Peter Hutton - IR Hans Jakob Hegge - CFO Svein Skeie - Head of Performance Management and Risk Orjan Kvelvane - Head of Accounting

Michael Alsford - Citi Haythem Rashed - Morgan Stanley Oswald Clint - Sanford Bernstein Jon Rigby - UBS Teodor Nilsen - Swedbank Rob West - Redburn Anish Kapadia - TPH John Olaisen - ABG Biraj Borkhataria - RBC Lydia Rainforth - Barclays Mehdi Ennebati - Societe Generale Torbjorn Haland - Fearnley Securities Marc Kofler - Jefferies Ilkin Karimli - Credit Suisse Nitin Sharma - JPMorgan Brendan Warn - BMO Capital Markets Hamish Clegg - Bank of America

Good afternoon everyone and thank you for joining us in the conference call for Statoil's 3Q Results 2015. My name is Peter Hutton, Head of Research for Investor Relations, and I'm delighted to welcome Hans Jakob Hegge to lead the call having taken over a CFO since the 01st of August. Also participating on the call Svein Skeie, Head of Performance Management and Risk and Orjan Kvelvane, Head of Accounting. We’ll have a presentation from Hans Jakob for around 15 minutes, and then we’ll open up for questions and we expect to complete the call by around 1:30 UK time. And with that I'll ask Hans Jakob to start.

Thank you Peter, good afternoon and welcome to everyone attending this conference call. May I start by saying that I look forward to presenting Statoil's results and taking questions as this is the first opportunity to speak to you as CFO of Statoil. The focus remains the same as previous quarters. Safe and efficient operations, reducing costs and positioning the company for the future. Let me start with the three main messages today. First, we delivered strong performance in a challenging environment. Operations remained solid and reliable, generating strong cash flow and keeping our balance sheet robust. However even though we've improved on our cost base in underlying currency we've seen weaker results from international upstream which I'll address shortly. Second, we continue to see cost improvements coming through and becoming more systematic with adjusted OpEx and SG&A down 16% year-on-year when segments are waited in underlying main currency. Showing not only in our bottom-line but also in our organization and culture. Third, we continue to make significant improvements in our capital expenditure allowing us to reduce our guidance for CapEx in 2015 by $1 billion to our own US$16.5 billion. And we’re bringing down the breakeven on several unsanctioned projects, thought levels which look attractive even at current prices. As announced earlier today two of our development projects Aasta Hansteen and Mariner have been delayed by one year. At the same time we communicated improvements on Johan Sverdrup. As a reminder the dividend remains unchanged at $0.2201 per share. The dividend will be stated in Norwegian krona at the effective exchange rate closer to payment as we announced last quarter. Moving on to strong production performance. Third quarter was another quarter of strong safe and reliable production. Our production efficiency was above 90% on NCS with unplanned losses below 4%. Higher regularity on our assets produces some of the most profitable incremental barrels. Overall our equity production was up 4% year-on-year that is 7% adjusted for divestments. Jack/ St. Malo is now ramping up strongly from first production in December last year and is achieving good flow rates. And we’re seeing the benefit of projects which started earlier last year such as Gudrun and CLOV in addition we have Valemon which started earlier this year and more fast track projects. We’re also realizing value of the volume from our gas machine and this has contributed well as prices are higher than last year. Looking at Norway the production was up 8% year-on-year. That is up 10% adjusted for divestments. This is despite the fact that underlying decline remains around 5%. More than half of the growth came from operational improvements and new fields. The other half came from a successful decision to defer production in 2014 an example of value of volume as we realized higher prices. Equity volumes in the international segment were 1% lower overall refracting the softer needs disposal. Moving to the next slide, adjusted earnings by segment. We've got quite a lot of information on this slide but I'll take you through it. Clearly results in the third quarter reflect a band price which was down over 50% year-on-year and down nearly 20% on last quarter. Our job is to manage the controllable elements and we continue to do so very actively. Upstream operations in Norway delivered adjusted earnings of NOK15.5 billion and 5.1 billion after tax down 33% and 22% respectively. The adjusted earnings were supported by continuous strong operational performance giving a 10% underline production growth. The impact or lower crude prices was partially mitigated by lower cost and lower discounts to the brand prices. However, we also saw higher European gas prices in Norwegian krone. Adjusted OpEx and SG&A per barrel were down 10% compared to third quarter last year reflecting increased cost efficiency in our operations. DD&A cost per barrel increased 1% reflecting higher depreciation as we ramp up production on new fields such as Gudrun and Valemon. Moving on to DMP international that was challenged by the tougher pricing environment in third quarter. Adjusted earnings moved from a small loss in the second quarter to minus NOK4.2 billion this quarter. The negative result in U.S. dollar is further more impacted by the U.S. dollar NOK exchange rate development. We're not pleased with this results and I'm very focused in our actions to improve. To improve possibility we have worked hard on reducing costs, year-on-year we see a 22% reduction in adjusted OpEx and SG&A per barrel in U.S. dollars. These cost improvements are important contributions in a challenging oil price environment and shows that our efficiency effects all paying off. DD&A per barrel in U.S dollars has been reduced by 17%. Underline production was up 4% as operating momentum is progressing in a very positive way as we continued to shift to more attractive areas. NMP has changed his name, but hasn't changed its ability to deliver strong earnings. Adjusted earnings were up 36% to NOK6 billion, after tax adjusted earnings increased by 83%. Demand driver for the strong result has been continuous high European Refinery margins, high reliability at our refineries has put us in a position to take advantage of this high margin environment. Liquid trading have delivered strong results across the board and is benefiting from continued contango in the oil markets. Downstream activities normally in a lower tax environment compare to upstream. In this quarter we see high after tax contributions from this part of our business. Moving to the next slide, financial results. As we have seen this group figures include the benefit of strong operational performance and continued progress on costs. However, these are not sufficient to make up the reduction in prices year-on-year with Brent prices down by more than 50%. As group level our net operating income is NOK7.3 billion, excluding adjustments of NOK9.4 billion. Let me take you through the adjustments, first net impairment charges of NOK4.8 billion mainly related to expression assets and unconventional assets on-shore on the international segment. Second, provisions from disputes of NOK3.3 billion and net other adjustments of NOK1.3 billion. We reported adjusted earnings of NOK16.7 billion that was down 46% from third quarter last year, mainly reflecting the lower price environment. Effective tax rate at around 78% was higher than last year due to the losses in the international upstream which tends to have lower tax rates. Overall we report adjusted earnings after tax of NOK3.7 billion. Then we move to the slide on cash flow 2015. Despite the pressures from oil in the 50's we are pleased that we remained close to neutral on free cash flow earlier year-to-date after dividend. This includes proceeds from divestments of around NOK27 billion. We are seeing resilience in all cash flows and the benefits of exercising flexibility in our capital spending. On top of this we have strong underlying production efficiency and lower OpEx and SG&A per barrel in local currency. We will be updating the outlook in February next year. Our adjusted net debt to capital employed was 24% at the end of third quarter. This is a small increase from second quarter due to currency impact and a small increase from impairment. What about the outlook for 2015, we move to the last slide in my presentation. We have positively revised all elements of guidance for 2015. First capital spending is reduced by a further $1 billion to around US$16.5 billion. This is down 8% on the 18 billion guided in February at our capital markets update, which was in itself a 10% reduction on previous plans for 2015. There are several drivers, we're making better progress on the improvement initiatives. We are prioritizing the use of capital very strictly. We are starting to see some impact of cost deflation and the weaker NOK also contributes as some of NCS CapEx has NOK as underlying currency. Second, we expect organic growth over 3% in production this year. This is ahead of the 2% we said in 2015 and 2016. This is as before based on 2014. It is adjusted for divestments and reflects high production efficiency, lower impact of maintenance and higher flexible gas volumes. Third the impact from maintenance is reduced to 40,000 barrels in the year and to 15 in the fourth quarter. And last but not least we expect exploration spend to total around $3 billion in the year, down from our guidance of $3.2 billion in February. We will drill a similar number of wells as expected but with greater efficiency. To conclude my presentation, we see the imperative for continued improvements. We are taking actions and I look forward to providing a more detailed outlook at the capital markets update February 4 next year. With that I ask Peter to take us into the Q&A part of the call.

Thank you Hans Jakob, with that we'll open up for questions and the operator will explain how to register. In the interest of time and fairness I ask everyone to keep to one or absolute maximum for two questions. If there're any outstanding questions there may be time to come back later in the call or we can follow up directly in investor relations. So with that [indiscernible] you open up for questions and explain the process, thank you.

Thank you, [Operator Instructions] we will now take our first question from Michael Alsford from Citi, please go ahead your line is open.

Thanks for taking my questions, I have two questions, but just firstly on the priorities of the company. Could you confirm in terms of priorities whether you're willing to perhaps go above your gearing framework of 15% to 30% in order to maintain the dividend policy of the company and where do you see perhaps the level of gearing? That would perhaps mean that the dividend becomes more at risk if the macro remains weak. And then just secondly on the international MP business, could you give some color as to what drove the further impairments since second quarter in the U.S. onshore and what was the driver behind the reversal of the impairment on the offshore assets in the Gulf, during the quarter. Thank you.

Thank you Michael for asking that question. First to the dividend. There's no change in policy and we have strongly committed to our dividend policy. We see this as a confirmation to our financial discipline. We have guided on 15% to 30% gearing and we’ll say that that's not a sacred band. If there are M&A opportunities coming up we might look at that but with a plan to be within the band. So the dividend policy remains firm. Impairment, looking at the impairments we explained that we have a net of around 5 billion. The reason for the dividends earlier on [indiscernible] could take us into that. We do not comment on specific assets but as I understand this is the question around the Gulf of Mexico and the impairment figures.

So you had a question on onshore, the driver for the impairment and that is mainly market effects, the prices you see, the forward prices of liquidity is going down and that will also impact on the onshore. On the offshore, yes there are negative market effects as well, but they are asset specific improvements as Hans Jakob commented upon and we’re working hard on improvements and at some point in time we take in some specific improvements into the models and this time that has a very positive effect and that is the basis for that reverse.

Now we take our next question from Haythem Rashed from Morgan Stanley. Please go ahead, your line is open.

Two questions from my side. Firstly, on international business. I wondered if you could just spend a little bit of time talking about how exactly and on what are the sort of things that are being done to turnaround this little weakness in the results here, because as you highlighted costs are coming down already quite a lot. DD&A per barrel is also down, is there a lot more on the cost side that you can do over and above that 22% that you think which can help drive a better results there. And then secondly, my question is sort of semi-related to this. Given the tax impacts of the loss in the U.S. over the quarter is there anything you can say about 4Q and tax rate guidance over the next couple of quarters. Is there -- should we expect the tax rate would remain quite high over the next couple of quarters, if the international business continues to underperform?

Thank you Haythem for asking that question. DPI or the international had a loss of NOK4.2 billion in 3Q prior to tax and as you know we’re structurally more exposed to the oil price than DPN. We see significant improvement in the control of the elements such as OpEx and SG&A that were down 22% year-on-year, the DD&A is higher in NOK but down 17% year-on-year per barrel in U.S. The production growth is 4% corrected for divestments and we also had some 3Q specific elements as part of the international results. Moving to the tax rate on fourth quarter, Svein would you answer that question?

Yes, I can give some reflections around the tax rate for the international segment, and as we've also explained earlier is that is there earnings composition, coming from the different countries that will have an impact on the tax rate, because in some countries we have a positive contribution and others where there are less contribution, that has also often lower tax rate. And that’s will imply that tax rate can vary a bit. So that we should also then expect and it could happen also going forward on tax rate for the international segment.

Hans Jakob, could just clarify the first part. Are you saying that if oil prices remain where they are now and -- oil and gas prices remain at similar levels. That’s ultimately the profitability in the international is unlikely to improve dramatically from where we are at the moment, or perhaps you could just explain is this -- is there more that can be done on the cost side even in this oil price environment that would mean the losses that were made in 3Q could be reversed.

No, there were some specifics in the quarter and as the improvement efforts move along, you could see positive contributions from the international moving forward.

We’ll now take our next question from Oswald Clint, Sanford Bernstein. Please go ahead. Your line is open.

Can I ask a question on the U.S. onshore portfolio? I wondered if you could give us some more specifics in terms of drilling cost reductions and the OpEx in that side of the business, just so we can compare it with some competitors that would be useful. And then maybe a question on that Aasta Hansteen and Mariner, I guess it's unusual to see projects going up in cost these days. So could you just explain a bit more thoroughly what exactly has happened there? Thank you.

First on the U.S. onshore business. We’re working hard on the improvement program taking out synergies from reorganization. We also have some restructuring costs and layouts. So we are all working on improving the business and expecting to learn from the various assets and we’re compared to peer we see very encouraging progress and results. Moving to Aasta Hansteen and Mariner we -- as we have announced we have postponement of one year, one of the reasons for the project delays is engineering, equipment packages and capacity and additional consequences, on all stuff it is 9% increase the CapEx is up NOK2.8 billion and there is 2.4 billion in currency and in Mariner announced the 10% CapEx increase. So this has negative impact on possibility in the isolation, but we are working from a portfolio of more than 40 projects and then not to forget we have had three discoveries this year adding volumes to Aasta and improving the economics.

We will now take our next question from Jon Rigby, UBS. Please go ahead your line is open.

Yes thank you. Two questions please the first your referenced some number of issues of what was driving you lower CapEx figure. You had some significant success in driving down OpEx which if you listened to other companies seems to be a more difficult thing rather than CapEx. Could you perhaps talk about and you referenced cost deflation, but you seemed to say that there wasn’t significant cost deflation in the adjusted figure. So could you talk a little bit more about a snapshot it way you're seeing cost deflation right now and how it might affect your CapEx into 2016 where I assume that it will have more impactful -- will be more impactful, if you could do that please? And the second just going back to the tax issues and particularly the U.S. I sense that the taxpaying position is quite important here but I understand it because you obviously got taxes of carry forwards as well, so from an accounting perspective what's the oil price you would estimate that you start becoming theoretically taxpaying although obviously sheltering would be the tax of carry forward. So somehow it’s the reverse, the affect that we're seeing now, which is higher accounting tax book, low cash and turning around the other way. Could you give us some more insight into that?

Well thank you for asking those questions. First on the cost savings I'm very pleased to see that OpEx and SG&A were 50% down year-on-year in underline currency and looking at DPM the OpEx that were down per barrel driven by reduced activity level, lower use of external services and over time. As you know I'm -- used to be an operations guy and on [indiscernible] we talked about the sessions [ph], we reduced that personal from the suppliers, utilizing our own staff, simplifying the work processes and very strict prioritization and we have gone through some substantial changes in that respect. Our assets are also paying off in the international as we see lower O&M [ph] cost and SG&A savings well in addition to that one third of the cost reduction in end comes from lower royalties. I'd also like to mention the softening of the supplier market, as we have more than 500 initiatives to re-negotiate and rebid and we see sort of benefiting from a softening market in the contracts awarded. And maybe it’s a bit technical but we’ve also done some changes to the way we split contracts and share risks that have been made. So this are some examples of cost improvements. Earlier on we had a very specific question related to the prices in the U.S?

Yes. So as understand it you asked about how to recognize the tax loss in the Q3 in the U.S. And the accounting rules are pretty strict because you need to see that you have utilized the tax loss carry forward before you kind of start to recognize this in the tax asset again. So if you cannot see that in the [indiscernible] that you have utilized all the tax losses then you not allowed. I don’t think I will be specific when we see or when we believe that that will happen, but we are not in a position where we have utilized that to defend having a tax asset in the balance sheet right now.

Great, I'll just come back to you on the Gulf question, just would it be reasonable to conclude that you obviously have sort of greater velocity around OpEx than you do around CapEx, so would it be reasonable to conclude that 2016, '17, we’ll begin to see some of the flavor that is clearly evident in the OpEx trajectory and your CapEx trajectory. Will we see some of the clear benefits being driven through OpEx right now, contributing to even further through optimization benefit in CapEx.

Well, what we guided on at the CMU is on CapEx side in '17, '18 we have 5 billion to 7 billion in flexibility. I think we demonstrated today and this year that we are using the flexibility and we’ll come back on these issues at the CMU in February next year.

Sorry to pursue this point, but obviously the world is changing very rapidly, so I was just trying to sort of get some color on sort of thinking between February of this year and now given your experience with the success around the OpEx, it is that thing that we could expect to be expanded upon on the CapEx outlook, next time you revisit that?

Well what we adjusted our outlook today and made some changes as announced and we've given examples of that and another example maybe a last one in this round is also the starting levels, we just did changes in the US. We used to [indiscernible] employee company, there are just above 22,000 at the moment and we expect to be just below 21,000 in 2016. So that's just another example of the dynamics.

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

Good afternoon. Thanks for taking my question. I have two question. First of Troll, the gas production at Troll has been very strong in the past few quarters. Now I guess that do not represent normalize production. Could you please indicate what we should assume as a normalized production for Troll going forward? And second question is on impairments, so over the past few quarters, you a mixed substantial impairments in particular related to the North American business, assuming that the forward curve increases by $10 per barrel, how much will the impairments would you be able to reserve?

Well thank you Teodor for asking those questions. Troll is in my heart as I used to be the operations manager of Troll some years back and what I know from Troll and Luciber is that it is our flex gas fields and I think we’ve made good decisions to defer production in 2014 to this year, due to the stronger prices in the European gas market. We've utilized that at a part of the volume-over-volume strategy. Moving forward we do have this flexibility but it's too early to say on the production of gas from Troll, due to uncertainty about the market price. To your second question, impairment, North America forward. This is quite dynamic, we've done impairments we do also reversals and this is part of -- to some extent changes in the forward curves, but also the modeling around fair value or looking at a market which in some instances are there, in other instances we have little activity and a few reference points. So these are dynamic considerations for triggering impairment and reversals.

We will now take our next question from Rob West, Redburn, please go ahead your line is open.

A quick question for me is really on the international realizations than just to take to get a sense of, was there any one off-ish factor like a under left, come into the realizations in your DPI segment this month, are anything more persistent like challenging realizing full value for any particular volumes, any particular region that you think could last into future quarters. And then secondly for me, we’ve got the CapEx budget going down $1 billion as announced this morning. Could you say something around potential fear maybe that some investors might have that maintenance is what’s getting cut as part of that reduction. Anything you say around that would be right, particularly reassuring? Thanks.

Thank you Rob. The first question about one-offs in international, there are some one-offs. One example is the restructuring cost in the US. On the CapEx drivers for the reduced CapEx is as you know, we moved from 18 that was a cut from $20 billion last year, then to $17.5 billion last quarter to US$16.5 billion this quarter. We’re making better progress on the improvement initiatives. We’re definitely doing stick capital prioritization.

I'm not sure if my line is still open. I meant specifically on the realization. So the revenue per barrel metric.

Svein would you fill me in that one?

I can fill on that one. And if you look at the realized price system for the international segment, you see on the oil side that it has been done around $40 a barrel. We’re then exposed to several markets for oil production. Some with varied licensing included and those things getting good benefit. But we’re also then producing some fields with more heavier quality which have a higher discount in the current environment. On top of that we also don’t have anything for the better liquid productions from the U.S. which is than exposed to a different market onshore than we have for the rest of it. If you look down at the gas price, you could also look at that one. And this costs are compared with last quarter. In the international segment last year we had Shah Deniz as a producing entity impacting the gas price, now we have some gas production from Algeria, rest of the gas production is coming from U.S. and is than much more exposed then to the Henry Hub, which in this quarter the Henry Hub price was into two-ish.

Our next question is from Anish Kapadia, TPH. Please go ahead. Your line is open.

Just firstly on U.S. onshore. I was just wondering at current oil and gas prices, do you see the need to reduce activity further and on the flip side of things and what kind of oil price, what kind of gas price do you need to start adding rigs back in the likes of the Bakken and the Marcellus. And then secondly, just wanted to get somewhat of an update on your potential FIBs. The timing of these, if so they are indeed still planned just on assessing the key projects here in Castberg, Goliat, [indiscernible], if you can give some dates around those if you're still planning to go ahead with them?

To the U.S. oil and gas prices and the need for reduction in the activity. We’re working hard on improving the business and as I said we've reorganized the business, Torgrim, the previous CFO has been quite actively reorganizing, doing some staff reductions, moving activity to Austin and trying to extract synergies from the various fields and a more standardized way of extracting the learning. On Bakken we have quite a higher share of our production and we've taken down the rigs. We also look at utilizing the flexibility in the U.S. business in order to adjust to the current price environment while continuing to improve our operations. Looking at the potential FIDs on timing we have quite a long list of projects, we try to improve on the projects and Johan Castberg is a project that I know quite substantially about from previous role and it is very rewarding to see overall that in this bucket of portfolio we've been able to take down the breakeven prices substantially. Johan Castberg in particular was around 80 breakeven at the point and we've said that it's around 60 and we’re continuing to improve it and we won't sanction it until we've actually seen that we've taken off all the benefits. And we have some updated list on those projects and cost side in particular is estimated production starts late 2022 as an example. But I can't go into all the details because we have quite a long list.

Just to clarify on the first question. So at current oil and gas prices given the improvements you've seen in cost and CapEx you don't see the need to cut activity any further, is that correct?

Well we are taking it a little bit down while we are improving on it, but we have further flexibility and we also have the opportunity to scale up when prices are having a re-bounce.

We’ll now take our next question from John Olaisen from ABG. Please go ahead. Your line is open.

Good afternoon, gentlemen. Two questions from me please. One as the Capital Market update in February this year, you said that you expect to have free cost cash flow that will cover the current dividend in 2016, with those priced at $100 [ph] since then you’ve kept to the CapEx and exploration and operating cost that you highlight for 2015. I was just wondering if you could update us on that free cash flow to cover dividend that with oil prices at now for 2016, please.

Well the guiding, well we’ve done an update on the outlook today and we’ll revert to this issue at the CMU next year.

Okay. My second question is on gas demand in Europe. One thing is your production regularity, but I guess the main driver of your gas production and sale is demand from Europe. And even your gas production from you guys in Q3 was up 20% compared to Q3 last year, just wondering what is going on, is it higher gas demand from Europe or is it lower supply from others suppliers to gas in Europe?

Well we get quite a few questions on the European gas market and we’ve seen good prices, we have produced the Flex gas and we -- it's a sign of our value over volume as I said. We do see volatility in the European gas market moving forward but we also see some reduced volume from European producers, UK and Groningen as an example.

So there's thing changed from the European gas demand market, is improving and how is the pressure you see, may I just follow-up please.

It's pretty stable.

We will now take our next question from Biraj Borkhataria from RBC. Please go ahead. Your line is open.

The first one was on tax question, on cash taxes they were particularly low again this quarter, which is one of the reasons that helped your free cash flow generation. I was just wondering if you could remind us of the schedule of payments for each year in terms of how much cash taxes paid in each quarter. And then the second one on the midstream, you’ve guided -- well another strong result today and your old guidance was NOK3 billion to NOK4 billion per quarter, I was wondering if that is still relevant going forward and heading into 2016? Thanks.

Regarding the tax payments as you saw in the quarter, not that high compared with earlier one, but as we also do when since we only have one installments in the third quarter in the taxes from Norway. We had a payment of installment on the 1st of October, that’s why we than included half of that one in own net debt ratio calculation. So we paid one installment 1st of October and then we will paid the final installment for this year at the 1st of December. But I also wanted to remind you that during the year, the first-half of the year we paid the taxes coming down from the results in 2014. In the second half of the year, we are paying the tax then coming from 2015 and we will pay the last half of those 2015 type of taxes in first-half of 2016. That’s also why the taxes have come down compared with what you saw in the first-half.

And on the midstream guidance?

The MNP business has traditionally been between 3 billion and 4 billion it is strong refinery margins, high regularity and we are not changing the guiding on the MNP.

We will now take our next from Lydia Rainforth from Barclays. Please go ahead. Your line is open.

Thanks, and good afternoon, gentlemen. Two questions if I could. The first one just picks up on something around one of the earlier questions around the gearing levels and not being a sacred bonds in event of M&A activity, can you talk through what the hurdle criteria would be for any M&A options that you would look at. And the reason I ask that is when I look at the impairments over the last 12 months to 18 months. It does appear that the impairments have been taken have been primarily in assets that are been acquired. I just want to make sure that whether you are looking at the M&A activity in comparison being competitive with your own internal options? And then second one, would like to just know, Hans Jakob, your reflections on what you found as CFO in the last two months to three months. And have there been any surprises within that you found as [indiscernible] since you’ve started? Thank you.

Thank you, Lydia for asking those questions and tempting to go into detail on M&A, but I am not going today we haven’t seen a very active market on the M&A, but we are definitely looking at it and if you are to close a deal we will comment on the announcement. So that’s as far as I get on the M&A. When it comes to the impairment, it is certainly a dynamic issue, the net impairment is of around NOK5 billion, mainly expiration assets this quarter. As the forward price is down 16% from Q1 and 20% from Q2. Surprises yes, you always get surprises, there are high levels of engagement around the improvement activities, it’s very rewarding to see throughout the organization and to see more and more examples coming up on improvements and that is of course good for a CFO to notice.

Could I just say that we’ve got around 10 minutes left, I am not sure we’re going to be able to get through all of the questions. But I think for those who are unable -- we’re unable to take those questions, we’ll certainly follow-up after the call and we’ll take any questions directly through to Hans Jakob offline. Can we move to the next question please?

We will now move to our next question. Please go ahead. Your line is open Mehdi Ennebati, Societe Generale.

Hi good afternoon and thanks for taking my questions. Two questions please. The first one on your production guidance for 2015. You say your 2015 equity productions would increase above 3% year-on-year. Rebates to refund [indiscernible], however to get this 3% or even 4% production growth you have post very long production in Q4 compared to last year. So should we then consider that we lower production in Q4, 2015 maybe because of low natural oil and gas prices? Are you just overly cautious and you should expect your Q4 production at the kind of normal level which would mean year-on-year equity production growth of maybe 5%-6%. The second question regards we your U.S. natural gas production, so currently [indiscernible] is more or less to the last handed to you, you highlighted in the recent part that integration of Johan Sverdrup gas company in U.S. in the upstream plus midstream allow you to face low Henry Hub prices, I just wanted to know, if at the current Henry Hub price to the last pair handed to you, your free cash flow positive, regarding your U.S. and China gas integrated business? Thank you.

Thank you, Mehdi for asking the questions. On the production guidance for this year we said about 3% and it’s of course dependent on the natural gas market and the attractiveness of using more flex gas. To the U.S. natural gas, as I said we are adjusting the activity a bit and we do have flexibility moving forward and we are of course following the prices very closely.

Okay. If you are adjusting flexibility in U.S. net gas, let's say it probably means you are under free cash flow positive at to the last [indiscernible]?

If I am asked -- well because we have the income in the DP U.S. results in itself. But as you might have also seen from our MD&A if you look at the disclosure in the back there, the natural gas of -- had then also a positive results of approximately NOK0.4 billion. On top of that we also get some income from the revenue enough from the gathering system coming to, but you also typically see in the U.S. is that there are more seasonality there that we are taking benefits than from sending the gas of to Toronto, as one example and also into the Manhattan and Manhattan typically has been a higher margin in the quarter and the first quarter. So you also need to take that into considerations on and not only the Henry Hub in itself.

We will now take our next question from Torbjorn Haland from Fearnley Securities. Please go ahead. Your line is open.

Yes, good afternoon. Thanks for taking my question. I was wondering if you just comment a bit on the other post under adjusted earnings, 700 million the EBITDA on what's behind a post and also how should we think about that going forward? Thank you.

Yes, so 700 million it's consistent over the new energy solution segment and also the technology and project department and other corporate staff. So the main part of the 700 million is from the new energy solution and TPD segment. And it's around the trend that you’ve seen that is normal level for that area.

Okay. And secondly, if I may, on the CapEx, you mentioned a couple of factors there, affecting the lower CapEx, could you give some color on how much of the lower guidance is related to the foreign exchange. And how much is related to the lower activity and efficiency improvements?

Yes, there is a limited currency impact from 2Q. We see -- we're definitely starting to see some impact of cost deflation and as I said we have strict prioritization and are making very good progress on the improvement initiatives. So limited currency impact from 2Q.

Can I just intervene before we go to the next question? We still got a few callers left who have a question, in the interest of time so we get through to everybody can I ask people to keep that to one question each for the remaining questions and then we will follow up with anything else after the call. With that can we reach the next caller, thank you.

Our next question is from Marc Kofler from Jefferies, please go ahead your line is open.

Hi, afternoon everyone, thanks for the presentation. I just have quick question, again coming back to the production guidance. I noticed that you haven't changed the 2% target from 2014 to 2016, despite the increase in the 2015 guidance. I'm just wondering if that 2% now in light of what we've seen here today, is that conservative and you know how much credibility should we be assigning to that 2% based on the volumes year to date.

Thank you Marc, hopefully we will meet at the Capital Markets Update in February and we'll revert to that.

Just, a following up, can I ask just as a guide from here, perhaps the next year just as a group. Could you say pressure might be flat up or down, perhaps?

Depends on price development related to flex gas.

We will now take our next question from Ilkin Karimli, Credit Suisse, please go ahead your line is open.

Good afternoon. Quick one from me, can you just remind us what kind of gas prices your operating cash flow guidance for '17,'18 is based on both in Europe and the US please. Thank you.

Once we said that the Capital Market Day in February and we gave the guidance on $60, $80 and a $100 on the oil price. We did not have a specific disclosure on the gas price for Europe and US.

We will now take our next question from Nitin Sharma, JPMorgan, please go ahead your line is open.

Thanks, gentlemen. Coming back to that question on dividends, you reiterated strong commitment to dividend policy. Now that policy promises growth in cash dividends in line with long-term earnings, if we then factor in the lower oil price environment, it obviously means underlying earnings outlook has come down. Given this background, could you maybe clarify. Is there a commitment to a DPS number or no matter what the oil price is you are promising maintain that DPS or will it likely change as the environment is changing. Thank you.

Well thank you Nitin for repeating our dividend policy. We are talking about long term trend and we are sticking to the policy.

We will now take our next question from Brendan Warn, BMO Capital Markets, please go ahead, your line is open.

Thank you its Brendan Warn from BMO just one question. Considering the timing. Just in term of Aasta Hansteen and Mariner. Just can you tell us your confidence level and just step through what you have done to fully contain the schedule and budget or are we expecting further delayed and then just in terms of the 40 projects. What are the risks then to other major projects such as Johan, et cetera?

Thank you for asking that question Brendan. Aasta and Mariners are two of our more than 40 projects, but important to us and Aasta will have a startup second half 2018, so we have with Mariner a startup on the second half of '18. We have several measures to make those projects robust but I won't go into detail on those. Besides that we work hard on the revised schedules and the improvement measures, so we stick to our plans -- revised plans for second half of 2018 for both of the projects.

And considering you haven't reiterated the CAGR production growth '16 to '18 do I assume that’s at risk because of this delay?

We’re not commenting on that. The production guidance for the future is the CMU theme next year. No change to that.

We’ll now take our last question from Hamish Clegg, Bank of America. Please go ahead. Your line is open.

Can you tell us very simple, otherwise simple question for you. What is the breakeven gas price in the U.S. for your Marcellus business?

Svein, will you finish?

I'll not go into exact numbers on it, but because it's also dependent quite a bit which kind of acreage we’re in. You have so many acreage that always being the competitive at very low prices and then there are other areas that needs somewhat higher prices. But also you need also to take into consideration the midstream and the gathering system that is extremely important and can create significant value. Because we take -- as we look at the position that we have there, we see it as a value chain project, and then linking both of them together. And then taking benefit from the markets both in as we have done this quarter in Toronto and also at Manhattan pipeline that we’re having now.

So do you know what gas price you breakeven?

We’re doing, but we’ll not -- we’re not prepared to disclose that one.

With that that’s the end of the questions. Thank you. We have to close the call after an hour. Thank you everyone for participating. Please feel free to follow-up with IR for any questions that you may have. I look forward to seeing many of you in the near future and differently I hope in the 4th of February at our Capital Markets Day next year. Thanks everybody.