Hilde Merete Nafstad - Head of Investor Relations Torgrim Reitan - Chief Financial Officer, Executive Vice President, Chairman of Corporate Risk Committee and Member of Corporate Executive Committee

Trond Frode Omdal - Arctic Securities ASA, Research Division Teodor Sveen Nilsen - Swedbank First Securities, Research Division Kelly Chen - Nordea Markets, Research Division Peter Hutton - RBC Capital Markets, LLC, Research Division Guy A. Baber - Simmons & Company International, Research Division Brandon Mei - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Brendan Warn - Jefferies LLC, Research Division Jeremy Aston - Exane BNP Paribas, Research Division Michael J. Alsford - Citigroup Inc, Research Division John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division Nitin Sharma - JP Morgan Chase & Co, Research Division Jon Rigby - UBS Investment Bank, Research Division Helge André Martinsen - DNB Markets, Inc., Research Division Rahim Karim - Barclays Capital, Research Division Jason Kenney - Grupo Santander, Research Division

Good morning, ladies and gentlemen, welcome to Statoil's Second Quarter Earnings Presentation. I am Hilde Nafstad, and I'm the Head of Investor Relations with Statoil. This morning at 7:00 a.m., Statoil announced its results for the second quarter of 2013. We announced it through the wires and through Oslo Stock Exchange. The report and the presentation can, as usual, be downloaded from our website, statoil.com. I would ask you to kindly make special note of the information regarding forward-looking statements, which can be found at the last page. We will start today with our CFO, Torgrim Reitan, who will go through the earnings and the outlook for the company. As usual, the presentation will be followed by a Q&A session. And we will aim to end the conference at 2:30 CET. [Operator Instructions] Now it's my privilege introduce Statoil's Chief Financial Officer, Torgrim Reitan. Please, Torgrim.

Thank you, Hilde. And good afternoon, and good morning to all of you in the U.S. In the second quarter, Statoil delivered adjusted earnings of NOK 38 billion. Strong performance particularly from our international portfolio. Our financial results were impacted by lower prices and weak results from our marketing business. For operations in the quarter, we are solid. We produced as planned, ramping up new production on the NCS and producing record volume outside Norway. At the same time we maintained stable underlying operating cost. And we have earlier said, our 2013 production will be lower than 2012. This is due to commercial decisions we have made to increase value creation, like divestments on the NCS and using our gas flexibility. Our production was broadly in line with what is needed for the full year. And please note that our divestments to Wintershall and the Ormen Lange redetermination will have full effect in the second half of the year. This summer, our activity level in terms of project execution is high. One example is the Gudrun project in the North Sea. This is our global project with contents from Thailand, Poland, Norway, Singapore and China. On Thursday, the topside was lifted into place on the steel jacket, successfully completing one of the most important project milestones. Norway prepared for production start earlier next year as planned and we are on time and around NOK 2 billion below cost. So we continue to deliver industrial progress in the quarter and in line with our strategy. We sanctioned 3 new projects in the quarter and received government approval for 4 major NCS developments. We decided to invest in a joint oil export solution for Edvard Grieg and Ivar Aasen, enabling future growth in the Utsira High. The Shah Deniz consortium erected a trans-Adriatic pipeline to efficiently bring the gas from Phase 2 of Shah Deniz to the European market. And we took over operatorship in Eagle Ford strengthening our position in the U.S. onshore now with operatorship in all of our 3 premium plays. We continue to prioritize robustness and value creation in our portfolio. In the quarter, we announced a review of the Johan Castberg development in the Barents Sea due to overstated project estimates and awaiting clarifications in the tax framework. And we also took some of our U.S. rig count further to optimize our CapEx. And we are achieving better efficiency in our drilling operations. And finally, we continue to deliver on our exploration strategy. In 2011 and 2012, Statoil was among the companies finding most and largest discoveries. The drill bit has delivered 550 million barrels so far this year and this compares well with the success of the last 2 years, where more than 1 billion barrels were discovered. So we made 5 discoveries in the quarter and we secured attractive exploration acreage. In Norway, we were awarded 7 licenses in the 22nd round. In Russia we signed new agreements in the joint venture with Rosneft. We will explore offshore Azerbaijan in the Caspian with SOCAR. And in Brazil, we were awarded 6 licenses in the 11th round. In Tanzania, we farmed into Block 6; and in Australia, we farmed into 4 offshore licenses in the south. It's the longest. So by this, we take important new steps to position Statoil for the future. Our net income is down compared to second quarter last year. That's -- as you know, we booked significant gains in the second quarter last year after completing the divestment of our retail business and the NCS assets package to Centrica. We had actually around NOK 16 billion in one-off effect in the same quarter last year. Due to currency changes and increasing interest rates, less financial items contributed to a lower results for the quarter this year. But that's all right. We make adjustments to our results to reflect the underlying business. This quarter, our adjusted earnings decreased somewhat. This is mainly due to lower realized prices for liquids and gas and changes in the production mix. We had lower earnings from marketing and trading that impacted the results. Now we'll come back to that in more detail on the segment. However, we produced at record level from our portfolio outside Norway and that contributes to our strong international earnings. As you know, depreciation normally fluctuates with production that we have ramped that production and started new fields in the quarter. This quarter, we increased production at Skuld with a depreciation cost of around NOK 300 per barrel. And this will increase over time from that field. And on average, the DD&A over the lifetime is typically half of the initial DD&A. We also have lower production from older fields, like Troll and Kvitebjørn, which have much lower depreciation, around NOK 20 to NOK 30 per barrel. So as you can see, our DD&A is impacted by the production mix. New projects have higher depreciation per barrel due to the booking profile that you saw of the equity reserves, and because new projects are more expensive than the old one. So this is a trend across the industry. So as we continue to put new production onstream, you should expect all depreciation per barrel to increase. In 2014, this effect is particularly clear as we start producing from large new fields such as Gudrun, Gjoa and Valemon on the NCS. We maintained a stable underlying operating cost through the period. This is as expected and something I watch very closely. And I will come back to this in further detail later. Adjusted after tax, we generated NOK 11.3 billion and this is on par with the second quarter last year. The lower tax rate is a result of relatively higher production from lower tax regimes outside Norway. In the second quarter, we produced as planned. We maintained a stable equity production. And as previously mentioned, we delivered record production from a project outside Norway. And overall, the production was in line with our expectations. But this is not more than what we need for the year as a whole. As we have said, we expect to produce less this year compared to last year, mainly due to divestments, gas optimizations, the redetermination at Ormen Lange, reduced capacity at Troll and In Amenas. We also expect to carry out most of our turnarounds in the second half. And I will come back to this further when we talk about the outage. So the segment, on our recent business we delivered adjusted earnings of NOK 31.5 billion compared to the 10 quarter last year, earnings were mainly affected by deliberately lower gas production of farm-down at Kvitebjørn and operational disruptions at Troll and Snøhvit. We largely offset the lateral decline on mature feeds by ramping up production including 4 new fast-track projects. And as mentioned, DD&A is increasing, as expected, in detail. From our operations outside Norway, adjusted earnings were NOK 5.9 billion. Our earnings have almost doubled from the same period last year and we produced more than 1/3 of our volumes outside Norway. And the cash flow per barrel from our international portfolio is as good as from our Norwegian production. We increased our entitlement production by 11% by successfully ramping up Marcellus, Bakken and Eagle Ford in the U.S., Peregrino in Brazil and PSVM in Angola. Production was also positively impacted by operational improvements, in particular, in Azerbaijan. The increase was partially offset by natural decline at several fields and decreased production as In Amenas. The results from marketing, processing and renewable was NOK 0.8 billion. And I'm disappointed by that result. It is mainly due to losses on the natural gas trading, weak trading in crude oil and product and lower refinery margins. In addition, the results were impacted by lower NCS volumes. But please also recall that the second quarter last year was a very good quarter for MPR across-the-board. Our overall realized gas price is down but that is due to higher share of the U.S. gas in the global mix. If you look at the European prices, the realized gas prices, we're on par with the prices realized through the winter season. And they are still strong. And lastly, it's important to note that the value creation that comes from the flexibility in the gas machine is mostly reflected in our upstream results. So we have stated earlier that MPR result will be more volatile. Trading results are, by definition, volatile. And then we have farmed down our ownership share in Gassled, which affected our results by around NOK 1 billion per quarter. We have delivered a cash flow from underlying operations of NOK 107 billion year-to-date. The change from last year is mainly due to lower prices and a lower production. We made 3 tax payments in the first half of 2013, and these were based on the last year's earnings. Our NCS tax payments will be somewhat lower in the second half of the year. Then we paid a dividend of NOK 22 billion in May at NOK 6.75 per share. These are solid, direct yields to our shareholders. And then we have invested NOK 59 billion into our projects and this is according to plan and in line with our estimates of organic gross CapEx of $19 billion for the year as a whole. Adjusted net debt to capital employed increased from 12.5% to 20.8% at the end of the quarter. And increased debt rate is according to our expectations. However, we do expect a somewhat lower gearing at year-end. The Wintershall transaction is expected to close as of July 31 and that will bring in proceeds. And tax payments will be lower in the second half of the year. So we continue to maintain a firm financial framework and a solid balance sheet. As we discussed in the previous quarter, we are working constantly to improve our cost position further. In DPN, we have maintained stable underlying total cost for 6 quarters now. This is despite having more fields in production and despite industry cost inflation. In the second half, we will produce less due to turn around. And I would like to remind you that in the short-term, our operating cost are, to a large extent, fixed so you should expect a higher cost per barrel in the next quarter. In MPR, the improvement program we have put in place is paying off. Quarter variations will naturally occur due to seasonal changes in volume. In the international segment, we continue to deliver profitable growth. The growth in operational costs and SG&A is explained by higher royalties and transportation cost. Compared to last year, diluent cost in Canada is now included in operating cost. So the change in the second quarter last year is related to: a, activities, more fields in production, higher transportation costs and royalties; and, b, external factors such as increased [indiscernible] tax on NCS. So the underlying operating cost is stable. Then let's move to depreciations. We see an increase in DPN this quarter. We operate in new fields onstream with higher depreciation at the start of the life cycle, as we discussed earlier. Internationally, however, you will notice that we have improved the unit DD&A from the same periods last year. In general, DD&A will vary between quarters, also in the future, but you should expect to see higher levels as new fields are taken. As we move forward, we will continue to improve our cost base and further strengthen our competitiveness. Statoil has an attractive portfolio, with more than 100 competitive projects. During the summer, huge operations are taking place. Over the last 12 months, 32 million work hours have been invested in projects where we are the operator. And I'm very impressed by the work done in the various projects. We used the summer season, with calmer seas and less wind, to carry all the big lift, to lay pipelines and cables and install subsea templates and risers. So you have them in progress on Gudrun, which I mentioned earlier. We have also installed the first modules on Asgard subsea compression and subsea templates for 3 p fast-track projects. On Valemon, we are transporting new models to South Korea where the topside are under construction as we speak. So we work restlessly. We have improvement in general across the organization and we are delivering strong results. Of course, we are delivering all projects at or below our estimates. We also forecast to reach all the main milestones for 2013. These are strong results and evidence of all robust project execution capabilities. Now let's talk about the outlook. As we have discussed earlier, our growth will not be linear. 2013 production will be lower than 2012. And this is due to commercial decisions we have made, divesting NCS efforts realizing significant gains, optimizing gas off-take for maximum value creation. As we have said previously, we now have how more resources in our portfolio than we need to reach for 2013 production ambition. We are prioritizing strongly among competitive investment opportunities. We are on track for our ambition to produce more than 3.5 million barrels of oil in 2020. But then as we said, value creation is what we do and we, of course, not married to any production numbers. Turning more specifically to our outlook. The Ormen Lange redetermination will reduce production by 20,000 barrels a day on an annual basis this year. This means around 40,000 barrels in the second half of the year. The divestment to Wintershall will also impact our production. 40,000 barrels a day from the closing, which is in a few days, the 31st of July. We have decided to move some of our maintenance work from the second quarter towards the second half. For the full year, we expect our maintenance to reduce equity production by around 45,000 barrels per day, most of it is our liquid-producing fields. We expect the turnaround effects in the third quarter to be 110,000 barrels per day. On Troll, we have reduced capacity, limiting the flexibility. The situation at In Amenas will affect output in 2013. We will invest around $19 billion in 2013 as expected. We are bringing new projects on stream with low breakeven price across the portfolio, delivering industry-leading rate of returns. We expect to receive the proceeds from Wintershall during the next quarter, leading to less cash flow reinvestments, being less than the gross investments of $19 billion. We will explore for around $3.5 billion drilling around 50 wells in -- this year. And we will drill around 20 high-impact wells from 2013 to 2015. We have a high inventory of competitive projects and we will continuously optimize the timing around this. I know you like to watch our wells, so let me give you some wells to watch. The Barents Sea campaign in the Johan Castberg area continues. We believe further oil potential in this area. [indiscernible] is next out, and operations have started on that well. In East Canada, Harpoon West delivered an oil discovery. While it's too early to determine, there's more potential at this time, it is encouraging for the area and for the -- by the north well that is currently being drilled. And we are preparing to start drilling on the Buzio well in Mozambique any time. But these are exciting times for our exploration team. So to round off, Statoil delivered strong operations in the quarter. As our financial results are impacted by lower prices for liquid and gas and a weak result from MPR. We produced as planned. We delivered record international production contributing to strong international earnings, and we maintained stable underlying operations operating cost. Productivity level on new key development is high-end and we execute all projects according to plan. We continued oil exploration progress by accessing attractive exploration acreage and we are on track and maintain our guiding for 2013. So Looking ahead, Statoil is well-positioned to grow and create value. We continue to efficiently develop our project portfolio. We have a strong resource base and we are prioritizing strongly. And we will maintain a firm financial framework and we will continue to pay a predictable and a growing dividend to our shareholders. And we will do all of this while we are keeping our balance sheet solid. So thank you very much for your attention. And then I'll leave the word to you, Hilde, to lead us through the Q&A session.

Thank you very much Torgrim. And for the Q&A session, Torgrim will be joined by Svein Skeie, who is Senior Vice President for Performance Management and Risk; and Ørjan Kvelvane, who is Senior Vice President for Accounting and Financial Compliance. We'll start out with questions from the audience here in Oslo and then turn to the telephone audience. First, I will first ask the operator to please repeat the procedure for processing questions over the telephone. Please go ahead, the operator.

[Operator Instructions]

So we'll start off with questions from the audience in Oslo and I'll ask you to introduce yourself, and please limit yourself to one question. And also, if you have forgotten how to use the microphone, there's a cord in front of you. You push the button and when it's ready you can speak. Okay, Trond, you're first. Trond Frode Omdal - Arctic Securities ASA, Research Division: You say the Troll compressor is limiting. It's not limiting capacity, but it's limiting your flexibility, so in terms -- can you -- when will that be finished? Is it going to be by Q1 or Q2 next year or when you replace the new compressor?

Thank you, Trond. So the Troll compressor -- the new Troll compressor will be in place in the second half in 2014. When that is said, we have capacity to produce more or less the production permit during the year, but it will be less flexibility. Trond Frode Omdal - Arctic Securities ASA, Research Division: Just follow-up on that specific, but the trading, the poor result in the trading division, that was also impacted by trading losses?

So then the trading organizations they take care of the flexibility at Troll and they make money out of that flexibility. So since there has been less flexibility at Troll, there are less profit in the trading organization. Teodor Sveen Nilsen - Swedbank First Securities, Research Division: [indiscernible] Regarding the weak trading results that you already touched on Torgrim, there's no doubt about that they're both this quarter and last quarter, it was well below [indiscernible] and also well below your historical margins and then there are others. I'm fully aware that the results will be upheld, but the 2 last quarters at this time that changed in this [indiscernible] division? Do you expect your earnings going forward?

Thank you, Teodor. First, a couple of points. Historically, the profit from Gullfaks has been part of that segment, that was NOK 1 billion on a quarter basis. That's provided more profitability and stability to that segment. That is the addition so less result and more volatility. We must be prepared for strong results and weak results from this segment. And last year was a record set of numbers and this year so far it has been disappointing numbers. But on an overall level, you should expect solid results from our business like this, that they are typically more able to make profit in contango market than in a backward-dated market on the oil side. On the gas side, you will typically also be subject to the structures in the markets as such. So it is not that systematic change as we see it. It is 2 quarters in a row with disappointing results, but then again if you look last year and so on, it's only the contribution from this area. Teodor Sveen Nilsen - Swedbank First Securities, Research Division: Obviously, the main reason [indiscernible] just the shape of the protocol [ph].

On the trading side, it is partly market structures. It is partly operational issues like we touched upon Troll that limits the opportunities on the gas side to earn money. It is partly related to being out having a few cargoes to arbitrate around so the value generated from tending those cargoes to high-priced markets typically is in the MPR segment. And then there has been generally disappointing result from the trading on top of that.

Do we have any further questions from Oslo? Yes, please go ahead. Kelly Chen - Nordea Markets, Research Division: Kelly from Nordea Markets. Regarding your record-breaking international production, I noticed that most of the gain was from onshore U.S. production and was in that from Marcellus gas? Could you give us an indication of whether or not this growth is going successfully forward relative to production remain asset levels? And also, perhaps a bit on the big camps [indicernible] in the region as well.

Thank you, Kelly. So production from Marcellus is increasing. It is increasing less than it would have been if we have kept the rig econ [ph], we have taken it on from our own 30 rigs to 14 rigs currently. So that's the state we're going forward. You should expect it to continue to grow but at a lower pace than earlier.

Any further questions?

[indiscernible] Can you also comment on the Eagle Ford and Bakken because has 30% growth year-over-year and Eagle Ford 140%. Bakken, present, what do you expect for it?

So the rig count currently at Bakken is 10 rigs we are running there. We have taken on the rig counts also there to run a number of rigs where we feel that we really can extract the learnings across the rigs as we develop drilling more efficiently and technology and frac-ing, and all of that. So that's a typical rig count to plan for going forward there. So I can't give specific growth profile out of Bakken and Eagle Ford, but you are correct in saying that sort of less -- a lower growth rate than we have seen over the last year. I think it's fair to assume.

Okay. Do we have any further questions from Oslo? If not, we will return to our telephone audience. And the first question comes from Peter Hutton with RBC. Peter Hutton - RBC Capital Markets, LLC, Research Division: Confirmation on the Bakken there. You said you are operating 10, what was that before? I think in the first quarter you said in the first quarter you produced 47,000 barrels a day and over the rest of year, it'd be more like 40,000 to 45,000. Is that still correct? And the second part of the first question is on the cash flow and CapEx. And I know that there were 2 payments out for tax, but even as adjusting for that, the second quarter underlying cash flow generation was just about NOK 8 billion, which you compared to NOK 13 billion a year ago, is there something in terms of cash absorbing that we're not seeing coming through on that one, I'm struggling to get those 2 to tie in, particularly effectively. And then also on cash, you -- we're able to confirm the CapEx guidance of NOK $19 billion for this year. Are you also able to confirm the $21 billion average 13 to 16 as well at this stage?

Okay. Thank you, Peter. That was one long question. So let's see here. On Bakken, we have taken down the rig count from around 15 rigs last year to 10 currently. When it comes to -- maybe you can adjust the cash flow question, the details there. On the network, yes, $19 billion for this year. We are running our investment portfolio without delays and overrun. So it's very stable and the forecast that we currently run. The $21 billion in investments is also impact as we see it. The $21 billion is consistent with delivering 2.5 million barrels per day in 2020. Of course, our portfolio has the potential to produce well beyond that. So to get to 21, hard prioritization among good investment opportunities will happen. The 21 is what we plan for. Regarding the cash flow for 2013, in the first half of the year, as we said, it has been lower. It is mainly then related to that we are paying them taxes based on the results from last year, from the Norwegian continental shelf where we both had -- where we had higher production. So in the second half of the year, we expect that the taxes would be somewhat lower. In addition, on the cash flow side, the results from MPR is affecting the cash flow in the first half. And on the CapEx side, as Torgrim also said in his presentation, is that we will soon get the proceeds from the Wintershall transaction, which is coming out by end of this month. Peter Hutton - RBC Capital Markets, LLC, Research Division: So generally, sizing more cash in the second half?

Peter could you repeat that it's hard to hear you. Peter Hutton - RBC Capital Markets, LLC, Research Division: Generally, sizing issues more cash expected in the second half?

We will specially have the effect of the tax for the -- in the Norwegian assets. They are not affecting the production level for this year and not the level from last year.

Okay. We continue with the next question here from Guy Baber from Simmons & Company. Guy A. Baber - Simmons & Company International, Research Division: I have a question about the Eagle Ford, production picked up nicely there for the quarter and now, that you've taken over operatorship in the Eastern part of the play, I was just wondering if you could address how comfortable you are with the size of your position there? If the size was smaller relative to your other plays? It appears there's an opportunity to increase your exposure there. And then more broadly, are you still looking to add your named [ph] onshore portfolio acreage [ph] to this business?

Okay, thank you. So we have taken on the operatorships, so that is going very well. Rig -- I mean, the efficiency in the drilling operations is improving and the cost of well is improving. That's good to see. This is a rather small asset in our portfolio. It is a good asset. And generally, we are fine with it across the unconventional sector. It is -- we positioned our drilling in both Eagle Ford, Bakken and Marcellus. And they're pretty comfortable with the positions that we have. Well, that is said, of course. If the right opportunity is there and the price is great, then of course, we will take a look at it. But generally, we are fine with it and happy with the portfolio back there.

The next question comes from Brandon Mei from Tudor, Pickering, Holt. Brandon Mei - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: On the marketing and trading results, you touched upon low results due to operational issues on the upstream volumes. Can you give some color on dollar impacts there due to the lower volumes?

Okay, Brandon. The impact of lower volumes on the trading result. It is on the MPR side. I can't give specific numbers on the volume. It is contributing to the lower results, but can you recall how much it was?

I think if we look at the entitlement volumes from MCS last year, it was around 10-ish. This year, it's approximately 9-ish. So we have less there, of course, the price is also affected. It's around from 10-ish down to 9-ish in volume.

Our next question comes from Brendan Warn from Jefferies. Brendan Warn - Jefferies LLC, Research Division: Just one question. Just can you give us a bit of an update on your gas commercialization negotiation in Tanzania, just perhaps a bit of an outline on steps forward in terms of appraisal when you believe your sort of threshold volume metrics? And just can you remind us of timeline to something like the financial investments decision please?

Okay, thank you, Brendan. So good progress in Tanzania. Great discoveries, significant volumes and sufficient volumes to move forward that makes more confident of a commercial decision. We noticed quite a bit of interest from buyers towards the investments. So that is solid. We work together with BG to establish location for the onshore site. And that is typically something that we will share. And then, we have more work to build on in the license. And more wells to be drilled. And LNG is a scale game, so the more volumes, the better profitability. So the first priority is, of course, to maximize the volumes in place and then move forward towards the decision plan. I'm not prepared to give a date for that, but the progress is good and we are working closely with Tanzanian authorities and our partners.

The next question comes from Jeremy Aston from Exane. Jeremy Aston - Exane BNP Paribas, Research Division: So a couple of exploration questions. Firstly, Cachalote was dry. Should Buzio also be dry will you throw in the towel in Mozambique? And secondly, Det norske, your partners, have just announced that the primary target at Cliffhanger North is dry. Could you possibly describe what you found in the secondary target?

Okay, yes. So Cachalote, the status is known, so we are moving Discoverer Americas. We have moved Discoverer Americas to the other well, and that is being worked. So beyond that, there are more opportunities. And they are sort of separate in modeling and so on. So we still have interest in that area. When it comes to Cliffhanger North, we finalized the well, we will conclude with our partners. And then we will communicate around that, well coordinated with the oil directorate like we do on the older wells on the Aleutian continent.

The next question comes from Michael Alsford with Citi. Michael J. Alsford - Citigroup Inc, Research Division: I've got a question a bit on the gas market in Europe. I know you've talked a little bit about the trading result that was weak in the quarter, but can you perhaps talk a little bit more broadly about what you're seeing in terms of your key markets there, the demand for gas and how the supply outlook is looking currently?

Okay. Thank you, Michael. So gas market in Europe is strong. We are seeing summer prices above 65p per term. So in a historical perspective it's great prices. So the market is characterized by LNG going other places, so that is firming up the market. We see a growing demand for gas in over the years. Not a big growth, but 1 to 1.5 percentage growth in that market. We see significant decline in indigenous production. And we see that more gas needs to come to the markets. That this one part of the equation. The other one is politicians and the appetite for gas and the long-term fuel for Europe. So we see a positive development also in that respect. There is, maybe, one concern and that is in Germany, where we miss clear statements from politicians that gas is better than coal. So we all know the answer to that, so we're just waiting for clarifications. Then the things we have done on our long-term gas contracts. That has proved very well, carving back the flexibility, enabling us to create additional value and expand our presence in the European gas markets. So far so good. And impressively strong prices in Europe. Michael J. Alsford - Citigroup Inc, Research Division: Okay. And maybe just one comment on inventories. Are you seeing increased demand because inventories are generally low? Or is that, in terms you just saw it, real demand is -- your short term demand is high currently?

Well, could you repeat that? I didn't get that really. Michael J. Alsford - Citigroup Inc, Research Division: Yes. Just a question on where you see inventories in Europe -- is it sort of simply people refilling low inventories? Or are you're seeing underlying demand strong within Europe?

I mean, there has been -- the underlying demand has come down since 2008. But we expect that to turn in a year or 2 to a modest growth in this area.

Next in line is John Olaisen with ABG Sundal. John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: I have a couple of questions. First on the payable taxes, this quarter as already discussed, was a lot higher than the P&L tax. Just wondering for the whole year, should we expect the payable tax to be pretty much the same as the P&L tax? Or should it be higher or lower, any arguments on that?

Okay. John, thank you. So we paid the taxes on the Norwegian continental shelf now based on what we saw from the 2012, and then we paid half of it in the second half of last year. And then we paid the other part of it, the third part of this year. For the second half, there will be then some expectations to what kind of return we are seeing for the remaining part of the year and then calculating the net taxes payable as we see it. That will be based on the returns as well as the other capital expenditures. Based on what we've seen now, we see that it will be lower. But I cannot comment on, vis-à-vis, on the effects and the level of the profits from the results. And then with large investments on the NCS and with the depreciation that we do there, there will be typically deferred taxes. I mean that contributes to build deferred taxes in that equation. John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: But the net for the year, will it be -- will it all be reworked in the second half or just for the magnitude, it's such a huge payable tax charge this quarter?

Yes, this quarter. So I think we're not ready to give you the exact numbers on the -- for the fourth, but it will be lower than the first half of the year. John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: Okay. And then to realized oil price in Norway, there was a record of high discount of rent of almost $9. Any reason why it keeps increasing -- in particular fields where they.. [Technical Difficulty] John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: On the discount to the Brent in Norway, it was a record of almost $9. Are there any particular fields where the [indiscernible] oil is trading at a bigger discount to Brent than it has been in the past? Or any particular field contributing to a lower realized oil price?

The main explanation to that is NGL prices and the share of NGL into the liquid production. John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: All right. And then finally from my side, the natural gas realized gas price. You mentioned that it was due to a high portion of U.S. and gas production, but if I just look at the numbers that you've provided, it seems like the U.S. gas production contributed with 5% -- 5.0% of Q2 gas production, while it was 5.1% of Q1 production. So actually the U.S. production was, in percentage terms, was slightly lower than Q2 than in Q1. That doesn't seem to explain the dip in your realized gas price. As you mentioned that's the reason why natural gas price was down.

Well, when we compare second quarter with second quarter last year, we see that increased share of U.S. gas changes than the overall... John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: Sure, year-on-year but you mentioned Q1.

And then, when you look at the European prices for this quarter, it is on par with what we saw across fourth quartile and first quartile gas prices. John A. Schj. Olaisen - ABG Sundal Collier Holding ASA, Research Division: Sure, but you mentioned that the prices in Q2 in Europe were flat compared with the prices in Q1 this year.

I think we'll move on to the next question now to allow time for everybody. But please feel free to contact Investor Relations for further clarifications. Next question comes from Nitin Sharma with JPMorgan. Nitin Sharma - JP Morgan Chase & Co, Research Division: One short question. It's around the medium-term free cash flow profile. So you're guiding to average organic CapEx 2013, $16 billion or $21 billion. Could you also please comment on the free cash flow profile of the company over the same period, say, assuming $100 oil price scenario or maybe under your own planning scenario please?

Okay. Thank you, Nitin. So the free cash flow development over the year, if you recall our presentation at the first quarter we did in February, we laid out numbers for investments for operating cash flow. And also an oil price reference price, price used for calculation purposes, which is at that point $110 per barrel. So it was $19 billion in investments and then it was $20 billion in -- of cash flow from operations. In '13, yes. And then you have the dividend. So that is still more or less on the same level when it comes from the cash flow from operations in the redetermination of Ormen Lange and MPR results is now impacting the free cash flow for the year [indiscernible]. So when it comes to oil price assumptions, the sensitivities that we show in the MD&A is valid. An oil price of -- change of $10 per barrel will reduce, after tax, NOK 8 billion. So that's metrics that can be used to calculate the various price effects.

The next in line is Jon Rigby with UBS. Jon Rigby - UBS Investment Bank, Research Division: Just ask a question on the Bakken and then just a quick follow-up on CapEx. So on the Bakken, the profile, it looks impressive year-over-year. But I think it's being noted. It's flatline for 1Q, 2Q, can you talk about the reduction in the wells? But is there anything else -- oil rigs -- is there anything else impacting it like weather through the winter period, which we would expect to underline in the second half of the year? Or is the production rate we're seeing now consistent with the well count that you talked about? Also on the Bakken, are there any implications following the crash, the rail crash, railing out crude for your operations? And can you remind me how much we do rail out? But then just to come back to you on CapEx, sorry, it's a bit extended, is you did talk about choice and efficiency around choice of projects because of the success you've had. So might we expect that you could look at that $21 billion and maybe the positive impact is that can come down as you divert CapEx into more efficient projects?

Okay. So let me take the CapEx first. So then, the CapEx in Bakken is -- spending there is consistent with a number of rigs that we are earning. We see more efficient operations. So we get more out -- more work out of the rigs that we run, so that's good. Bakken is performing well and the production is ramping up. And all of that is good. When it comes to the rail crash, the tragic rail crash, we are unfamiliar with that -- with the company. There might be some changes into regulations when it comes to railing in U.S. and Canada, so we will follow that very closely. And I'm sure there will be an investigation and learning to be shared with other companies as well. And that is set, the rail cars that we are running are new. 1,048 car rails. They have -- are built on a different standard than the ones involved in the crash. It's a bit like double hull, like we have in ships that we also have in the rail cars. So we follow the latest standards in this respect. Then you had one last question, Jon, and that was related to privatization. Can you repeat it? Jon Rigby - UBS Investment Bank, Research Division: It has to do with investments. I mean, you talked about the $21 billion being consistent with your production aspirations, but you've also then name-checked the fact that you've clearly had success developing then identifying better and better projects over the last couple of years. And I just wondered, will that translate ultimately to a lower CapEx bill for the same production aspirational. Do you think $21 billion remains about right?

So the $21 billion is, I think, what we are prepared to guide for. Currently, it's $21 billion a year. And 2.5 million barrels per day in 2017 [ph]. So -- but all the privatization being done, meaning that the quality of the growth will improve when you pick the best project. Jon Rigby - UBS Investment Bank, Research Division: All right. But the quality of the growth doesn't improve through the CapEx intensity on the production value of the production?

We are not ready to make any adjustment on that basis, Jon. But it's a very interesting question.

The next question comes from Helge André Martinsen with DNB. Helge André Martinsen - DNB Markets, Inc., Research Division: Two questions, if I may. Your DD&A cost on a unit basis is up 28% year-over-year in Q2, and 22% in the first half of the year. A new one will further increase DD&A cost forward 2014. Could you please indicate the growth rate for DD&A unit cost for 2014? Are we talking about 20% to 30% on a year-on-year basis?

Okay. Thank you, Helge. So the growth rate of -- or a growth rate of 21% or 28% going forward is not what you should expect in the longer-term if you take a few years ahead. That's, of course, too high. But you will see some -- not a linear development necessarily. And I was very explicit on 2014, where we have a few significant new projects coming on, on the MCS that we typically contribute with same type of issues, DD&A issues that's discussed, has this year. So it's just to give some highlight on that, but the growth rate in that magnitude that you mentioned on a longer-term perspective is not the right number. Helge André Martinsen - DNB Markets, Inc., Research Division: But for 2014?

We are not prepared to give a specific number on the growth side on DD&A for 2014. So yes. Helge André Martinsen - DNB Markets, Inc., Research Division: Okay. And one more question, if I may. On the realized oil prices for the international business. It dropped relative to Brent compared to Q1 despite that we have seen a significant strengthening of the WTI and Bakken prices relative to Brent. And we also seen improving West African crude essentials, so could you please elaborate a bit on what is driving your international liquids price relative to Brent?

Okay. Thank you, so 2 main drivers there. Peregrino is at discount to Brent, so there's a higher production from Peregrino this quarter. The second one is related to WTI. So over Bakken production, we are railing that out of the Williston area. So it has not been priced at the WTI up to now. At least to a lesser extent. So that doesn't really make a big difference. So the main explanation is Peregrino production.

And onshore U.S.

And yes. And onshore U.S. production spend we have, the liquids production out of Marcellus. That has increased significantly. And that is, significant discount to most Brent and WTI. Helge André Martinsen - DNB Markets, Inc., Research Division: But it will follow the WTI prices?

The liquids out Marcellus is NGLs and ethane, so that will follow that markets more than WTI.

And we have Rahim Karim with Barclays. Rahim Karim - Barclays Capital, Research Division: Just one clarification, please, and then a question on gas markets. So clarification with that talk -- when we talk about gearing being lower at the end of the year than where we are today, can you just reconfirm the guidance you gave 4Q of around 15% at year end? And then the question with gas market was, I just -- you talked about the success of your historic gas contract renegotiations, I was hoping if you could just give us an update just on your current renegotiations.

Okay. Thank you, Karim. So the fourth quarter, we had around 15% net debt at the year end. And then we use the forward prices at that point in time for calculation purposes. And that was $110 per barrel. So prices so far this year is lower, so that will have an impact on the gearing. Apart from that, MPR results is -- will also impact the free cash flow from the year earlier. So on the -- on lower prices and the effects, you should expect it to be more soft -- a bit more soft, 50% at year end. Then on gas markets, gas contracts. So we have them -- we have successfully concluded a significant part of the gas renegotiations. There are a few outstanding, those are progressing well. The discussions that we have with our counterparts can be -- I think we can characterize them as colorful. But that's the way of negotiations, but progressing well. So we are offering more spot indication into the long-term contracts, but in return flexibility goes away from the contract portfolio. And that flexibility is a good platform to create the best value creation. Rahim Karim - Barclays Capital, Research Division: Great. And would you say you're on track to finish those negotiations by the end of 2013?

It is progressing well. I will not be surprised if there are few outstanding by year end. So -- but that's the nature of renegotiations.

We'll take one last question from Jason Kenney with Santander. Jason Kenney - Grupo Santander, Research Division: So I'm just curious about the Bloomberg line this morning stating that Statoil management is not focused on the company's share price currently. And I can appreciate the focus on operational delivery and also intense effort to deliver value, but I'm just wondering if there was something you could do to highlight the inherent deep value in your business, possibly by relating the share price to the underlying NAV. I know you tried to do that with the divestment analogy at the recent Capital Markets event, but I mean, on the face of it, self-liquidation [ph] could be value-adding in this respect, I just wanted to know how management might begin to think about the share price in the future once you get through this kind of intense capital commitment and operational focus at this time?

Okay, thank you. I'm a bit puzzled that Bloomberg says that management is not occupied with the share price because we, definitively are. I'm not sure where that comes from. The way we think about the business is that, we need to be very good at what to do. That's the best recipe. We need to be good at exploration. We need to have the best projects. We need to be good at developing those and strong at operating those. And then selling oil and gas. If you're good at all of that, that's a recipe for a strong share price. And if you do that within a firm financial framework, which is a solid balance sheet, strong gearing and strict privatization, I think that's good medicine for long-term value creation for our shareholders. So to me, it's very important to balance all of these well. To what speed we actually push the accelerator. And as we have discussed, we have the potential to grow farther. We have the potential to realize even more of our projects, but it's very important for us to find the right pressure on the accelerator. Balancing, picking the best projects, seeing through that we have the execution control and capability in place and also the financial framework that we deliver that in a toned manner. So it was a big question, but I can assure you very much that, as management, we are very occupied by share price and what we are doing compared to our competitors.

Thank you very much. That will conclude the Q&A session for today. And today's presentation and Q&A session can, as usual, be replayed from our website in a few days. And transcripts will also be available. If you have any further questions, please direct it to us in Investor Relations and we'll be happy to help you. Thank you, all, very much for participating, and have a good afternoon.