the evolution in the going some capital spending that we saw in 2016.

How much wiggle room flexibility is there in the 2017 program and should we you know should we expect is it even possible to get the same kind of gradual decrease in capital spending coming through this year that we saw last year.

And then following on from that I just wanted to clarify if how significant the knock currency assumption in the capital spending program for this year is, I think it was off on one the slides? Thanks..

So I think I’ll leave Hans Jakob to address this..

Yeah, so thank you for asking that question Mark. As you aware of we’ve started off with the level of doubling coming from a level of U.S. $20 billion down to last year’s U.S. $10.1. So the efficiency gains has been tremendous and what’s the further potential, what's the sustainable level. So we guide of around U.S.

$11 billion for 2017 and we say it will be somewhat higher going forward in the guiding period and we have maintained the flexibility of U.S. $4 billion to U.S. $6 billion that we talked about last year.

So we don't have to sanction the projects according to the plan, but we plan to do so because we think we have our strong value proposition, very attractive returns at this level on a breakeven of U.S. $27. And in terms of the exchange rate you are correct..

Thanks Jakob. Could I just say in relation to the breakeven cash flow that we talked about last year that was what we could do, when we talk about U.S. $50 this year that is what we will do, all our projects is included in that roadmap for 2017 and going forward..

Thank you. Haythem Rashed from Morgan Stanley. Eldar just a question for you on the DPI business the international upstream business if you take a step back sort of broader than just the U.S.

you've sort of said in the past you've not been so happy with performance there in room there's room for improvement, I just wonder if you can give us an update from where you see that business going in 2017 it sounds like some of the headwinds around DD&A mean that maybe you know results from that business will still sort of to have a bit of a transition phase in 2017 is a fair assessment or do you think that will start to see some of that improvement already this year? Thank you..

I think I will offer an opportunity for Lars Christian to comment on his part of the business you have addressed the U.S. business, but in general from my perspective. The international business in the balance sheet looks slightly different from the Norwegian Continental shelf. It is a younger portfolio obviously then also a higher cost portfolio.

It has been accessed in slightly different ways as well at least part of the portfolio which actually make us reflect market values in the balance sheet are not historical you know development cost. So that gives us depreciation DD&A per barrel, which is I think in this quarter two and a half times what you see on the Norwegian Continental shelf.

Nothing I could do about that is this is history of this is where we are, my focus is on value and value to me is about cash and how on improvements. So my focus is on improvement and on cash generation. On cash generation we are on par it was mentioned by Hans Jakob that U.S.

$17 per barrel of cash from our operations internationally including both Lars Christian and Torgrim’s portfolios onshore and offshore. That's the average. That is exactly the same as we have on cash generation from the Norwegian portfolio, excluding expiration.

So it is really a cash generating portfolio internationally, I think really you're demonstrating that we have a good starting point to develop this portfolio it will be part of our strategy going forward. SG&A OpEx is down around 30% in the international portfolio which is on par with what we are seeing in the rest of our business.

So really I think there has been a really good progress Torgrim as addressed his progress and Lars Christian if you would like an opportunity to comment on your achievements. Thank you..

Thank you, Eldar. In addition to SG&A down 30% our operating expenses is down 30% since 2013. Cap Ex spending down 50% in 2013 we expected mining increase in range 20% to 22% toward 2016. It's actually down 20% compared to 2013. So this is across the whole board.

If I look at my portfolio of assets I have some of the best assets in the company internationally, and I have some not so good assets which is a case across the whole board actually for the company. Last year I said the net operating income before exploration would be positive at U.S. $46 a barrel, I delivered that result at U.S.

$45 a barrel and then the realized oil price for last year was just south of U.S. $45 dollars a barrel. And so it is to just focus on oil price last quarter, which was kind of higher definitely, but the first quarter for 2016 they realize oil price for the international part of the business was you know well below U.S.

$30 actually so that is what I kind of have been the baggage for the whole year of 2016. As Eldar saying the DD&A is two and a half times the Norwegian Continental shelf for fourth quarter of 2016 for the full year it's twice as high. And the cash flow after tax per barrel basis is at par with NCS.

So it is a strong portfolio, but it has its challenges on [indiscernible]. We have worked extensively to improve it and we are not fully where we would like to be and you see also our students from portfolio adjustments.

We have exited one asset and we have acquired a couple that will definitely also improve the composition for the international part of the portfolio. One comment on regarding the new projects going forward for an international part of the business, we see the exact same improvements as we do for the NCS projects breakeven is down by U.S.

$40 so far under still working many of these projects to bring them forward in due time. Thank you..

Thanks Lars Christian. One more from the floor then I'm going to take some from the phones and then I got closure of questions in the middle here.

So Hamish?.

Thanks Peter. It's Hamish Clegg from Bank of America Merrill Lynch. I think we can all agree you’ve done an excellent job on the cost cutting program the efficiencies have gone extremely well and appear to have brilliant momentum going forwards as well.

As we feel we’re exiting the trough in the cycle for the sector with oil prices starting to look slightly better, and a good outlook, the focus for some of us shifts onto the discipline side we see the momentum in your cost cutting program, but would like to maybe if you could allude a bit more to the options in your portfolio for your resource base, you gave us a U.S.

$20 billion 2P resource number today which is just great nearly 30 years. Could you expand a little bit on a couple of things for me, first is how much of that is coming from London and in your hands.

And second beyond that with that exploration program where will the focus be can we see more opportunities in Brazil and you didn't mention the prospective it in the northern parents as well? Thank you..

Okay. So I'm glad to have Tim Dodson here who is heading up our exploration business, I address the exploration briefly in my presentation that was - that's an aggregate level I will give Tim the opportunity to answer that question on the resources reserves the nature of that he could add some color to that..

Yeah, so thank you for the question I have a slide on the organic tubular of 90% in the year with limited contribution from exploration. We had very strong operating momentum adding volumes from existing fields and on Lundin it’s 1.65..

Could I also just say before you get the word to Tim that referred to Lars Christian. Lot of resources is outside of Norway.

We have some assets I pointed towards the beyond 2022 portfolio, which is in many ways predominantly portfolio outside of Norway that are also Norwegian assets, but most of the big Norwegian assets will be done that we know today, we depend on exploration, the big assets are outside of Norway.

We are improving that portfolio as Lars Christian making this quite significantly. You're not prepared to give sort of details you would find them in the graph on the page Hans Jakob illustrated they are improving, but you're really haven’t address them as forcefully as you have been doing on projects like you Johan Castberg and other.

So we expect significant continued improvement on that portfolio, and that is really and also what is part of the resource base. Tim..

Thank you very much. When it comes to exploration our focus going forward will be more or less the same it has been for the last few years. Our results have not been as good as they were in the period 2011 through 2013 when we proved up close to five billion barrels of current resource the 20 million.

We have been focusing the last two years in reloading basically replenishing our portfolio. That should come as no surprise as we drilled out what turned out to be a very good portfolio in 2011, 2012 and 2013.

And that's really what exploration is about sort of always say that every prospect you drill and test it moves out of my portfolio whether it's a dry well or a commercial discovery, which I had on to my developing production colleagues, so these about replenishment.

Our focus going forward will be as it has been before a balanced and attractive mix of exploration activity and prolific basins, we have a very attractive program in Norway, in fact in sort of I include UK into that this year.

We have good follow-up opportunities in both Canada and Brazil again prolific basins, and then we have select higher risk frontier opportunities that can represent breakthrough opportunities in terms of big discoveries with the potential for standalone developments.

So that will be our focus going forward, good opportunity set this year, and I think the perspectives for next year are also fairly good given the fact that we've loaded up with so much and such good quality acreage over the last the last two years..

Thanks Tim. We're going to take four or five questions from the phone to now please. Thank you. And then we're coming back into the center and I'll kick off with that..

We will now take our first question from Anders Holte from Danske Bank. Your line is open. Please go ahead..

Good afternoon, guys. Actually my questions have been answered already, so I’m good..

We will now take our next question Teodor Nilsen from Swedbank. Your line is open, please go ahead..

Hi, good afternoon and thanks for taking my question. One question on CapEx, you said that’s the normalized CapEx level going for will be $12 billion to $14 billion. I just wonder what kind of supplier price that’s just that you assume, do you assume an increase from today’s level? And then just a follow-up on exploration question.

Could you mention some specific prospects in the brown field that you like? Thank you..

Okay. So in terms of the supplier cost basically what we have assumed into the numbers are contracts that I mentioned 30 billion of contracts that has been awarded and options that is add - added to these contracts these the way we are struck to them, gives us optionality in terms of using the same contracts into new projects.

So we have I would say a pretty good overview of prices and the cost of supplies in the conventional portfolio that has included, so we haven’t taken any bets on something beyond that. When it comes to onshore in the U.S.

we see already I mean in the in the conventional part, we see still a lot of capacity in some of the segments into rigs for instance. There’s a lot of rigs, spare rigs that is that hasn’t got a lot to do. Marine activity ships, a lot of capacity in many segments which will in many ways impact for quite some time the cost of supplies.

When it comes to the U.S. situation, it’s more dynamic, more responsive. And I think Torgrim already sees that there are some pressures on cost of surprised that is already included in his assumptions and also in fact included in the improvements that Torgrim was showing in his presentation. So then Tim expected that’s on the Barents Sea.

So please say some comments..

Yeah. Okay. Thank you. Thanks for the question. As Eldar already mentioned in his presentation, we will be testing a number of high impact opportunities this year just to the quick count, I think it’s six which I have communicated where all three of those in the Barents Sea, Cogen and Germany North.

The three others in case you’re wondering is [indiscernible] in the U.K. and it’s a prospect in Suriname and the prospect in Indonesia. The first four the moderate risk. The second the last two or typical high risk, high reward Frontier prospects..

Thanks, Tim. I realize comes more questions on the phone..

We will now take our next question from Anne Gjøen from Handelsbanken. Your line is open, please go ahead..

Yes. Good afternoon. Thank you for taking my questions. I have a question related to tax. In fourth quarter tax in Norway I see this as surprisingly high, am I understanding or this that it has to do with reduced uplift with such low investment level going forward that’s very slow.

What kind of impact will that have on your tax? I understand that for the company as such it is difficult to give tax guidance, but is it possible to say something about a tax rate in Norway but this for example oil price of $50, $60, $70? Thank you..

So, he is the tax set for not I used to be..

Yes. So thank you Anne for asking that question. In the quarter, we had a tax rate in Norway was 72% that’s in line with our guiding. But you’re absolutely right when the results go up and the CapEx goes down, the tax rate will increase. But we haven’t changed our guidance..

We will now take our next question from Halvor Nygård from SEB. Please go ahead..

Thank you. Two short questions. Firstly, in your production guidance it looks like if you plan to produce around 520,000 barrels a day in DPN, flex gas on U.S. onshore in 2020.

Could you say something about the split between the two that is how much is puts gas and how much is onshore? And then secondly, you mentioned that you’re looking to add one to two new core areas both offshore and onshore.

Can you give some more color in terms of geography type of hydrocarbons timeline and if it will be organic or inorganic? Thank you..

So I wanted to. Yeah, I expecting that question. I think it’s too early to tell.

We are looking at we’ve heard today about are a very interesting exploration portfolio that could take us to certain places not all the places that they miss exploring, but we know hopefully work we will get some exploration success that as much reality portfolio and that could be related to places where we already have legacy assets or it could be totally new places.

So in the offshore, it is - obviously there are some good opportunities with the East Coast Canada and Canada as one of them. You didn’t mention drilling in Canada but you will drill wells also East Coast Canada this year. The Gulf of Mexico, Mexico, wider Gulf of Mexico including Mexico is definitely one option.

You have accessed acreage in a Frontier acreage in Gulf of Mexico two licenses again which is not being drilled this year but it which is ahead of us. In terms of Mexico or Gulf of Mexico, we are in the process of reviewing and taking another look at sort of how to understand geology and prospectively in that region.

So that - these are examples of what could be but could also be other opportunities to build those kind of core position. That doesn’t mean that the core or contracts will be the only places where we are but that you see the potential to develop a saleable and material position in one to two additional offshore countries.

Onshore, it’s again it’s too early. We are exploring many opportunities both from an exploration perspective and from a business development perspective, John. Russia as one of the countries where we have we are pursuing several opportunities both offshore and onshore. So that could be one of the onshore opportunities but it’s too early to conclude.

So let’s say one to two and it’s just the guiding to telling us that we are doing more than just hanging on to Brazil and they use onshore. We are really looking to build a more robust portfolio of core countries also outside of Norway. Then? That’s it..

No. Yeah. That’s it. One more from the phone and then we’ll go through to cluster questions through here..

We will now take our next question from John Olaisen from ABG. Your line is open, please go ahead..

Hey, good afternoon, gentlemen. A question to slides from Johan Castberg. Jakob, you say that the noticed a start-up from 15 or 22 will have a return on capital employed, average return on capital employed of above 10% in oil prices 70 in 2020.

First of all, it sounds a little bit low, this is - if you could common for a little bit of that for incidence what kind of gas price assumptions do you have behind that? And maybe just as importantly, do you think this portfolio of projects will pull up or pull down the average return on capital employed for 2020?.

Yeah, yeah. I think it give feedback. Okay. So the last question it goes up. About the returns, I think we’re coming from a lower level on returns that’s been quite moderate the last year, it’s fair to say.

But going forward return of both 10% on an internal rate of return well into the 20s, I think that’s a clear direction and a very valuable and attractive value position..

In terms of gas price we have now disclosing the price assumption, so basically in ‘20 we’re talking about a U.S. $6 per million Btu European gas price and U.S. $4 at real price..

Yeah. Not 6..

We come back into on to the floor now and then got a close to here. I’m going to kick-off with what really are going to go first with as nearly there. You log in your question, sir..

Thank you. Yeah, I really wanted to follow-up one of those previous questions Eldar but yeah new growth options in the international upstream business and obviously looking at a rising oil prices scenario 75 to 80 obviously forgives a few sins in terms of M&A, you’ve spoken about a lot of impairments through history.

So maybe talk about business development and what criteria you specifically look at today going forward.

What’s changed their to ensure that you’re really acquiring or accessing high return projects what regardless of the oil price please? And then secondly, if I can just follow-up on the Margareth’s one of our charts talking about the reserve recoverable resource stepping up 12% or so over the last three years.

Is that the normal level of resource creep that you’ve seen over your experiences, is that higher than normal, if so will it’s really doing that and what - is that something we should expect to continue on that new portfolio? Thank you..

So first on business development, Tim you might not. John you might want to add to my comments here but I said in the strategy that this very conscious strategic direction of being counter cyclical is important. We have been that and we will definitely try to be even more counter-cyclical.

That doesn’t mean that we - we could sell and buy at any point in time given the portfolio and the assets are and the buyer and seller is the correct one. But generally, we would like to do this in an efficient way, counter-cyclical way. I think the mindset that we do that.

Tim do an exploration, John does on business development exactly the same as Margaret has on her our assets. It’s not about the long term assumption, it’s really about building resilience, cash flow at all times and the principles that we establish.

So we need to see project even if we have to put a price on the table to access project that really has the potential to fit into the kind of resilience in terms of breakevens that we see and would like to see to sustain and be a robust against whatever kind of uncertainties that we might have.

I don’t know where thought process is going to be 75, just an assumption we want to build resilience into that portfolio.

On top of that, John is working on optimizing and looking at projects and that we can support cost efficiency, synergies for instance and then we should confidential, unlock even small stuff that we did last year and with guidance on.

So it is really a value driven, M&A strategy has been highly successful so far but it’s even more important that in the future that we hang on to the strategic principles that we have established. I don’t know John if you want to add to this..

Sure. So business development is a mixture of buying and selling. You saw that we took advantage of the selling side for 2012 to 2014 at about $12 billion. If you get back over to 2010, it was about $25 billion of proceeds and about $12 billion of profit, no last info.

And then on the acquisition side, if you look at what we’ve done this year, we’ve been doubling down in places that we know. And some of those acquisitions around Lynn Dean that’s about $540 million up on the mark-to-market basis at the moment. Now it’s simple.

And with regard to Carcara taking advantage of the down turn and we’ve had a lot of interest from many companies including big name IOCs informing into that acreage and we’re looking forward to building on that when the next license round is announced in Northern Carcara.

There are many - what we’ve done is Carcara is the beginning of a very significant opportunity. I think there’s still opportunity for value creation to do in that area..

Thanks, John. I’m going to go for Biraj and then Anish and then Rob, that’s all..

Hi, thanks for taking my question. It’s is for Torgrim. Just follow-up on questions on service costs.

Could you just clarify what you’re seeing right now in terms of any kind of service cost inflation? What’s baked into the plan and do you see that as a risk to getting from 90 to 50 breakeven?.

Okay, Torgrim. You take that..

Thank you very much. We feel that we have reached sort of the bottom of the cost curve within onshore. We see increasing activity particular out of the Permian Basin and we also noticed that all suppliers are starting to want to discuss supply cost again.

We have assumed a 20% increase in supply costs over the next couple of years into the numbers and that is to me a pretty robust assumptions. So that it’s consistent to, so we should be able to deliver on the 90 to 50 with a significant growth in supply cost.

The main driver for 90 to 50 is efficiency, not market effects so that efficiency is sustainable deliveries and that we continue to deliver on through this period..

Thanks.

Anish?.

Thanks. It’s Anish Kapadia from Tudor, Pickering, Holt. I had a question on your reserves, Statoil compares fairly poorly versus peers on reserve life and I think it’s a push back from some investors in terms of looking at Statoil relatives to pairs.

When I look at your resource space, it seems like you’ve got about 3 billion barrels of resource that has been sanctioned and a further 3 billion barrels of resource that’s works some $50 that hasn’t been sanctioned this year.

So I really wanted to get a sense of how does your reserve replacement, how do you expect to trend over the next five years or so as you bring some of those projects online and you also sanction some further projects?.

So, obviously the resource base campaigns both the resource that is booked today and also resource that we expect to be booked as we drill wells and create more certainty according to the criteria that is established for that certainty going forward.

Some of the project is still not at the breakeven level that we would like to see in particular in the international portfolio, significant improvements but still room for further significant improvements.

And we are confident that these projects will translate into resources but it will take time to develop these resources and into resource and I think we have a track record now of showing what we are capable of doing.

And all I have to do is put Margareth there Margareth on the task and she will deliver the kind of now returns that we see both from our current assets and we will also make sure that we pursue the same strict criteria in terms of the assets that we acquire that we explore for that these are assets that has the potential to feed into the future resource base.

In terms of expectations, I said briefly that we expect our reserve replacement ratio to be on average above 100% over the next few years. I can’t guarantee you on a specific year but looking at what we have at hand and how we’re working to mature these assets, drilling more wells, I’m sure we will get more reserve also on Julia, Torgrim.

So that’s the nature of it and that’s what we expect to see over the next few years..

Thanks.

Rob?.

Hi. This is Rob West here from Redburn. One of the messages I’m taking away from today is that you could have taken CapEx much lower if you wanted to. You haven’t given us a number of where you could have taken it except when I got my ruler out later and read off your slide.

If you want to say a number that would be welcome but you’re spending more than that because of counter cyclicality and desire to grow. And on page 23, you gave us a useful 20% IRR at $50 oil on these upcoming projects which are the basis of the growth.

So my first question for you is to me 20% IRR makes sense to put that money into new projects rather than getting rid of the scrip or paying more of the dividend or buyback. Is there a hurdle that you need projects to clear where you maybe not so sure and say actually say 10% or some low number, I’d rather give it back in cash.

That’s the first bet? And secondly related to that sorry to break the hot and rule about two questions. So one from Margareth I think, that 20% IRR pre-sanctioned and I'm guessing that would not be too dissimilar to IRRs and projects that you saw pre-sanctioned previous points and previous cycles.

I guess one reason those IRRs might not have been achieved previous days because of re-inflation once projects get going and change orders and design weaknesses. So could you talk a bit about higher levels of design certainty going into these projects today.

I guess you talked about simplifying them so they should be less complex and less prone to overrun. But is them more engineering per project going in on that list of projects he showed us a little bit later in the presentation, I think any about that would be great..

Okay, I'm very reluctant to give any hard lines anywhere really, that’s blocks in sort of flexibility and you know in terms of what is good enough for a project, I think we are impressed with what we had achieved and what Margareth has achieved U.S. $27 dollar breakeven.

And you see there is a range of projects and a lot of them hasn't been worked yet. So to say this is the kind of project that we want to invest in. And we will do something else for the money that I can't offer that kind of you know hard line and criteria.

But like what I can say is that you know the oil price assumption gas price assumption is not kind of a criteria that it used to be you know we look at and NPVs and so on based on our long term price assumptions, but really what is the key criteria now is okay is this project as good as it can be your value driven.

So we have time to wait to make it as good as it can’t be. And do we have the resilience and the best outcome, and then you know that is the more important criteria in terms of breakeven than actually in terms of does it meet the criteria in relation to an oil price assumption.

So very different mindset I would say the oil price assumption is more actually for an accounted purpose than for decision making purpose in terms of the new projects. In terms of project and uncertainty on this and I would say Margareth knows very clear again that we take the time did you mentioned the Peregrino II project we spent one more year.

We felt it was not good enough. One more year and we significantly improved the returns in that project. We had actually have idea in the project then we stop that hey we can do better.

And we spent the time that it takes to improve this project and that means a lot of process is more quality up front loading in a way, but it also in terms of challenging the projects. This is not setting a team to design something.

It's really is this the best design and that kind of process is really also very important for us that we have teams that circus around and address challenges the projects there’s no reference this project future of that is a project that was a new platform. Then we start to challenge that and suddenly it's a subsea.

We didn't think it could be, but by doing that process you know taking the time, we turn around to come up with a totally different solution so you need to do that and then once we have the project.

I don't think we do more engineering or any more you know work into the scoping, but we spend more time to make sure that we have the right fit for purpose solution. Now Margareth you have at least an opportunity to add to this..

Yeah, first of all I think we to do it another way we start with the minimum solution, we start with this sign to cost and if we need to add something it must be of value creation, and I feel we are maturing the projects in a better way, and I think we start earlier with involving other suppliers to really get the best solution.

So and it's not only - it's not only make Castberg, we have postpone the bit because we thought we could do it better, we have had proactive teams to really challenge us, and it's the material stock so I think we work differently, because we have people to challenging and we start by the minimum solution and not the very big solution as we used to do so.

We're not using more engineering in ours, but we are maturing the projects better prior to sanction I would say..

All right, thank you. We’re going to take the last question now, because we're nearing election to over time.

Tom?.

Thanks Peter. This is Tom Robinson from Deutsche Bank. Just one question and it really relates to strategy in the new energy business, which I think how do you effectively start your comments of today and could you just talk about a long time shape of cash flow in that business and how you measure it success in that business.

And the way I’m thinking about this is to me it feels like you know you go through an investment phase that potentially may last a number of years, and if you follow the CapEx outlook that you presented in Slide 11 certainly a number of years when do you move out of that investment phase into something that generates cash for the group?.

So the earnings from year end was positive in the last quarter. We don't report it but it was positive. So we are already there. I think this is a very different business. It has a different risk profile, mainly slight to similar when it comes to project execution as such, but when it comes to the revenue side, and operation side it's very different.

Also the risk profile gradually will change as we will take on more market risk that will make it also more similar, but not quite, because it's different markets than received in upstream oil and gas.

So to me this is attractive, but you have to relate it the attractiveness and the reward to the risk profile of the relevant projects that you're talking about, that's something we always have done. We relate projects to project specific risk pipeline projects for instance, different risk that regulated them than E&P projects.

So we see returns in the range of 9% to 11% , 11% is basically the Dudgeon project and Hywind is more at the 9% the pilot project. So that's kind of returns that we see. And these are quite a distance from the cost of capital to these projects. So they are creating value on behalf of our shareholders.

Fort we will look at the same type of returns, but they were always if we see higher risk or market exposure we will look for returns that is capturing that and rewarding us for that, but it also offers opportunity in the marketplace instead of having a fixed rate you can really work with the market.

So the condition for all of this is that here is able actually to deliver a product. I don't allocate 15% to 20% of anything I give a roadmap here on the slide in terms of how this could look like I think it will be back loaded.

I think it will have to struggle fight really hard to get project to fill in to something like that if we doesn’t we want, if we does we will, but it's really tough commercial exercise exactly in the same way as we do within oil and gas..

Thank you..

With that I’m going to call the Q&A session to a close.

Is there any summary at the end held on that you’d like to say?.

I hope you got a good understand of where we are. I really tried to come through today explaining that we have fundamentally reset this company in terms of cost how we run it, in terms of efficiency, but also the opportunity set. And that in many ways comes together into when I can say that you know we can actually be cash flow neutral at U.S.

$50, not only today we could do that going forward. That's the place I didn't think that we would be actually, now we are there and that gives us a whole set of new opportunities.

High value opportunities and I think also we have for the longer term strong organizations from capabilities to add resources to our business through business development have demonstrated it through exploration be patient.

We have demonstrated in the past and I feel confidence in our capacity to not only run the short term and our current portfolio, but also sustain our oil and gas business while also developing a highly profitable renewable business. So thank you very much for coming. Really appreciate it. Look forward to see you all again next year.

Thank you very much..