Orrön Energy AB (publ) (ORRON) Earnings Call Transcript & Summary

Thank you, sir. You're online now.

Thanks very much, Roberto. Welcome, everybody, to the Lundin Energy Q3 2020 Results Presentation. We'll follow the usual format. Alex will talk through the highlights and operations, and Teitur will take you through the financials, and then we'll have a Q&A session afterwards. Without further ado, I hand over to Alex.

Thank you, Ed, and good morning, everybody, and very pleased to be here at my -- I guess, my last quarter release. But let's get into the highlights. Overall, I have to say, very pleased with the Q3. Of course, I will say -- start to say a few words about the corona crisis, and we are successfully continuing operations. I think we see now the second wave, but it's fair to say this second wave where we are much better prepared, perhaps than the first one. And the way the industry has reacted in Norway and the mitigating action we've put in place makes me comfortable that we will continue on this trend and being able to continue to operation without disruptions. Second point on the production. You've seen the production where we are at or just above guidance. And you also, in particular, seen that our full year guidance has increased, and I will say a few more words on the slides. But also through to show that the -- we will have a record 4 quarter production for the company at 175,000, and I will say a little bit more later on about these numbers. In terms of operating costs, we continue to be industry-leading, low operating cost. For the period, we posted USD 2.79 per BOE. And it's fair to say that we, as a company, continue to focus on cost control, and I'm very pleased with these numbers, and we will maintain our long -- well, this year's operating cost at 2.8%. Of importance also, Edvard Grieg, this is all news. Obviously, we posted an increase in reserves to 350 million barrels of oil equivalent. It's quite phenomenal when you think about it. When we submitted the plan of development, Edvard Grieg was at 186. And what is even more phenomenal is that I don't think this is the end of the outperformance at Edvard Grieg. But -- and of course, with increased reserves, we will see, as you see, and there's also an extension of the plateau production, which is now anticipated to be end of 2023. So really, Edvard Grieg is continuing to outperform, and I think that's not the end of the story of Edvard Grieg. On the free cash flow, I think, I was very pleased to post $546 million of free cash flow for the first 9 months. That's even more outstanding when you take into account the average oil price achieved during the same period, which was just above $36 per barrels of oil equivalent. So it really shows how resilient the company is at this low oil price environment. Q3 was no different, with a posted free cash flow of $165 million. And then -- and perhaps before I move to growth, it's fair to say that we have now posted free cash flow for the last 3 years quarter after quarter. So really pleased also with that result. In terms of growth, you've seen the transaction with Idemitsu, and I will say more later on, on the slides. And we also started our high-impact exploration program in the Barents Sea in the fourth quarter. And you will see also next year, we will continue to be quite active, all through actually the Norwegian Continental Shelf. So growth is definitely here and -- both in our existing assets and new concession new areas. So moving to the next slide. We're zooming into the production guidance. I guess a few points worth highlighting. #1 is the first 9 months production of 157,000, which puts us at the upper end of the original guidance range. If you remember, at the Capital Markets Day, we guided the market between 145, 165 with a midpoint of 155. And today, we're now posting, despite the curtailment of the production in Norway, 157. So very pleased with that. Most importantly also is looking forward, Q4 guidance has increased. This is mainly in relation to the increased production quota that we have received for Edvard Grieg and Johan Sverdrup. So for the full Q4, we anticipate to produce about 175,000 barrels of oil equivalent per day, which is a record quarter, or a record production for the company. An actual fact, if I look at the performance of October, we've been producing an average over 175,000 already. So we're well on the way to achieve this Q4 guidance. So as a result of the Q4 highest -- higher production, we are now increasing our guidance from what used to be a target of 157 to now full year guidance between 161,000 to 163,000 barrels of oil equivalent per day. And finally, it's worth pointing out that we've been at the upper range or at upper range of the guidance for the last 21st quarter, so more than 3 years. So very also pleased with that performance. Moving on to the operating cost and efficiency. Definitely, it's fair to say that we are, Lundin Energy, industry-leading operating performance. Our production efficiency continues to be very good, with a range between 95% to 98% across all assets during the third quarter. As I mentioned, posting for the first 2 -- 9 months, $2.79; Q3 $2.8 right at the guidance. But remember that Q4 we will have higher production. And so I have absolutely no concerns of achieving the full year guidance of $2.8 per barrel. The carbon intensity, also very pleased with the performance. Just to remind you, we guided for this year less than 4 kilograms of CO2 per barrel produced. And today, the average for the first 9 months is just below 3 kilograms. So well below our guidance. So -- and that's much lower than the world average -- 6 of the world average. And I will say a little bit more about it on the next slide. It's also worth pointing out that just Johan Sverdrup today, it's producing less than 0.2 kilogram of CO2 per barrel produced. And that's well below the guidance of 0.7%. So a phenomenal performance, and it shows the strength of electrification of platform. Moving on to the next slide. So I'm in Page 5. As we -- and it's a good follow-up to my last comment. We're definitely delivering on our decarbonization strategy. Just to remind you, we guided the market to producing less than 4 kilograms of CO2 per barrel produced for the period of 2020, 2022, and you've seen that we're well below that mark. And by the time Johan Sverdrup Phase 2 comes onstream and Edvard Grieg is fully electrified, we're targeting below 2-kilogram of CO2 produced -- per barrel produced. So I would say, certainly leading as an offshore company. And the most important thing is that this will allow us to target our carbon neutrality by 2030 and maybe even earlier based on the performance we see to date. And just to remind you, our strategy in terms of decarbonization is really made of 3 pillars: Number one, reduction of emissions, which is mainly done through the electrification of the platforms. As an example, by end of 2022, 95% -- or over 95% of our production will be fully electrified. Number two, is our investment in renewable in connection with our electricity production on Utsira High, mainly Edvard Grieg and Johan Sverdrup. So as we said, we will invest in renewable to offset and replace all the electricity we're consuming offshore. Thirdly is, obviously, continuing to work through innovations to further increase our efficiency. And finally, any residual CO2 emissions will be offset through other natural carbon captures or other technologies. So we have a clear way forward, and we are definitely achieving and well on the way to achieve carbon neutrality by 2030. The box on the right just show you right now where we stand in terms of the replacement of electricity we're consuming. The Leikanger project, the power project, is now accounting for 30% of the electricity we're consuming on Johan Sverdrup Phase 1. And by the time we have completed all wind farm project in Finland, we will have replaced 60% of the electricity we're consuming. So really, what's remaining for us is probably one more project to offset to replace all electricity we're consuming at full phase on Sverdrup and full electrification on Edvard Grieg. Moving on to Johan Sverdrup, definitely on a league of its own. You're mostly familiar with all the numbers. I will not go through all of them. I think I will highlight just a few things. Number one, Phase 2 is progressing on schedule and on budget. We are now over 45% complete, so very pleased with that. First all, on Phase 2, as stated before, is for the fourth quarter 2022. I stated also very pleased with the efficiency, not only in OpEx, which is below $2, which is an absolutely phenomenal numbers and is there to stay, but also on carbon footprint, we hardly produce an emission of CO2 per barrel produced, which is really -- to me, Johan Sverdrup is really the -- a field of the future, both in terms of performance, efficiency and carbon footprint. But if we're moving on to the next slide, I think that the punch line is really that Johan Sverdrup will continue to surprise us, and it continues to outperform. We've seen several steps, if you remember, first of all, Phase 1 plateau production was standing at 440,000. During the first quarter, this plateau production was increased ahead of schedule to 470 at no cost. And during the month of November, we will be further testing the capacity on Sverdrup, and we're expecting that we will be able to show that we can produce above 470, but this remains to be seen with the capacity testing that will take place during November. Reservoir performance overall, it's excellent. The well results is up to above expectations, so very pleased with that. And today, we have 11 wells producing, which is giving us well capacity that can exceed the current capacity for 70,000, hence, the oil capacity test that we will be conducting during the month of November. And we are about to complete well #12, it's going to be in production very soon. So very soon we'll have 12 wells ongoing. So also very pleased with the performance in terms of operations. Moving on to Edvard Grieg, or the Great Edvard Grieg area. Again, as I stated before, Edvard Grieg continues to outperform. It's been simply a phenomenal field when you think of the history and where we are today. Edvard Grieg has seen an increase in reserves of 50 million barrels of oil equivalent, and we've seen the plateau extending again and this time to end of 2023. Just to put things in perspective, Edvard Grieg was supposed to decline by end of 2017. We've been able, over the years, to extend the plateau production by 5 years, and we may have not seen the end of this. So very phenomenal performance from this field. We're going to also see the first infill drilling campaign starting at Edvard Grieg, which is due to start in 2021. And then tiebacks, of course, particularly in this environment, you want to maximize your existing facilities and you want to maintain the capacity as full for as long as possible. So the tieback project we're doing -- exactly doing that. And we're now well underway. We're solving in Rolvsnes, and we have potentially new tieback projects such as Lille Prinsen. And of course, there's a lot of exploration. We haven't seen the whole story in terms of exploration, particularly in the Western flank of Edvard Grieg and so there will be a lot going on in that area. And really, the game plan is to maintain the facilities full for as long as possible, and this will generate some of the best and most profitable barrels. And it's quite phenomenal. If you then, finally, look at the reserves, as I mentioned, 186 was the planned development reserves today in the Greater Alvheim Area, Edvard Grieg, Solveig, Rolvsnes, we're now exceeding 400. And if you add the 3P, 2C, we're getting close to 600 and then for the exploration 8 tonnes. So we still have the ability from the current 400-plus to double again the resources over the years. Moving on to the next slide. This is just a snapshot of our current project, tieback, Solveig and Rolvsnes. I would say, overall, everything is on schedule and budget. So pleased with that. Just to remind you, first all, for both Solveig and Rolvsnes is for the third quarter of 2021. So we're getting very close to that, which is only next year. And it's also worth mentioning that these tiebacks are very value accretive. Look at just Solveig as an example, with breakeven oil price of below $30. And both Solveig and Rolvsnes have upside. I'm thinking about Solveig Phase 2, and I'm thinking about the full phase of Rolvsnes. And obviously, those additional upside will be really crystallizing once we have some production history, but a lot of potential also in that area. The next slide is -- I think it's a very important slide, and it's worth focusing on. If you look at the -- there's really 2 things is -- we're showing is, number one is the further plateau extension. As I mentioned, now we've extended the Edvard Grieg to 2023. But if you look at these slides, you can see that when I was talking about further upside, if you include the 3P reserves and 2C contingent, you can see that there's scope to further increase the plateau production. But obviously, this will come with time and, of course, any other exploration upside. The other one, which is really something we haven't shown before, it's accelerations. And now we are accounting for once Eva Olson comes into the client, the ability for Edvard Grieg to actually not only extend its plateau, but increases production So you can see that over -- from 2022, Edvard Grieg will have capacity, and there will be capacity to further increase production, while Eva Olson is going to decline. And that is significant because, by the end of 2024, if you include also the 3P reserves, we can exceed the increase by almost 40% of current production level. So to take things in perspective, the last time we show you that slides on the 2P level, it was the red line you see in front of you. And you see that now you can start to have a better view of what Edvard Grieg can deliver over the years, not just in plateau extension, but it increased production. So again, really a phenomenal outcome. And as I said, Edvard Grieg will simply continue to outperform over the years. Moving on to Alvheim. Really, the game plan here is to stay in production. Aker BP has done a phenomenal job when you think that Alvheim is really a mature asset today, still with operating cost below $6 a barrel. The game plan here is really about infill wells. The first one will be 2. The first one will be online during the fourth quarter 2020 and the second one early next year. We also have tiebacks, such as Frosk, Kobra, Gekko developments, which we all plan to project sanction by mid-2021. So really pleased with the performance and another great field, a great example of performance. Moving on to the growth side. I think we've shown again and again that Lundin Energy will continue to grow and continue to focus on high returns and valuable barrels. We currently have 4 projects underway. And as 4, I'm thinking about Johan Sverdrup side Phase 2, the infill drilling in Edvard Grieg, Solveig and Rolvsnes. You've seen us recently also enter into a deal with Idemitsu, where we acquired 10% on the world-class asset listing, which has estimated resources of $500 million and which is currently going on the concept selection for submission of planet development by end of 2022. I think what is important also is with the latest tax incentive that had a really a significant impact on our organizations, and we have now 9 potential new projects targeting over 190 million barrels of oil equivalent to Lundin Energy. And this is very much -- some of these are acceleration due to the tax incentive, and we've seen really benefit to this environment. And so the company is very busy bringing -- hopefully maturing this project to commerciality. On the exploration appraisal, we've also been very busy. 2020 is -- we have 7 wells. We have already drilled 3 and made a discovery, which is the Wisting -- the Iving discovery. And we are now remaining 4 wells and 3 this year, we'll be very much focused on the Southern Barents Sea, but more on the next slide, but a very exciting program. And obviously, we continue to be very active on the app and license maturations and really focusing on high-quality, high-returns prospect. And moving on to my last slide before I hand over to Teitur, and this is really a snapshot of the particularly of the Southern Barents Sea. Now that the Southern Barents Sea is the only area for Lundin, we are very much all through the Norwegian Continental share, very busy and maturing prospect and licenses. But we're showing you these slides because it's fair that the fourth quarter will be very much a focus on the Barents Sea. And really, 3 things to highlight. Number one is obviously the acquisition we made with Idemitsu, which is giving us exposure to 10% to 500 million barrels of oil field. And this transaction was a very, in my view, value accretive transaction, where we acquired this position with less than -- or at about USD 1.8 per BOE, which is very, very good and a very -- an excellent asset, currently doing -- going through the concept selection, and we anticipate a plan of development being submitted by 2022. Number 2 is our Alta/Gohta Discovery, definitely had impacted by the tax incentive, and we're currently working very hard to prove that this project can be a potential tieback and a commercial project and more -- we will say, more certainly next year during the Capital Market Day. Thirdly, very active exploration program, three high-impact wells in the coming months. We're currently drilling Polmak, which is on trend with the existing discovery in Alta. It's a high impact with about 400 million barrels of oil growth. And then we will be moving to Bask, which is very much on trend with Johan Castberg, further down flank towards the west. And then with Equinor Spissa. So very exciting program and very exciting activities overall in Southern Barents Sea. But as I said, this is fourth quarter, but in the coming quarter, you will also see activities all through the Norwegian Continental Shelf. So without further ado, I'll pass on to Teitur, who will guide us through the financial highlights and the financials overall. Thank you.

Okay. Thank you very much, Alex, and good morning, everybody. So kicking off with the first slide here, we normally run through the key highlights for the quarter and the 9 months, and I think we can summarize the quarter as yet another solid performance from a financial perspective. The operational team in Norway is doing a good job in keeping costs under control and also the project teams are doing a great job in controlling capital expenditure. As we have preannounced, you can see in the top left box here, we were significantly underlifted during third quarter. And of course, our financials are reflecting the sold volumes as opposed to the produced volumes. So 146,000 barrels oil equivalent of sold volumes during the quarter, which is 11,000 barrels less than what we actually produced. Obviously, Q3 has been less volatile in terms of oil price fluctuations compared to Q2. So we have had a good price realization during third quarter, just below $43 a barrel for the oil and gas NGLs $21 per BOE. As I said, costs very much in line with expectation, $2.80 in the third quarter, and capital expenditure and E&A of $160 million and renewable investments of $5 million. Alex touched upon it, but very strong free cash flow and CFFO performance for the 9 months, $1.25 billion of CFFO and close to $550 million of free cash flow generated for the first 9 months. We continue to distribute dividends on a quarterly basis. And during the first 9 months, we have distributed $247 million. The net debt at the end of the quarter ended at -- sorry, $3.7 billion which leaves us with a leverage ratio of 1.7x. So then looking a bit more into the details and the comparatives to the same periods last year. Obviously, underlying everything here is the fact that sales prices are significantly down, both compared to the 9 months and to the quarter last year. So for the 9 months, you can see they're down 41% and for the quarter, 29%. But that's been more than offset by increased sales volumes driven by Johan Sverdrup coming on stream from October last year. So the comparative periods last year, there was no contribution from Johan Sverdrup. So therefore, you see sold volumes up, almost doubled for the 9 months and up 72% during the quarter. So that's resulted in an EBITDA generation of $1.43 billion for the 9 months, which is up 17% on the same period last year, and for the quarter, up 25% at $516 million. CFFO, we reported $1.25 billion for the 9 months. That was all helped by a release of working capital of $92 million for the 9 months. And the cash tax payments during the first 9 months was $91 million. For the quarter, $353 million that was negatively impacted by working capital build of $70 million, we've obviously seen an increasing oil price in the third quarter compared to the second quarter, and that has resulted in a higher receivable at the end of the quarter of $290 million, and that's, therefore, resulted in a build of working capital of around about $70 million. Nevertheless, CFFO up 53% on the same quarter last year. Then moving on to the next slide and looking at free cash flow, where we are stripping out the impact of completing the sale of 2.6% Johan Sverdrup, which completed in the third quarter last year. So like-for-like, excluding JS sale, we are up more than 240% for the 9 months, $546 million, and for the quarter, $164 million of free cash flow. And if you would add back the working capital build, we would have been at $230 million in free cash flow generated. Adjusted net results where we take out various mostly noncash impacts such as FX and where finance -- noncash finance items, we're reporting, for the 9 months, $193 million of net profit, which is up 11%, and for the quarter, $76 million, which is also significantly up on the [Audio Gap] I touched about oil price realization. Just to remind people, our cargoes are being priced off the data Brent. And you can see here that in this third quarter, on the column to the far right, dated Brent averaged $4.94 for the quarter. And as it happens, that's exactly what our realized oil price was for the quarter. When we then blend in the gas and NGLs, we have averaged over $40 a barrel. So very good performance by the marketing guys. Unlike in Q2, where most of our cargoes were sold to Asia, during the third quarter, the majority, around about 80% of the cargoes have actually been sold in the European market and just below 20% has gone to Asia during the third quarter. And what we've also seen in this quarter is a normalization back between the relationship between data Brents and the future Brents. where at one point in Q2, we saw adjustor there of close to $10 a barrel, which was unprecedented. So also that has normalized again as to the third quarter. On costs, very stable picture here in terms of absolute costs. This is reflecting the cost from the production, the 157,000 barrels of oil equivalent per day. So we posted $46 million of absolute costs, which is up round about 12% compared to Q2. But that has also been driven by a stronger NOK in the third quarter compared to the second quarter by around about 10% strengthening in that. So that has also impacted, but you see that the unit costs are continuing to be industry-leading and extremely low, $2.80 for the quarter. And that remains also the full year guidance, $2.80 for this year. Then on tax, you can see here that we reported a tax charge to the income statement of close to $600 million, made up of current tax of $250 million and the deferred tax of $34 million. And that resulted in a relatively high tax rate of 88%, but that was also driven by, for the first 9 months, an FX loss of $595 million, which is mostly nontax deductible since it arises in the Netherlands. And that's what has driven out the high reported tax rate. But if you adjust for that noncash FX loss, you can see that the adjusted effective tax rate would be 76%, which is much more in line with what we would expect from an operational perspective given the tax jurisdiction in Norway with 78%, with [Audio Gap] in the Norway. And on cash tax installments, so this reconciles back to our cash flow statement. So you will see, in the third quarter, that we made tax installments of $38 million. And you can also see here that during the fourth quarter this year, we are due to settle around about $350 million of tax installments, of which $274 million relates to the 2019 tax return. So that's the final settlement to balance out the 2019 tax return. And then we are scheduled to make 2 further tax installments for the 2020 tax return amounting to $76 million in Q4. And while we're currently now estimating in terms of first half 2021 tax installments to fully settle the 2020 tax return, we are estimating around about $470 million in total, $118 million in Q1 next year and an additional $236 million in Q2 2020 to fully settle the 2020 tax rate based on an assumed effective realized oil price of $40 a barrel during Q4. So if we realize anything different to that, then obviously, this first half 2021 installments will change somewhat. And just a quick summary on the cash flow generation during the first 9 months and the buildup of debt. As we said, the CFFO $1.25 billion. We've invested in oil and gas $625 million and another $81 million in renewable investments. So totaling $706 million, which is, therefore, giving us a pre-dividend free cash flow of $546 million. I mentioned upfronted dividend payments of $246 million, which, therefore, leaves us with debt reduction of close to $260 million for the first 9 months, and also a cash build of roughly $40 million for a net debt reduction of $300 million for the first 9 months. In terms of liquidity for the company, so we ended Q3 at a net debt of $37 billion. And today, we continue to have in excess of $5 billion of committed credit lines, so well in excess of $1 billion of headroom liquidity at the moment. But obviously, as we have communicated previously, the RBL is now in this amortization phase. And by the end of this year, it has amortized down to $4 billion. And with the corporate facility we have and the renewable facility on top of that, we will still have committed lines of $4.5 billion. And in fact, we will have ample liquidity right out to mid-2021, at which point, the RBL will amortize by another $750 million. So that, obviously, leads into our refinancing discussions, which we have communicated in the past. That's a process, which is currently ongoing. Obviously, the key aim for us here is to improve the terms significantly relative to what we currently are paying on the RBL. And the target continues to be to have refinanced certainly before mid-2021. But obviously, the sooner we can close the refinancing the better commercially, given that we are going to get improved terms. And as I said, that's an ongoing process, and we are estimating to have somewhere between 15 to 20 lenders on board in the new facility. So obviously, it's a process to get all of those lenders onto the same page and agree terms. But things are going in the right direction, and we are hoping to get refinancing done sooner rather than later. And this slide, I think, articulates very well the resilience of the company. If you look over the last 9 months, extremely low cost base for the portfolio and good quality oil. So we realized, including the NGLs and gas, just over $36 a barrel for the 9 months. And that has generated an EBITDA margin of over 90%. With OpEx, as we said, [indiscernible] also very low G&A costs of $0.50 per BOE. We continue to have relatively low financing costs, although we hope those will be even lower once we have refinanced and also relatively modest tax installments. So as CFFO margin of 80% or $29 a barrel of a $36 [indiscernible]. CapEx per barrel that we have invested equates to $16.3 BOE, which, therefore, gives us our free cash flow metric per barrel of $13 a barrel, which, therefore, equates to roughly $550 million, and that more than 2x covers the dividend we have paid over the same period. And as we have also previously guided, the free cash breakeven for the portfolio, when we look forward from having started up the Phase 2 of Johan Sverdrup, it's less than $10 a barrel. So there are 2 key things coming out of that, of course. One is that we will remain very resilient even if oil prices remain low and volatile going forward. And the second point is, obviously, if the macro environment improves, then this portfolio has significant capacity to generate free cash flow, which will translate into shareholder distribution and continue to maintain a conservative gearing level on the balance sheet, in addition to continuing to invest in the organic growth, which is the cornerstone of the company strategy. And just looking a bit further back in time, I mean, Alex mentioned that we have had 13 quarters running on free cash flow generation, which is what you see here in the top left. cumulative, including the sale of JS, we've generated close to $3 billion since the third quarter of 2017 in free cash flow. And that has been resulting in deleveraging the balance sheet. As you can see, we -- in Q3 '17, we were up at 3x net debt-to-EBITDA, and we are now reporting 1.7x net debt-to-EBITDA. And that's despite having done a share redemption scheme of $1.5 billion during that period. And if you actually look at the chart in the middle bottom middle, since we initiated the cash dividend in Q2 2018, we've generated CFFO of close to $4 billion. And how we have allocated that cash generation, you can see here has been a balanced split between reinvesting in the business. Roughly 40% of the CFFO has gone into reinvestment to continue to grow the business. And then a significant amount has been distributed back to shareholders close to 60%. A big chunk of that is obviously the share redemption of $1.5 billion, but we've also distributed $755 million of cash dividend since we launched our dividend policy. And there's also been a reduction in absolute debt over this period. So this is an extremely solid platform and with the low breakeven cash flows we have going forward, we will have a very good platform to continue to generate good free cash flow to distribute between a balanced debt and distribution to shareholders. Then just recapping very quickly on the updated guidance we've given. Increase in production to 161,000 to 163,000 BOE per day for the full year, up from 167,000, which was the previous guidance. OpEx remains unchanged. The CapEx guidance has been reduced to $650 million. That mostly relates to phasing some of the CapEx into next year. E&A expenditure is up a little for the full year now, just reflecting a rescheduled work program on our drilling campaigns of the $160 million. And decommissioning is also slightly up to $50 million for the full year. And similarly, on the renewable investment, which is mainly driven by FX movements from $90 million up to the $95 million for the full year. And my final slide is just a quick recap on the dividends. As you know, we have declared $1 dividend per share for 2019 to be distributed out in quarterly installments during 2020. And we have now distributed 3 out of those 4 quarterly installments totaling $213 million. And the last quarterly payment will be made around about 8th of January 2021, with the share con ex dividend on the 30th of December 2020. So that concludes the run-through on the financials, and then I'll hand back to Alex for some concluding remarks.

Yes. And thank you, Teitur. This is really the last slide. I'll try to go quite quickly so we can move on to the Q&A session. But really, if I had to summarize -- first of all, Lundin Energy is showing again and again, its resilience in terms of this low-price environment. We've also seen an increased production guidance, and we will see, during the fourth quarter, record production for the company at 175,000. Continue to be industry-leading when it comes to low operating cost and also carbon emissions. And this is not just for this year and particularly also when the onset of Phase 2 comes on stream, we will continue to see this low operating cost for many years to come. On the corona, I think, we said it all. I think the industry in Norway in particularly, and us as operator, I think we put all the action to mitigate any risk for disruption in production and also in terms of delays on project. You've probably have seen also that in terms of growth, we continue to deliver. I'm thinking about the reserves increase in Edvard Grieg, opportunistic deals such as the Idemitsu deal on the Barents Sea and also our continued exploration program all through the Norwegian Continental Shelf with the high focus this quarter on the Southern Barents Sea. High-quality resilient business, really reflected by strong free cash flow generation in a period of lower price. And to -- as Teitur show you, to put things in context, despite the fact that we average just $36 For the first 9 months, we were able to generate a substantial free cash flow over $500 million. So really, one can say Lundin Energy is really uniquely placed to continue to deliver significant growth in value and sustainable and material growing dividend to shareholders in the years to come. And I think those are very much proven by the numbers you've just seen. And finally, I guess, on a personal -- more personal note, as I said, this is my last quarter. So I guess, in a way, a mixed feeling. In one way, I'm very pleased to see these fantastic numbers and hand over the the leadership to Nick. And of course, I'm sad to -- for being the last quarter because I had over the years a phenomenal time with this company and the team. Really, truly an amazing journey for the company, but also for myself. And as I said going forward, I'm actually very pleased with the team we have in place and the new leadership, and I -- having worked with Nick for the last 5 years, I know he's going to do a tremendous job, and he shares the same passion and -- that I've had in the last few years. So a little lot to him, but I think we're going to see a lot of good things in the company in the years to come. And as I said, I'm absolutely convinced the company will continue to deliver a significant growth value and in -- particularly during this energy transition. So really thank you all for your great support over all these years. And as I said, it's been extremely rewarding for me to be -- to offer such a great company and also a great team of people. And finally, You can be assured that I will remain faithful to our shareholders over the years, and I will be watching this new leadership, delivering values as we've been used to do. So with no further ado, I guess, we'll move to the Q&A session.

[Operator Instructions] We have the first question from the line of Mark Alsford.

It's actually Michael Alsford. Anyways, let's carry on. So firstly, I just want to wish you very well for the future. I've got a couple of questions, please. Just firstly, on production. You're producing 125,000 barrels a day currently. And given your comments on the increased plateau production potentially at Edvard Grieg, you got Phase 2 of Sverdrup. I was a little surprised why the long-term production guidance remains at 170,000 to 180,000 barrels a day. So could you please elaborate on that? Secondly, You talked a little bit about the well capacity at Johan Sverdrup exceeding the production capacity. Could you give us some guidance as to what that potential capacity is with the second -- or so with the 12th well coming on stream? And then finally, just a quick one on -- for refinancing. It feels to me that the share price is suffering from the uncertainty regarding the refinancing. So could you maybe give a little bit more color as to what the financing structure you're targeting? Is it another RBL? Is it a corporate facility or a bond, for example? And really, what are the improved terms you're looking for? I'm just wondering whether you sacrifice some of that upsides to get the process done more quickly and remove that uncertainty.

Yes. I'll start with the first 2 questions then hand over to Teitur, the third one. I mean your first question in terms of guidance, yes, you're correct. For now, we maintain the long-term guidance to 170,000 to 180,000. The reason really is that there are still quite a lot of variable in the equation. One of them is obviously -- and that goes into the second question, is the capacity, the full capacity of Johan Sverdrup. We're going to start very soon to embark on the testing of this additional capacity. We haven't had the results. So we felt it was premature to come up with a long-term guidance until we know more about what the capacity of Phase 1 -- full capacity of Johan Sverdrup is. And so this will definitely be incorporated during the capital markets in January, which also include, by the way, the Edvard Grieg. As you've seen in the slides, that was the first time this year, we show you the -- what impact could -- once Eva Olson goes into decline, we'll have an Edvard Grieg and additional production there, too. So we will be clear. We'll come to you in January, the Capital Market Day once we have all this -- and particularly the onset of capacity tested. And then it leads me to the second one, which is the well capacity. We are well in excess. I mean we have 11 wells, soon 12 wells. So when you multiply this by, let's say, 45,000 or more, you can see that we have a lot -- quite a lot more capacity than the current 470,000. So -- hence, now we have this capacity in wells and the plan is to test this. And there's still -- it's fair to say there's a high expectation for the capacity to further increase for the current level of 470,000. But I think let's -- we're only a few weeks away from this. So let's wait the results. And again, this result will be communicated in January.

Michael, just on your refinancing question, I mean, the structure we are looking at is to refinance into a new bank facility, but it won't be an RBL type of structure. It will be more of a corporate style structure, which will then allow us at some point in time to issue bonds on an unsecured basis and at par pursue with the bank facility. It is, as I said, an ongoing process, and I agree with you, timing is key here because we do expect to get materially better terms. So the sooner we can land is the better. But at the same time, this is likely to be a 5-year facility. So it's important we get the terms right since we are going to live with that for the next 5 years. So you won't -- don't want to compromise a good commercial outcome for the sake of amount forward or backwards. So that is the process as we have it. Obviously, we wanted to have done this earlier in the year, but then COVID came in the way. And as I said, we now recommence that process and things are going satisfactory with landing back the new facility within too long, hopefully.

Yes. If I may add, investors shouldn't be concerned. It's not -- if this refinancing will happen. And as Teitur really rightly pointed out, it's more a matter of getting the best possible results to reduce our cost. And secondly, we have -- time is working on our favor under the current RBL. We have until mid-next year, but of course, we want to do it as soon as possible, particularly reaching better terms, which will actually reduce our cost. So really, there shouldn't be any concern on this matter.

The next question came from line of Alwyn Thomas.

Alvin Thomas here from Exane. Alex, congratulations on a good tenure. I think we can all say -- you've not done too badly. All right. No pressure on Nick. I wanted to ask a bit about the Barents and Wisting. Now you've acquired the asset. Can you just maybe give us your thoughts on the commerciality of Wisting? And how it's going forward? I know there's been - Equinor's had some difficulties with some of the drilling beforehand, and there's always been a few question marks around it. And when you acquired it, what did you see that made you want it to go for it? And I guess, maybe give us a sense of how important the Barents is going to be for Lundin now to develop that commerciality for the company's future over the next sort of 5 years? And I guess second question would be on the dividend. I know probably not overly committal at this point in time, given some of the uncertainty. But is it perhaps fair to say that the previous level of $1.8 per share is roughly where you think the company would like to get back to on a sort of medium-term view.

All right. Well, I guess I can start by saying thank you. And then to your comment and then let me move to Wisting first. Yes, you mentioned drilling. And I think it is true. In the past, there's been some challenging issue on the drilling. But I would say all those are behind us. And both in terms of drilling technology and also the appraisal that is completed in Wisting, so there are no outstanding issue there. Really, we think it's all about now completing the work and having the concept selection, which will be leading towards the submission of the plan of development by end of 2022. So there's no question in my mind of the commerciality to Wisting is. No -- it's just about now completing the studies to submit the plan of development by end of 2022. Remember also that there's a fundamental change also is the tax relief we received from the tax authority, which has further improved the returns of the project, provided you submit the plan of development by end of 2022. So that's in terms of Wisting. So we are -- it's our first world-class project, 500 million barrels of oil, shallow reservoirs. And so we're very pleased to be there, and I think we made acquisition at a very competitive rate of less than $2 a barrel. In terms of the Barents' future, yes, it's no question that the Barents, Southern Barents has been a focus area for Lundin. I mean we have 7 core areas. So there's many other areas, but Barents has always been there. And I studied again and again. It's a very prolific area. You just look at Castberg $0.5 billion; Wisting, $0.5 billion. We also have the Alta development, which is also becoming very much in the front of our mind because of the tax incentive, which is also a few hundred million barrels of oil. You have Goliat. So the Barents, it's happening. People are always questioning the Barents, but it's actually happening as we speak. Castberg being developed and Wisting soon to have a plan of development. So -- and Today, we have a high impact drilling with 3 wells and all of them have got -- they are great, great locations. And I'm really keen to see the results. And I think over the years, we're going to see more and more on the Southern Barents Sea. So it's by far -- the story is just unfolding as far as I'm concerned on the Southern Barents Sea, but it's not the only area, core area for us. Your third question in terms of the dividend, I think, it's difficult for me to give any numbers at this point. And as you know, there will be -- the new dividend will be decided in January before the Q4. I would say a few things. Number one is that those have been -- there's always been no intention to have a sustainable and growing dividend. Of course, this year has been a particular year, and we've been cautious. It's true because we didn't know really in the world we're heading to. And I think now we have a better idea and it's more stable, even though we have a second wave, but I think we -- there's a better understanding on this now. But you've seen -- one thing I can say is that you've seen the numbers that Teitur produced. You've seen our free cash flow ability even at low oil prices. And you've seen that we -- our dividend payment this year, we had more than 2.2x free cash flow. So -- compared to the dividend we paid. So that's clearly ample scope to increase dividend, but I will leave it to that for now. And this is something we will decide and disclose in end of January.

The next question came from the line of Teodor Nilsen.

My question first. So well done, Alex, I wish you all the good luck with new challenges. I have one question on production, and one on dividends. First, just quick on production. Good to see that you actually have increased the permits. So is it fair to assume that the exit rate for Q4 also will be 180 to 5,000 barrels per day, such that We entered 2020 on a much higher pace than we previously assumed. And then on dividend, of course, I understand you can guide with size from dividend. I just want to get your thoughts around dividend increase wherein -- versus the tax changes in Norway. Do you think it will be controversial to increase dividend now just a few quarters after this tax change, which definitely has been very positive for the oil companies? And also in terms of gearing ratio going forward tied to [indiscernible]. You saw the -- a graph showing declining gearing going forward. Do you think we should expect the financial gearing at the current level of 1.7x net debt-to-EBITDA? Or how should we think around gearing going forward?

Yes. Thank you, Teodor. In terms of your question on production, I think the current increase in permits is pretty much allowing us to produce at maximum capacity, both in Edvard Grieg and Johan Sverdrup. Obviously, in Johan Sverdrup then we will have -- we will see what happened in November with the capacity, but that will be more for 2021, then it will impact 2021. So I think the exit rate of -- end of this year of 175,000, it's a reflection to what will come than the following year. But keep in mind that we have the -- we still have also to include the capacity -- and the test and the capacity on Johan Sverdrup. So more of all that during the Capital Market Day. And in terms of your question on the dividend is relevant, but I think the tax incentives, which were very welcome, it's, above all, to increase activities in the Norwegian Continental Shelf. And I think, if anything, Lundin Energy, over the years -- and this is not the first crisis that we've been hit by another crisis back in 2015, if you remember. We've always shown that our activity level and our commitment to investment has always been very high. So as long as we can continue to have a level of investment and look for accretive value projects. And as long as we maintain and we can actually reduce our debt, then I have no problem increasing dividend. So as I said, we will see in January, whether we are all being equal with the free cash flow we're generating. We will continue to invest in Norway, and, at the same time, we think we can also continue to redistribute cash to shareholders. So I think the two go in hand in hand and is finding the right balance. I think to your last one, I'll leave it to Teitur.

Yes. Yes. I mean as you know, we are now publicly credit rated and we have investment-grade credit rating profile at the moment. And we intend to maintain that sort of credit rating. So we will, obviously, balance any capital investment desires we have with a growing dividend and also maintaining a conservative gearing ratio. We don't have a specific gearing ratio target as such, but we want to be -- want that gearing level to be appropriate for investment rate credit rating.

The next question came from the line of James Hosie.

Good luck, Alex. A couple of questions from me. Just first, can you clarify how the curtailment quotes actually worked. Is it for increasing on Sverdrup and greet because other fields have in or aren't producing their quotas? And what's the basis for raising quarters in those 2 fields than others? And the second question would be, on your updated long-term production outlook for Edvard Grieg, Are you just simply projecting the IRS starts to decline in 2022 or the shutdown during '25 to give you that extra capacity for you then to fill?

James, in terms of your first question, well, if you take a step back, the government of Norway decided to curtail production for the third and the fourth quarter. How this has been exactly located? I don't have the numbers of single fields. All we know at that time that both Edvard Grieg and -- or 2 man in Johan Sverdrup were affected. Now that commitment from the government stands until year-end. But of course, the reason we've been giving higher permit now to produce some pretty much at capacity on the current capacity it's obviously probably because these other fields and other development haven't developed to expectations. Beyond that, I really cannot say much more because I don't see any single numbers, and I don't know how that has been affected or not. So I can only look at our fields. In terms of Edvard Grieg, the -- I mean we always shown Edvard Grieg with the current commercial arrangement. And so that was pretty much on a gross basis, Edvard Grieg producing 95,000. But as you know, the overall capacity of the processing facilities, it's above that. And the reason we've always been standing at 95,000 is obviously for -- to honor the commercial arrangement with Eva Olson. Now the increase that we're showing now for the first time is really related to the starter decline Eva Olson, which we assume not next year, but from 2022. And really, this is the main assumption in terms of giving us more capacity to Edvard Grieg.

Okay. Just one follow-up on the curtailment point. I mean are the curtailments you're facing on star group still. Is that actually limiting the scale or duration of the testing for capacity you can do in Johan Sverdrup?

We have flexibility. As you know, we have to achieve a certain number, but it's not a daily number, but it's an average. So if we -- in terms of the testing, we have absolutely no limitation because no matter where we go, then we can reduce production if we want to meet the quarter. So there's no limitation in terms of testing the capacity. And so that will not -- I am foreseeing to be really able to test the capacity in the coming weeks.

[Operator Instructions] The next question came from the line of Al Stanton.

So Alex, I wish you happy sailing. For everything else, I mean, many of my questions have actually been answered by Michael at the start. But can I just check a couple of things in terms of I mean a lot of the numbers in terms of cash flow you've been talking about look like they could get spoiled in the fourth quarter by that tax bill. So I'm just wondering if that is very much a one-off. Last year was so exceptional that calculating the 2020 cash payments was always going to be quite difficult. And then can I also just talk about buybacks? I mean is that on the agenda at all at a certain share price?

Yes. I mean that tax installment in Q4, which relates to 2019, that is a one-off. And as I said, once that's been paid and the '19 tax bill has been fully settled. And the way the tax authorities in Norway are managing this going forward now is that, as you can see in our first half 2021 tax installments. In prior years, those would normally be the same size as the ones we have paid in the second half 2020. But now they've changed that so that the catch-up payment. If you are under installed in the first 2 or installments in 2020, then you need immediately to adjust your tax installments in the first half 2021, and that's what we are projecting now that we have to increase the tax installments that we have in Q1 and Q2 next year. So by the end of first half next year, we will -- should have fully settled the 2020 tax bill.

Okay. Yes. And on buyback, I guess I will simply say buyback is an option. Obviously, in this current environment, it becomes more and more attractive. And so it's something we're actively looking. At the end, it will be a balancing act because we want to continue to be able to pay and sustain dividend in the long term and increase dividend. But of course, we are mindful and its buyback. It's also of an option for the company that we're actively looking.

The next question came from the line Sasikanth.

It's Sasikanth Chilukuru from Morgan Stanley. I wish you all the very best for your future endeavors, Alex. I had 2 questions, please. The first one, I appreciate you're not necessarily giving specific targets, but I was just wondering on -- in terms of the priority of cash flow, you've kind of highlighted what you have done previously. I was just wondering if that is pretty much the priority going into the future as well with dividend being, or shareholder distribution being, the top priority for additional cash flow and followed by CapEx and followed by net debt. Now any guidance on what your priority would be, would be quite useful. The second one is is regarding your -- the Polmak exploration well. There have been some press reports suggesting some drilling issues. I was just -- and drilling being stopped as well. I was just wondering whether drilling is actually going on. Whether there's any delay in the drilling of that well. And whether -- if any delay that has any subsequent knock-on effect on your other Barents Sea wells?

Yes. I'll start with the last question. That was very simple. You're right. There's been -- we had some issue in the beginning. This is -- those are beyond us. And as we speak, we're drilling. So really, there's been very little delays. And in terms of, will that have an impact for the other wells? No. I think -- so now it's, I would say, it's business as usual. But obviously, it's something we've taken very seriously, and we're learning from it. On your first question, which is priority of cash flow. I think as you said, it's a balancing between debt, CapEx and dividend. I think you've seen, as Teitur showed you from the past, our share of cash flow distribution has always been significant. I'm not here particularly to give a specific guidance of that CapEx dividend and what has happened perhaps in the last few months is not necessarily a firm guidance or what will happen in the future. I think I'm sure our colleagues at the Capital Market Day will -- once we have defined a new dividend, we'll give more color on this, but it's always going to be I would say, a balance between these 3 and -- but cash redistribution, it's on the forefront of mining. It's an important part of the strategy of the company.

The next question came from the line of James Thompson.

Alex everyone else the sentiment. I wish you all the best for the future. I have a few questions, if I may. I just wanted to start with Edvard Grieg. And just perhaps you could talk about how much you're going to expect to choke back the Main Edvard Grieg field with Rolvsnes and Solveig coming on next year. And look at the chart, you're still expecting Eva Olson to be on plateau for all of 2021. And the second question really on Edvard Grieg is, obviously, earlier in the year, you received your carbon -- low carbon certification on the field. I wondered, is that actually making any difference at all now in terms of kind of refiner appetite for that crude. And could we potentially see a premium coming through given clearly there's such a market focus on low emissions at this point in time?

Yes. Okay. On the Edvard Grieg, your first question in terms of match Edvard Grieg, Solveig and Rolvsnes. I think it's difficult to answer this question. I think the important thing is that we have now -- there is certain capacity constraint. But as you see, over the years, this capacity, we will be able to fill in more than we've been in the past. So I think what we -- you have to look at Edvard Grieg, Rolvsnes and Solveig as one area. And at times, we will may chalk back some wells in Edvard Grieg or in Solveig until we have full capacity. And so it's difficult at this stage to really specifically give a number. Because I see really this as a unit and -- but it will give us a lot of flexibility and a lot of additional capacity. I think that's the best way to look at it. In terms of the low carbon at Edvard Grieg, you're right to point it out, we were the first company actually to have this low carbon certification has had -- has this had any impact, I would say it's too early to say. I truly believe in the future is the way to go, and I truly believe that, eventually, this will add value to shareholders at the end because it may imply a premium to our product. And also, I guess, what we do see, but that's more generic in terms of a lower carbon strategy, is that we do see impact today in terms of, for instance, on the financing because we can link our performance on the ESG in particular side, linked to the terms we're going to negotiate with the banks. And if we are below certain target that will lead to better terms. So there are -- we're starting to see benefits of being first-in-class when it comes to carbon footprint. And carbon certification is one part of the puzzle.

Sticking with the emissions, I mean, Sverdrup was only 0.2 kilos in third quarter. That was phenomenally low. What was driving that? And when will Sverdrup be certified?

Yes. As you said, it is phenomenal. I mean, 0.2, you could say that is almost 0. It's hardly no emissions. I think we're learning -- this is the first big field that was fully electrified, and we're learning from the performance on Johan Sverdrup. It's going to be really interesting to see also Edvard Grieg. And of course, for us, the lowest emissions, the better because that means to reach carbon neutrality will require very little in terms of offsets. So that's really good news. In terms of the certification of Johan Sverdrup, it's a good question. It's something that has been discussed. I'm not the operator of Johan Sverdrup. We obviously -- everybody is well aware of what we're doing. And we hope soon we will be joined by many other fields because -- and hopefully, Johan Sverdrup will be one. So I have no information specifically on this, but I know it's been discussed at the license.

Okay. And last one for me, a separate topic. Clearly, the refinancing is, I think, sort of top of mind for the market. And obviously, you've given us a bit of a runway there. But is there any scope to get this wrapped up before the year-end, Alex, before you hand over the reins?

Yes. I mean -- this is Teitur here, James. But that will certainly be the target. But above anything else, we need to get the right terms. So that is what the focus remains from our side. And obviously, it's a negotiation with the counterparties, of which there may be 15 to 20, but doable this year for sure, yes.

I guess, yes, end of the year, maybe. I mean our motivation is to do it as soon as possible so that we can have improved terms, which will have a direct impact on our cash flow. So -- and that's really our main motivation. As I said before, I -- I'm not concerned at all in terms of our ability to refinance.

The next question came from the line of Yoann Charenton.

This is Yoann Charenton from Societe Generale. Alex, as you sail away, I would like to thank you for your engagement with the sell side. And I will use your last earning calls as an opportunity to ask about the following, if you don't mind. If we think about the Barents Sea, we have seen some Norwegian explorers retreating from the area and it also appears that there is less -- there are less companies, basically, willing to put money to work out there. So following the Wisting deal that you announced a few weeks ago, have you seen an increase in interest coming from fellow oil and gas companies to farm down Barents Sea acreage to you? And second question, coming back to this tax changes time frame. Since you are participating to this ongoing rate to FID with all the Norwegian oil companies by year-end 2022, have you entered any new contractual relationships with all wind services companies of late with a view to minimize future cost average and risk of delays?

Yes. Thank you for your kind words. And moving to the Barents Sea. I mean, yes, the activity level, in general, difficult to say. I mean you can measure -- of course, there's the M&A side, and we've seen the Idemitsu deal. Will there be any more activities? Probably, I don't know. What I can measure is also in terms of licenses and appetite. And I think, in general, there's still quite a high activity level. But it is true that in the Barents, we've seen really a few players that have been active over the years. And I think you can -- I'm thinking about Equinor, I am thinking, obviously, of Lundin Energy, a BP and to some extent, also our -- and ENI. I think -- and that's a fact in itself because the fact that we only few companies into such a large area means that we don't really see the truth of the Barents Sea. But we, certainly -- from a Lundin Energy point of view, we always felt that the Barents Sea was an area to be -- an area where you can find large resources. In an area really that is no more expensive than any other areas. There's a bit of logistics challenge. But overall, drilling a well in the Barents and developing a project in the Barents, it shouldn't be really more expensive than in Norwegian Sea, for instance. So our focus more than the Barents Sea is to continue to invest in very value-accretive projects with low cost, and that will remain our main focus. So we'll see. I'm sure with -- if there are going to be more discoveries, I'm sure you're going to see a lot of people backing into Southern Barents Sea with a lot of interest. So let's say in terms of the Barents Sea. I've lost track now, your second question was.

[indiscernible]

Alliance actions. I think we're happy where we are now. We haven't specifically done new alliances or sales personally with -- through our Solveig and on the subsea tieback, we already had the contract in place. Maybe in the future, we're going to look at other ways to conduct the business. But overall, our main focus will always be in cost. So if that -- if you're an alliance will have an advantage, so be it, but it will be -- our main focus will be mainly to find the best possible way to reduce our cost and -- for any development. And then maybe through alliance or maybe not, it's difficult to say at this stage.

The next question came from the line of Anders Holte.

Of course, Alex, congrats on a very successful tenure. Just good to see that despite Alex's retirement and your retirement, it's been almost no notable change in terms of strategy. That's good to see. My questions are two this morning. So first of all, is to Edvard Grieg. I just want to clear something up. And you might have touched upon it in the call, so apologies if I missed it. But looking at your chart on Page #10 here, Edvard Grieg. It looks for MI in interpreting that the Edvard Grieg's main reservoir is now expected to hold its plateau up until 2023? And then, hence, the bump is coming from Solveig and the Rolvsnes? The second question is related to actually the crude oil price development as we see so far in this quarter. It seems that the super container development that we saw in Q2, it seems to be reemerging. The difference is now $5 per barrel on next month's contract. And I'm just wondering if you're starting to see -- obviously, not a huge product you saw in Q2, but are you starting to see some similar patterns in the price development on the crude oil barrels that you sell right now.

Yes. Thank you. And thanks for your comment. I guess on the more strategic side, I would say, actually planted the seeds. I made sure that they grow fast and high and Nick will make sure they grow even faster and bigger. So in that point, I think we're looking good. And the -- on your question of plateau, yes, the current guidance is now that plateau in Edvard Grieg has been extended to end of 2023. That's correct. And then for the extension of plateau is possible, but depends on the 3P and 2C. So we need to account for more 3P and 2P contingent resources. And if we do, then there's scope to increase the plateau production up to end of 2024. And then, of course, you all have exploration for the upside, but that's not quantified at this stage. And as I said, also with the -- with more capacity being available, obviously, the combination of Edvard Grieg, Solveig, Rolvsnes will give us a lot of flexibility beyond the -- for the 3P and 2C. So a lot of things happening in Edvard Grieg and the Greater Edvard Grieg areas will continue to outperform no question about it.

And then, Anders, on your question on crude oil pricing, I mean, yes, we are seeing some level of softness over the last few days, but it is nowhere near to the volatility that we saw during the second quarter. And we are continuing to sell all our cargoes at reasonable prices. Obviously, the data breadth differential is hovering around about $1.50 sort of discount to the ICE Brent. And that's not out of line if you look at that historically. But end in contango, I guess, is moving up a bit with this COVID wave scenario playing in. But we are far from the state of panic that was in the second quarter at this point.

The next question came from line of David Farrell.

Congratulations, Alex. A lot of questions been asked already, but I did have one, which I was hoping to ask. Given what's going on in the oil markets currently and potential for OPEC [indiscernible] continued curtailment through into 2021. Do you think there's any risk now that in Norway, they may reciprocate and continue to have the permits certainly through the first part of 2021?

Yes. Good questions. I -- the straight answer is, I don't think so. The situation we were facing back in March was quite different in a sense that you had the two storms. One was the -- obviously, the pandemia and the reduction in demand and the second one was the OPEC in the beginning that was doing exactly the opposite of what they were supposed to do by flooding the market with crude. So we had a really extraordinary situation at that time when everybody took note of that. And since then, we've seen OPEC -- a much better discipline from the OpEx side. And I think we have now a much better understanding of the world, even with the second wave. So I don't foresee at all post this year's further curtailment from the region. And I haven't had any signal on that front whatsoever.

The next question came from the line of David Round.

Thanks, guys. I'm going to be really brief. But there is a bit of a rush to sanction projects at the moment to take advantage of the tax benefits, obviously. If all these go ahead, do you think there's actually capacity in the Norwegian yards? And how are you thinking about potential cost inflation there?

Yes. I don't think so. I mean you're right. I mean this tax incentive has been -- I think has been very smart from the Norwegian government and had -- definitely has its impact. And we -- if you look at the impact on our sales, we are now able to move forward certain projects that we may have not done before. Will that really create capacity issues on Norwegian Continental Shelf in the yards? I don't think so because we don't really have the magnitude of fields such as Johan Sverdrup at this time. The largest field now it's Castberg and one in Wisting. But at this point, we don't see that concern in terms of capacity. I would say, it's more than like a ball of fresh air for the yards in general, and we're not at capacity. So even in terms of inflation, I don't see this as being a [indiscernible].

We don't have any other questions.

Thanks very much, Roberto. We've just got 2 from the web, which I'm conscious of time, but I think are worth asking. One of the questions is, can you talk about how you'll reach full replacement of your 500 gigawatt hour brand and power usage. You're invested in finish wind in Norwegian hydropower what types of additional investments you're looking at?

Yes. Today, pretty much we have -- we are 2/3 on the way. One project, the hydropower project is now up and running, and we'll be up in full production soon. And we're currently developing this project wind, onshore wind farm in Finland. And when the wind farm in field will be up and running, in addition to the other project, we will have replaced and offset 60% of -- or about 0% of the electricity we're consuming on the -- with Utsira High. So we're left with a 40% space to fully replace the 500 gigawatt hour that you mentioned. That 40% really, depending on the equity position, but if you take a position of 100% on a sizable wind farm, that would be sufficient to fulfill or a full replacement offset. So probably you're looking at one, maybe two projects if we take a lower equity position in some of the projects. So that's all it remains to be to be done.

Okay. And lastly, can you elaborate on your options at Alta and the feasibility of delivering a PDA by the end of 2022 for the Alta project?

Yes. The -- we're currently looking at the Alta -- in order to be able to submit a plan of development by 2022, Alta will have to be like less subsea tieback. So we're currently looking at the different options. Also comes a selection in terms of what would be the most feasible development for such a tieback. So it's early days, but we're working very actively because our aim -- we see really benefits of this tax incentive when we see good rate of return and a possibility to have this project through the holder of commerciality. So I think more details on this one next year once we have completed a lot of the ongoing war.

Very good. Thank you. Alex. Operator, I think that's the last question from line. So I'd just like to thank everyone for listening in. Of course, if you've got any more questions or need further detail, please don't hesitate to contact us or me. Thanks very much. Have a good day.

Yes. Thank you all.

Thank you.

Thank you very much.

That does conclude the conference for today. Thank you for participating. You may all disconnect.