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Equinor ASA (NYSE:EQNR)
Q4 2019 Earnings Call
Feb 6, 2020, 4:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Peter Hutton -- Senior Vice President, Investor Relations

Ladies and gentlemen, we're very pleased to welcome you to Equinor's Fourth Quarter 2019 and Capital Markets Update. We really appreciate you coming along to join us today. It's always good to engage with our analysts, investors and stakeholders. So, very, very welcome here this morning.

We will start with a short introductory video, and then go straight into presentations from Eldar Saetre, our Chief Executive Officer; Paul Eitrheim, who is EVP of the Renewables Business; and Lars Christian Bacher, who is the CFO.

We'll then open up for questions, both from the floor and also from those who are dialing in this morning, but safety first. Safety first. So what I would like to do is, just give a very short statement relating to safety. If the building needs to be evacuated, the fire alarm will sound. On hearing the alarm, security and support staff will be on hand to direct you to the nearest emergency exit and assembly point. This assembly point is comfortably close [Phonetic], which is next to Apex London Wall Hotel just across the street from this venue. I think I'm right in saying that there are no planned emergencies. But if there is one, there will be plenty of staff around to help you to move to the right place.

With that, thanks again, and we will start the video. Thank you.

[Video Presentation]

Eldar Saetre -- President and Chief Executive Officer

So thank you, Peter. And good morning to you all. So, we are living in times of change as the short film showed us, and the outbreak of the coronavirus is another strong reminder that as a society we are facing many, many challenges. But as always, it is a great pleasure to welcome you all to our regular Capital Markets Day here in London. And I must admit that even more than usual, we have looked forward to this year's edition. 2020 is set to be a very good year, and also the start of a strong decade for Equinor. Today, we will show you that we are well positioned to grow production, cash flow and returns above and beyond what I believe most companies in this industry can deliver.

In addition, the start of a new decade is an opportunity to take a really long-term perspective. So we will show you how we are underpinning a competitive and resilient business model fit for long-term value creation and in line with the Paris Agreement. Finally, we do this with a consistent and clear commitment to capital distribution. We have a strong balance sheet and expected growth in long-term underlying earnings allows us to increase the quarterly cash dividend and announce the second tranche of our share buyback program.

So, Lars Christian will soon go through our results in more detail. But as CEO, I am privileged to go through a few of the main deliveries in 2019. And the short version is this, we are doing what we said, delivering on our strategy, always safe, high value, low carbon. Always safe remains our top priority. Our number of personnel Injuries is noticeably down, but when it comes to the serious incident frequency, we were not able to continue the positive development from 2018. We will always strive to improve on safety always and are therefore reinforcing our efforts through consistent leadership and an even more systematic and rigorous approach across the whole company.

In 2019, we delivered high value with $13.5 billion in cash flow from our operations after tax, including accelerated tax payments in Norway of more than $700 million. This has been combined with an increase in total capital distribution of more than 40%, reflecting a 30% step up in the cash dividend, the conclusion of the scrip program last year as planned, as well as the introduction of our share buyback program.

New projects coming on stream last year represent 1.2 billion equity barrels to Equinor at an average breakeven oil price of around $30 per barrel. Our deliveries were also strong when it comes to low carbon. Average CO2 emissions from our production last year were 9.5 kilos per barrel, around half the global industry average, and our methane emissions was 0.03%, approximately one-tenth of the global industry average. These achievements are very important to us, because a core element of the Paris Agreement is that everyone needs to reduce their own emissions. And finally, last year, we made the investment decision for Hywind Tampen at the Norwegian continental shelf, and we won the opportunity to develop Empire Wind offshore New York, and Dogger Bank in the UK, the world's largest offshore wind project ever. Renewables projects in development in 2019 will add 2.8 gigawatts of electricity generation capacity to Equinor, underlining that 2019 was truly a game-changing year also for our renewables business.

Over the last few years, we have strengthened our competitiveness, radically improved our project portfolio. And driven by this -- driven by the strong opportunity set of high quality projects in front of us, we expect to invest on average $10 billion to $11 billion in 2020 and 2021, and around $12 billion in each of the two following years. So we are in a strong position to deliver profitable growth. Starting with an around 7% increase in oil and gas production in 2020. But even more importantly, we are also set to grow cash flow and returns significantly in the years to come.

At an assumed oil price of $65 per barrel, we expect to increase our return on average capital employed from 9% last year to around 15% in 2023, 15%. And we expect to deliver organic cash flow at record levels of around $30 billion in total, after tax and organic investments from 2020 to 2023, $30 billion.

Johan Sverdrup Phase 1 was sanctioned in 2015. And together with our partners and more than 500 suppliers and sub-suppliers, I believe we have raised the bar for execution excellence in this industry. We started production in October last year, ahead of schedule and 30% below the original cost estimate at the time of the FID. And we are now producing more than 350,000 barrels per day from 8 wells. On-track to reach plateau 440,000 barrels per day during summer.

The entire Phase 1 investments are expected to be paid back even before the end of this year, fewer than 15 months after the first well was put in production.

So, ladies and gentlemen, Johan Sverdrup has so far been visible in the capex numbers, but from now on you will see it even stronger impacted -- impacting our production, our revenues and our cash flows.

Johan Sverdrup Phase 1 is now a producing field, but we still have a highly competitive portfolio of new oil and gas projects coming on stream toward 2026. This portfolio can deliver 6 billion barrels to Equinor, at least; with the 60% liquid share and an average breakeven oil price below $35 per barrel. It also supports an annual expected annual average production growth of around 3% from 2019 to 2026.

Approximately 50% of this portfolio is located outside the Norwegian continental shelf. And as we are increasingly developing as an operator internationally, this gives us even better opportunities to leverage our industrial strength from the Norwegian continental shelf, like operational excellence, world-class recovery and project execution.

So, this deep industrial competence is now being incorporated into high quality projects like Bay du Nord in Canada, Rosebank in the U.K., and BM-C-33 and Bacalhau in Brazil, contributing to a profitable expected annual growth of more than 3% internationally. And when the last of these new projects, all of these new projects, on the Norwegian continental shelf and internationally comes on stream in 2026, the entire portfolio will already have been paid back. That is what I call it truly world-class project portfolio.

Equinor was built on the Norwegian continental shelf. This is our heritage and also a very important part of our future. In fact, the NCS never seems to stop surprising us positively. Here we are already delivering impressive recovery factor, second to none. And last year we even raised the ambition, aiming to add 3 billion barrels to our resources compared to previous plans.

During 2019, we have mapped 550 million of these new barrels of oil equivalents, which is equal to half of Johan Sverdrup field Equinor share. These are highly valuable barrels as well with an average breakeven oil price of around $25 per barrel.

We are also working to turn the gradual maturation of the Norwegian continental shelf into an opportunity for more significant further value creation. New ways of working and also a new dedicated operational unit are enabling us to reduce cost by around 25%, offering a breakeven oil price on field extensions compared to current plans of $25 per barrel. And this gives Johan even longer life to all giants like the Statfjord field.

When I started back in 1980 in Equinor, my first job was actually to do the accounting for the revenue stream from the Statfjord field. And ladies and gentlemen, we're still counting. Together with our partners on Statfjord, we now have plans to extend production toward 2014, to increase the value creation even further. And to me, this is really a good reason to love this industry. There is always more values to be created, which also includes exploration from well proven hydrocarbon systems.

Last year we added 120 million barrels at the Norwegian continental shelf from exploration, creating a net present value of around $500 million. So, we also have an exciting exploration program for 2020, both in Norway and internationally. And Lars Christian and Tim will talk more about this later today.

Let me then turn to the even longer-term perspectives. We know that the world needs to reach net zero emissions, and at the same time we must provide enough energy to meet the growing demand. The Paris Agreement and the UN Sustainable Development Goals set a clear direction.

And the single most important question facing any leader in our industry today is this one: How do you remain relevant and competitive, and how do we turn challenges into business opportunities and value creation in a low carbon future? How do we do that?

Equinor is well positioned for the energy transition. And today, we are taking additional steps by launching, what we call a new climate roadmap. We aim to strengthen our industry-leading position within carbon efficient operations, to grow profitably from a strong and competitive position within renewables, and to reduce the net carbon intensity from initial production to final consumption of the energy we produce by at least 50% by 2050.

So, we are doing this to drive change toward our low carbon future, in line with the Paris Agreement. And we are doing it with a clear commitment to value creation and to strengthen our competitiveness and resilience in the energy transition.

Today, we are setting a new ambition to reach carbon-neutral global operations by 2030. Our main priority will be to reduce greenhouse gas, emissions from our own operations in Norway and internationally, but we will also use quota trading systems and high-quality offset mechanisms.

In January, we launched an unprecedented set of ambitions for our operations in Norway to substantially reduce absolute greenhouse gas emissions, aiming toward near-zero in 2050. By 2030, we aim to cut 5 million tons annually, reducing our greenhouse gas emissions by 40%. And this can be done in a profitable way, increasing the value of our NCS portfolio.

Framework conditions, climate policies and also the availability of renewable electricity in Norway are supporting emissions reductions in a unique way. But we will work just as hard to cut emissions internationally. And we are now aiming to reduce the average CO2 emissions from our global operations to below 8 kilos per barrel by 2025, five years earlier than the previous ambition.

Based on the new opportunities that we won last year, we are now scaling up our renewables business faster than previously anticipated. Renewables are now likely to reach 50% -- 20% of our capex spend in two to three years. And we will move from now on also guide on production and returns in a more similar way as we do for oil and gas.

In 2026, we expect the production capacity from our renewables portfolio to be 46 gigawatts Equinor share, mainly based on our current project portfolio. This implies an annual growth rate of more than 30% from current levels.

Towards 2035, we expect to increase our capacity further to a range of 12 to 16-gigawatts, depending on the availability of attractive project opportunities. Scale is important to define competitiveness within renewables. And with a 10-fold increase already by 2026, we are quickly turning scale into a competitive advantage.

So, we will continue to utilize our deep oil and gas experience. And based on well proven project development capabilities, operational excellence, as well as a strong trading platform, we expect to achieve unleveraged real project returns of 6% to 10%. And then, through portfolio optimization, as well as efficient use of project financing, we can achieve significantly higher returns on our equity investments.

Renewables are not replacing or displacing competitive oil and gas projects. But it has opened a new set of opportunities to create value while also diversifying our portfolio and making it more resilient over time. And soon you will hear Paul talk more about this in his presentation. It is good, sound business strategy for us to ensure competitiveness and resilience in the low carbon future.

Therefore, we are today setting new ambitions for the longer-term. Towards 2050, we aim to reduce the net carbon intensity, including Scope 3 of the energy we produce by at least 50%. By this, we are not taking on the responsibility of others or undermining the emitter pays principle. In fact, we are doing this to strengthen our competitiveness and secure attractive business opportunities.

We have several levers and significant optionality to reduce the net carbon intensity, operational efficiency, the oil and gas split, combination, and scale, renewables growth as well as the CCUS and hydrogen are expected to be the main contributors. But we also have the opportunity to recognize offsets in natural sinks to reach the ambition.

And we have tested several scenarios using different levers and price margin assumptions and see that we are in a strong position to maintain competitive value creation and a strong cash generation capacity, consistently during this transition.

We know that in order to reach the goal, goals of the Paris Agreement, there will have to be significant changes in the energy markets. Which means that also our portfolio will have to change, accordingly, to remain competitive. So, we will produce less oil in a low carbon future. But value creation will still be high and oil and gas production with the low greenhouse gas emissions will be an even stronger competitive advantage for us.

In addition, profitable growth in renewables give significant new opportunities to create attractive returns. CCUS, CCS and hydrogen will also be important to reach the climate conditions globally. And these opportunities are playing directly at our core competence and strength.

Irene and Al, we will talk more about these topics in one of the breakout sessions; so, feel welcome.

We are now looking 30 years into the future. And it is not possible to predict the exact shape and pace of this transition, not for society and not for us. But we are setting a clear ambition to change in line with society and in line with the Paris, and the goals from Paris. And we will do this with a clear commitment to profitability and value creation for shareholders.

Our commitment to value creation is also a strong commitment to capital distribution. As stated in our dividend policy, it is our ambition to grow the annual cash dividend in line with the long-term, underlying earnings. And on this basis, the Board proposes a 4% increase in the quarterly cash dividend to $0.27 per share. This comes on top of last year's step up with an increase of 30%, and we are on-track to deliver on our $5 billion share buyback program.

Based on an even distribution for the rest of this program, we are announcing now a second tranche of around $675 million, including the Norwegian states share. The share buyback program is subject to annual reviews and the renewals at our AGMs and runs until the end of 2022.

So, let me conclude by summing up what I believe is the strong value proposition. First of all, we are growing production cash flow and returns from a material and world-class project portfolio. Secondly, we are taking actions to shape our portfolio in line with the Paris Agreement, while strengthening our competitiveness and creating significant value for our shareholders. And finally, we are committed to continue delivering competitive capital distribution.

So, with that, thank you very much for your attention and I'll leave the floor to Pal. There you go. Thank you.

Pal Eitrheim -- Executive Vice President of New Energy Solutions

Thank you, Eldar, and good morning. This is a very special day. It is actually the first time that we present the renewables business at the CMU. And of course, it is a great pleasure for me, but even more importantly, I think it is a strong signal about the strategic importance and the potential of this business for Equinor.

It's an opportunity for me to provide more detail on the renewables business and also talk about why we see this as an area of competitive advantage.

2019 was very much of a game changer for Equinor's renewable business. We won offtake contracts for Dogger Bank and Empire Wind. We sanctioned Hywind Tampen on the Norwegian continental shelf. We increased our shareholding in Scatec Solar, and we farmed down half of our share in Arkona for EUR500 million.

We have 50 years of oil and gas experience and a decade in offshore wind. For us, offshore wind is very much an extension, not the step out from our traditional business. We have a world-class technical expertise. We are financially robust and we are competitive on cost, and we now have the scale and the capabilities necessary to create value.

A few comments on our producing portfolio. Equinor strategy starts with always safe, and safety is our number one priority. In renewables, we had no serious incidents last year or so far this year. This, I think illustrates the underlying quality of our people, as well as our operations.

Our producing assets in the U.K., in Germany and in Brazil, provide stable revenues. In 2018, our share of net profits from our free U.K. assets was around GBP70 million. Last year, our availability factor was 96% and our production increased by an impressive 30%. Our contracts in this space typically start with a period of fixed prices followed by years of market exposure.

Since 2009, we have made gross investments of around $3 billion into our renewable portfolio. Last year alone, we invested $320 million, including the shares we acquired in Scatec Solar. And I will come back to our ramp up in investments shortly.

But much more important than the investment level is the internal rate of return. The real IRR of our portfolio, producing portfolio is above 10%. If we include the farm down in Arkona, the IRR increases to above 14%. This return is highly competitive. It's generated from a business with a very different risk profile than the rest of Equinor's portfolio. It deals with proven resources with no risk from exploration reservoir or decline rates. It also has fixed prices and guaranteed revenues for our current portfolio.

And Lars Christian will come back to the risk-reward profile of the broader Equinor portfolio. By 2035, we aim to have 12 to 16 gigawatts of renewable capacity installed. That is 30 times, 30 times what we have today. Our strategic ambition is to become an offshore wind major, and that is why I will spend most of my time today on that part of our strategy.

Our strategy is very much value-driven and plays to our strengths. We will leverage our offshore capabilities in markets we know, like Europe and the U.S., both areas geared for significant offshore wind growth. We will build offshore wind clusters to capture synergies and economies of scale and we will use our unique experience in floating offshore wind to capture opportunities. And for us, it is very much a question of when, not if, floating will be developed at scale.

Oil and gas and offshore wind are branches of the same tree. The IEA estimates that some 40% of life cycle costs of an offshore wind project have significant synergies with offshore oil and gas. We are now capturing these synergies in the Dogger Bank project. For the offshore substations, we are using members of the HVDC team from the Johan Sverdrup project.

Our experience from Johan Sverdrup has resulted in solutions that are more cost efficient than comparable offshore wind substations. We are, in fact, deploying the best of Equinor. Our muscle provides sufficient and flexible support across a wide range of technical and commercial disciplines. Renewables require relentless focus on cost and we will use what we can and just what we need in order to stay competitive.

We also have deep and long-standing relationships with the supplier industry, working across both branches; like in engineering, like in turbines and in marine operations.

Onshore renewables has seen the fastest growth in recent years. And in many markets, they are actually the cheapest source of electricity already. We will gradually develop profitable onshore positions in select power markets. Onshore currently represents around 5% of our installed renewables capacity, but we recognize that this is a business that requires distinct capabilities and business models.

And that is why we are partnered with a very proven solar developer like Scatec and also why we acquired Danske Commodities. And together with Margareth's people, we are exploring more onshore opportunities in Brazil, where we also see potential synergies between the renewables portfolio and the natural gas business.

As Eldar said, we are set to significantly ramp up our renewable's investments over the next 4 years. In 2020 and '21, we expect annual gross capex in the range of $0.5 billion to $1 billion. In 2022 and 2023, gross capex will increase to between $2 billion and $3 billion per year. Most of that capex will go into offshore wind projects like Dogger Bank and like Empire Wind.

Our portfolio now very much as the focus and the scale that we think is necessary to create value and stay competitive in this area, it fits with our strategy. It fits with our capability and it also overlaps well with our existing geographical footprint. We have a good mix of revenue regimes between certificates, contracts for difference and feed in tariffs. And we have a high quality project pipeline in different stages of maturity.

Dogger Bank in the U.K. and Empire Wind in the U.S. won offtake contracts last year and are now moving toward a final investment decision. We expect production from both by the end of 2024. Our share of that combined capacity is 2.6 gigawatts. In addition, we also have the floating Hywind Tampen project in execution already.

We have secured acreage with a total capacity of around 6 gigawatts. That includes the uncontracted potential of Empire Wind in the U.S., our Massachusetts lease in the U.S., and our three Baltic projects in Poland. Strategically, these projects will work to diversify the Equinor portfolio. It will also make electricity an important revenue stream for the Company going forward.

We expect project returns between 6% and 10%. And these are real returns, not nominal, which will typically add 2 percentage points to the numbers. This return range is competitive in the renewables industry and we are getting, thereby drilling both technical and commercial levers.

We see scale as an enabler for value, not as a goal in itself. In Dogger Bank, the combination of larger turbines, bundle project scopes and volume discounts, reduced costs significantly. We take a perfect project approach to improve our business cases. We benchmark our cost with standardized solutions, and we design to cost and revenue profiles. And recent auctions have shown that we are competitive on development costs.

We're driving operational excellence to increase availability, capture synergies and create value from digital solutions. And organizing clusters is allowing us to serve multiple assets at a lower cost.

Danske Commodities works closely together with our teams to improve margins and lower balancing cost. We are now established in 39 countries, and this deep trading expertise can also be applied in new markets. This is a capability that will be increasingly important with the introduction of more market risk.

Portfolio optimization is an integrated part of our business model and we have noted significant and great market interest in renewable assets, particularly among financial investors.

The Arkona sale generated cash and financial flexibility. It also demonstrated the value of high quality offshore wind assets.

Last but not least, project financing, as Eldar referenced, can provide access to capital at favorable terms. It can free up capex and increase our equity, our return on equity. And we saw that with the refinancing of Dog back in 2018, which released the significant payout and increased our equity returns by more than 25 percentage points.

All of our near-term projects have contracts with price guarantees, reflecting the low risk. They also have returns in the lower end of the range. But as we look to 2030 and beyond, we see an industry in significant transition. Technology developments will further reduce costs. We expect the gradual development toward more market-based prices, and this is the transition that we are comfortable with. We are financially robust, and we are used to create value from price risk.

For us, this combination of lower cost and higher market exposure, presents opportunities to drive returns toward the higher end of the range.

Offshore wind is set to grow significantly over the next 3 decades. And in 2050, analysts forecast the global installed offshore wind capacity of between 600 and 800 gigawatts. And just for reference, what is installed today is around 30, three-zero, gigawatts. And Europe is very much the global hotspot for this development right now and we expect both the North Sea and the Baltic Sea regions to develop around 60 gigawatt of offshore wind capacity by 2030, around 1/3 of that in the U.K. alone.

We are prepared for new auctions and lease potential. And in the U.K., we also work on options to double capacity at our Sheringham Shoal and Dogger wind farms.

The new backbone of our North Sea cluster will be Dogger Bank. At 3.6 gigawatts, it's the world's largest offshore wind development of there right now, and we own 50%. We see Dogger Bank as a strategic power hub, and the total potential in the broader Dogger Bank area can be multiplied by a factor of 6.

Final investment decision for the first Dogger Bank project is expected later this year. And when it's been fully developed with all 3 projects online in 2026, Dogger Bank will produce enough energy to power around 4.5 million U.K. homes.

Our position in the Baltic Sea is an example of early access at scale and of lower cost. Together with our partner, Polenergia, we hold positions in Baltic 1, 2 and 3, with a 100% potential of around 3 gigawatts. And an investment decision for the first project in Poland could come in 2022.

Like Europe, the U.S. East Coast has high ambitions for offshore wind. The states in the regions have announced very ambitious targets and is backed up by a firm auction pipelines for the years to come. And this is another energy market we know very well.

We have operated in this region for more than 25 years and recently Danske Commodities moved in with us at our Stamford office in Connecticut. We have successfully established strategic foothold in this region. And so far, we have access, two high quality leases: offshore New York and offshore Massachusetts with a combined potential of 4.5 gigawatts.

A beauty about the U.S. system is that it offers high optionality so that our projects can actually compete for offtake in different states. Empire Wind is our flagship project in the U.S. We are now setting out to develop the first 800 megawatts, which is around 40% of the total lease potential. We are positioning the remaining potential in the Empire Wind lease for future offtake auctions.

This is a project that is located in shallow water, close to the shore. And this combination of its location and its excellent wind resource, make it a very attractive piece of offshore real estate.

For Empire, we have secured competitive offtake contract in New York and we are now scaling up the project team to mature this project toward an FID.

One area where Equinor very much stand out is on floating offshore wind. We have more than a decade of operating experience from floating offshore wind. And up to 80% of the world's wind resources will likely require floating solutions to be commercialized. These wind resources are stronger and steadier as we have experienced in the Hywind Scotland project.

During its first 2 years of operation, it achieved an average capacity factor of 54%. That compares to an offshore wind average in the U.K. of around 40%. A higher capacity factor means lower intermittency and higher value. And we are uniquely positioned to play in this space.

In 2022, we will have a 118 megawatts of floating wind in operation, far more than any competitor. And of what we're seeing today, 118 megawatts is around 1/3 of the total global capacity at that point in time. To us, this is very much proven technology. Our floating lead is a gateway into Asia and it's also a gateway into segments with potentially higher prices.

Our main priority now together with Anders and the TPD organization is to continue attacking costs. Between Hywind demo in 2009 and Hywind Scotland in 2017, we took down capex per megawatt by 70%, and the ambition for Hywind Tampen is to reduce further by more than 40%.

As for bottom fix that we have seen, the key to further cost reductions is very much about scaling up. We are actively pursuing new opportunities in Europe, in the US and in Asia to access larger projects that can make a material impact on cost. And our ambition is to bring floating toward commerciality by 2030.

Take a look at this picture on Dudgeon to the right. I don't know if you have been offshore in a season like this. I have and I know that some of you are quite eager to go and see our offshore wind operations offshore. It may not look very rough. But I have some painful personal experience to share with you, and I'll give you the following advice: Don't have a big breakfast before you go.

I will leave you with three key messages. First, we have a value-driven strategy, leveraging Equinor's capabilities. Second, we are creating value from a strong portfolio and productions with returns above 10%. Third, we will develop profitable growth from scale in regional clusters.

As Eldar said, we are developing into a broad energy company and we have come a long way in a short time. I am confident that we will deliver high value renewable business in the years ahead.

Thank you very much for your attention and please welcome Lars Christian to the stage.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Thank you, Paul. Ladies and gentlemen. Good morning. It's a great pleasure to see you all. And it is a privilege to present the 2019 fourth quarter and the year-end results and Equinor's very strong outlook.

We delivered adjusted earnings in the quarter of $3.6 billion. This is down mainly due to lower commodity prices. Production in the quarter ended at record high 2,198,000 barrels per day. Compared to the fourth quarter in 2018, production and the liquid share of production increased by 1% and 3% respectively, due to the start-up of Johan Sverdrup, Mariner and Utgard.

Our realized liquids prices was down 4% to $56.5 per barrel. And even though we realized higher gas prices than NBP prices, our invoiced gas price in Europe was down 31% in the quarter.

The IFRS net operating income for the quarter ended at $1.5 billion with impairments, mainly as a result of changed method for tax uplift in impairment calculations for assets on the Norwegian continental shelf. Exploration and production, Norway delivered $2.7 billion before tax. Lower commodity prices, lower flex gas volumes were partly offset by new fields in production and higher liquid share and of 9% reduction in unit production cost.

The result is also impacted by a one-off settlement with COSL of around $60 million. For exploration and production international, the adjusted earnings were $247 million before tax mainly impacted by a 38% reduction in U.S. gas prices. and the expense and planned exit from our current Turkey assets.

If we exclude increased transportation cost to capture higher margins and cost from starting up new fields, fourth quarter underlying cost is at par with the same quarter last year. Cash flow per barrel after tax is $22, which is higher than what we see for the Norwegian continental shelf.

The Midstream & Marketing segment delivered a strong result of $524 million mainly due to strong trading in crude and natural gas. In addition MMP has obtained higher prices relative to the market.

For the full year, we report adjusted earnings of $13.5 billion, down from $18 billion in 2018, mainly reflecting lower commodity prices. Equinor's net operating income was reduced to $9.3 billion mainly due to impairments and lower commodity prices.

Our organic capex came in at $10 billion, which is at the low end of our updated guidance due to firm capital distribution and overall good project execution.

Total exploration activity ended down $100 million to $1.6 billion, including $248 million in field development costs. During the year we completed 42 wells with 18 commercial discoveries, giving us success rate of 42%.

Let's move from exploration wells to production wells. Last year we drilled 86 production wells with a breakeven of $11 per barrel. This is champions league level for oil and gas producing assets globally. And in 2020, with the new wells having it even lower breakeven, I think we will play in the finals.

So, let's have a look at the cash flow. In 2019, our cash flow from operations was $21.8 billion, including a positive $400 million cash effect from using new digital solutions in our operations.

We paid $8.3 billion in tax. And based on actual tax calculations for 2019, we have overpaid by $700 million. Another tax installment for the first half of 2020 will be reduced by around the same amount.

Total capital distributions to shareholders increased by 42% compared to the previous year, with $3.3 billion spent on cash dividend and $442 million on share buybacks.

We spent $9.3 billion organically on highly profitable projects and we report $2.6 billion in proceeds from sale of assets and $3.2 billion in acquisitions. We increased equity in Johan Sverdrup; Carcara, which now is called Bacalhau, and Caesar-Tonga, and we monetized half of our Arkona and entire Eagle Ford position and most of our shares in Lundin Petroleum.

After value enhancing transactions like this, after investing in our very profitable portfolio and competitive capital distribution, our net cash flow was negative $175 million. Our year-end net cash flow would have been positive $500 million if adjusted for overpaid taxes.

Adjusted net debt ratio ended at 23.8% in the middle of our guided range. More volumes in transit to capture higher margins and overpaid tax in Norway impacted the net debt ratio by around 2 percentage points.

Our production for the full year ended at 2,074,000 barrels per day. Our organic reserve replacement ratio ended at 83% and our 3-year ratio is 140%. The reserves-to-production ratio is 8.6%. We brought 6 fields on stream during the year including Snefrid Nord, Mariner, Utgard and Johan Sverdrup.

Johan Sverdrup has, during a successful ramp up phase, already delivered a unit production cost below $2 per barrel. And most of the Johan Sverdrup volumes have been sold to Asia to capture higher margins. Margareth, Arne Sigve and Torgrim can give you updates on our fields in the breakout session.

Ladies and gentlemen, before I move on to our outlook, I would like to reflect on learnings from the previous decade. The whole industry, suppliers and operators alike, need to adjust to the dramatic drop in the commodity prices. In Equinor, we started early, but we were reminded of the importance of always being cash flow positive, having capex flexibility and a strong balance sheet.

Following these principles allowed us to weather volatility in commodity prices, to act counter cyclically, to take advantage of opportunities and to deliver attractive returns to shareholders.

It's important to note that these principles will continue to guide us going forward. And recent events, including the effect of the coronavirus on energy prices, reinforces the importance of this.

Equinor 2020 is a much stronger company compared to 2014. We have transformed our cost base, our drilling performance and how we develop projects. And we have a very strong balance sheet. Our portfolio is resilient and robust from both a financial and a climate point of view. And it is from this strong position that we are able to pursue valuable growth in both Low Emission oil and gas projects, in fast growing renewables and expect competitive returns over the energy transition.

Last year, I said, we believe that there is still a significant improvement potential. Today, we increase our improvement ambition by 50% from $2 billion to more than $3 billion in cash flow effect in 2020 to 2025. We can do this because we see larger improvement effects from digital solutions, most importantly from our integrated operation center called IOC, and higher potential from automated drilling control.

Our objective is to collaborate in new ways with suppliers to safeguard achieved efficiencies, strengthen our cost culture and applying lean way of working, as well as drive further simplification and standardization. And remember, initiatives like this also helps us improve on sale.

Jannicke Nilsson [Phonetic] will share more details about you in the breakout session. But I would like to give you one example of scaling up digital solutions. We started streaming data live from three offshore fields to our onshore integrated operation center in 2018. We scaled up to 20 fields in 2019, and we see that IOC supported fields have higher regularity. By the end of this year, within two years of starting up, we expect all our offshore operated fields globally to be connected.

Our unit production cost continues to be strong at $5.3 per barrel. We maintain a high focus on improving our competitiveness, and we have an ambition to reduce our unit production cost with 5% from 2019 to 2021. To the right, you see the main projects that will provide high value growth toward 2026 and secure our long-term production. We are operated for 80% of the total volumes coming on stream, and operator ships are important to truly capture the value of our proven technical and commercial capabilities.

Our portfolio coming on stream by the end of 2026 delivers an internal rate of return of almost 40% at an oil price of $65. And even in a $50 world, it generates more than 25% annually after-tax. This truly demonstrates profitability and resilience. The break-even supply curve for the non-sanctioned projects coming on stream by the end of the decade continues to improve. Over the years, we have improved both when it comes to lowering breakeven and increasing volumes. We are very pleased to demonstrate that we have been able to more than offset the cost pressure we saw in 2019. And several of these projects are in a very early phase still being matured and improved. We already see attractive breakevens below $40 per barrel. We see a promising outlook for the decades to come, illustrated by attractive internal rate of return of above $30 aimed at $65.

As Eldar outlined, we see the direction of travel for the energy industry. Equinor chooses to invest in renewables for very good reasons. First and foremost, we do this to create value from developing an operating projects. Second, the renewable business has lower risk, and our future corporate portfolio will be more diversified and resilient with higher level of long term and stable cash flow. In addition, there is a potential to realize value from portfolio optimization as demonstrated by our Arkona transaction.

All value creation starts with showing discipline, and only investing in good projects with attractive risk-reward and only to sanction them when they are as good as they can get. And based on strong value creation, leveraging our technical and commercial capabilities, we continue to see good quality opportunities in this high growth market.

We have an exciting exploration program in 2020, and are targeting high value opportunities in high-graded prolific basins, such as NCS, Gulf of Mexico and Brazil. Two of these are currently being drilled. Monument in Gulf of Mexico and Araucaria [Indecipherable] license in Brazil. And this year, we expect to drill 10 to 20 exploration wells internationally, and 20 to 30 wells on the NCS. In total, we expect to spend around $1.4 billion on exploration, excluding field development costs. This is around the same level as for 2019.

In 2018, we experienced strong gas prices, whereas 2019, we saw downward pressure globally as Asian and European markets were well supplied with LNG imports. Our oil to gas ratio differs little from peers, and having assets at the low on the cost curve ensures competitiveness and provides resilience even in a low price environment.

Our gas position in Europe is strong with a total supply cost well below $2 per million Btu with low emissions and with flexibility both in production volumes, and when it comes to delivery points. We see this as very competitive against LNG imports and other imports.

We expect a 7% underlying growth in production from 2019 to 2020 and a 3% annual average growth in the period 2019 to 2026 with a growing liquids share. For the four years, 2020 to 2023, we expect an organic cash flow of around $30 billion after investments at an oil price of $65 per barrel.

I just told you about the high and improved returns in our future portfolio. Today, we give an outlook for capex of $10 billion to $11 billion for 2020-2021, growing to around $12 billion for 2022-2023 to take advantage of this world-class opportunity set. We only need a yearly capex level of around $6 billion to deliver a 2019 production on average for the period 2020 to 2026. Additional capex on top of the $6 billion will provide profitable growth in oil, gas and renewables. We have and are prepared to use our capex flexibility to ensure a robust cash flow in a low price environment.

We delivered 9% return on average capital employed in 2019, and we expect it to grow to above 10% in 2020 and around 15% in 2023. We expect to maintain a strong balance sheet, and we have a credit ratings in the AA category. Even in a $50 world, we expect the net debt ratio to remain well within our guided range. The Board proposes a 4% increase in the quarterly cash dividend to $0.27 per share. This comes on top of last year's step-up with an increase of 13%. We are on track to deliver our $5 billion share buyback program with the first tranche completed in the market, February 4th, two days ago. Based on an even distribution for the rest of the program, we are announcing a second tranche of around $675 million, including Norwegian state's share from 18th of May to the 28th of October 2020. The share buyback program is subject to annual renewal at our AGMs and runs over a period until the end of 2022.

On this page, we provide a summary of our guidance and outlook. I hope you see from the material presented today that we are entering a very strong decade for Equinor as illustrated by a 15% return on average capital employed in 2023 and a $30 billion organic cash flow from 2020 to 2023.

We expect competitive growth in production, cash flow and earnings. We are committed to deliver competitive capital distribution with a 4% increase in the quarter -- in the quarterly cash dividend and announcement of our second tranche of our share buyback program.

And by that, I thank you for the attention. Looking forward to your questions, and leave the word to you, Peter. Thank you.

Questions and Answers:

Peter Hutton -- Senior Vice President, Investor Relations

Thank you, Lars Christian. Now, we will open up for some questions from the floor. Just as a reminder, there are a lot of people here from the media. So there will be an opportunity for you to have interviews and questions after we've done with this one. So this is a focus on more of the financial side.

We'll take some questions from the floor. We've got some roving mics, and then we'll also take some from the phones. So I'm going to start off with Jon Rigby over here, please.

Jon Rigby -- UBS -- Analyst

Thank you, Peter. Thank you guys for the presentation, that's my phone breaking. Two questions, one on the results and one on the strategy. So, if I do the results one first. Obviously, a feature of the fourth quarter was a strong MMP result, which I think you acknowledge was both gas and oil trading. I just wanted to understand, how much of that trading is a feature of your activity in the fourth quarter as opposed to sort of legacy positions that have gone on over the last one or two years. I'm just trying to understand better how repeatable those kind of results are in the context of the macro that we saw.

The second question is, looking at your ambition around carbon intensity, it is subject to -- obviously the significant step-up in contribution of energy supplied from your offshore wind operations, and also on a reduction of your net by way of CCS. And I guess both of those, I mean the wind opportunity is subject to the economics being attractive for you to invest in CCS, I guess, the same is you need the environment to change and some technological breakthroughs I would think to make CCS work.

So my question there is, what gives -- is it -- if the economics are not there, would you still invest in those things because you want to get your carbon profile down, or would you sacrifice some of that ambition around carbon in order to preserve your returns? Thanks.

Eldar Saetre -- President and Chief Executive Officer

Okay, thank you. Thank you, Jon. So I think on the MMP and the downstream part, that the Irene will -- could answer that and try to reflect on the sustainability of the stronger earnings that we had this quarter. So I'll leave that to Irene first, and then we'll come back to the more strategic question. Is that OK?

Irene Rummelhoff -- Executive Vice President of Marketing, Midstream & Processing

Okay, thanks for the question. I actually think the earnings that we made in the fourth quarter is mainly a result of activity in four quarter. And what we have been doing lately on both the crude and the product side is that we are moving more and more volumes to Asia, and taking advantage of the arbitrage between the two markets.

With the introduction of Johan Sverdrup, we have the ability to build large vessels and take the advantage of scale in transportation cost. We also had some benefits on the results from additional infrastructure earnings due to Johan Sverdrup, but -- and on the gas side, we told you on the gas seminar last year that we're introducing a slightly new way of managing our risk exposure in gas, and I think we are starting to see the results of that. So I would argue that this is mainly due to activity in the quarter that we can hopefully repeat going forward.

And it's worth noting that the crude trading business is actually made money in 18 consecutive months, even in a backward market. It's definitely much easier to make money in the contango market. So quite proud of what we have achieved, good team.

Eldar Saetre -- President and Chief Executive Officer

Thank you, Irene. So you might --- could have continued to talk about CCS as well, but sit down, please. I'll try to sort of -- you'll get a chance to talk about that in one of the breakout session actually, because that is now within your responsibility. This is the US and the hydrogen business, but it's a good question. On the longer term, on the transition and the net carbon intensity, we highlight very much renewables and the structure of oil and gas business and the scale of oil and gas business, but also the CCS -- CCUS and hydrogen as a component. And I indicated that we have tested many scenarios I can assure you, also when it comes to the CCS and the hydrogen more or less.

So it's -- we know quite firmly that to reach the goals stated in Paris, CCS, CCUS and hydrogen will have to be part of the solutions. I basically have seen no scenarios without it as a major component. It's not the thing, but it's one of the things that actually needs to work. And we also know that we need the commercial models to work for this to happen. Now that needs actually, as a starting point, is a cost, and you need to finance that cost. So price on carbon is something we have been very vocal on; we need that globally. We have that in Norway, in Europe, but we need it also globally.

I think also you will see demand changing out there. There will be more demand for clean energy and for many -- now segments of our society is really hard to decarbonize without using oil and gas, or taking it into hydrogen. So this will -- the demand for these kind of commodities will increase and these kind of solution and technologies.

We see that in the Northern Light project in Norway. Once people out there in Europe, industry sees that this is -- can actually become a reality and will become reality, we see a lot of interest coming in. They only see this type of solution. That's the only way for them to decarbonize. And they have customers at the other end of the equation, and then cost will come down. Technology, like on renewables, cost will come down; technology will support it; scale will support it. So these three components, demand, technology, cost, and a regulatory environment that will enforce it will have to make this commercially viable.

And that's a question, how viable? And I don't think this will ever be a sort of a major business and it's all right, but I do think it is important from a value creation perspective to look at what it does also with the oil and gas and the attractiveness of oil and gas. So we think, we have to look holistically at what CCS does in the energy space, and also what it does with the overall profitability of oil and gas. But as a starting point, we would never enter into any projects, if they are not kind of stand-alone as such from a profitability and risk reward perspective.

Peter Hutton -- Senior Vice President, Investor Relations

Thank you. A couple of questions coming through this side, so I've got John Olaisen and then Thomas.

John Olaisen -- ABG Sundal Collier -- Analyst

Thank you. It's John Olaisen from ABG Sundal Collier. A question to the $30 billion in estimated free cash flow over the next four years, given a $65 oil price. First, a quick just definition of that, what kind of gas price is that assuming. And secondly, it's after organic investments. If I'm right, some of the non -- inorganic capex would be oil and gas license rounds, wind auction rounds, etc. Just as a definition, and then I have the main questions afterwards, please, if you can define that please.

Eldar Saetre -- President and Chief Executive Officer

Oil and gas price.

John Olaisen -- ABG Sundal Collier -- Analyst

Oil and gas price and its license rounds and wind auctions included in that capex number?

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Gas price 6 [Phonetic] NBP and 3 Henry Hub compared to the $65 oil price, so that's a price stack.

Eldar Saetre -- President and Chief Executive Officer

And then the $50 scenario is 5 NBP.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

NBP. Okay. And organic to your point, the inorganic is not included, because we don't know what level it will be going forward. So this is based on what we have in our portfolio.

John Olaisen -- ABG Sundal Collier -- Analyst

So what's you pay in wind auction rounds and licensing rounds, it's on top of that. And also, historically, you've been a net buyer of assets and of companies, so that would come on top. Could you elaborate a little bit on going forward, where we would you do be looking to do further acquisitions in the four years to come that would lower the $30 billion available for shareholders.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

But first of all, the $30 billion at $65, we last year guided $14 billion at $70. That was over three years; now we guide over four years. So to compare the two numbers to get the numbers right, you have to add the dividend, $10 billion to the $14 billion and divide by 3 and multiplied by 4 and then to get to around the same number per year, but at $5 lower oil price. So it's a much, much stronger, robust sort of cash flow, a message that we provide you. I think when you look at the portfolio outlook over the next five, six years, that growth, we do that out of a net debt ratio in the middle of our guided range.

We have enough on the plate to deliver that growth and not every going to do on buying companies or assets. We can cherry-pick and take the time to make it right. That's the beauty about having a strong balance sheet; you don't need to divest to, sort of, buy stuff. And that's the beauty of having high resources in the bank, so that you can take your time to work it, and that's why we've done the deals we did in 2019, and that will guide us going forward too.

Eldar Saetre -- President and Chief Executive Officer

So oil and gas is basically you can't produce the resources more than once. So it's about replenishing and building portfolio for the future. So you have to build that. There are two ways of doing that, through exploration or through acquisition, and that means we will continuously look for good opportunities, but we have a strong portfolio as Lars Christian says for many, many years, and there is no need for us to do anything at all to build resource base, extend it in a meaningful way. High value opportunities, we have all the time in the world to get this right and make sure that whatever we do is really value enhancing for -- into our portfolio.

And by the way, all organic, that also includes all the things that goes into the planned activities and auctions that we might take part in. And we also include actually reasonable assumptions from exploration that you will do exploration, and there will be investments coming from that. So part of what we consider to be normal business, but not inorganic -- straightforward inorganic opportunities.

John Olaisen -- ABG Sundal Collier -- Analyst

Okay. Thank you.

Peter Hutton -- Senior Vice President, Investor Relations

Thanks, John. If you can just come forward through to gentleman at the front. Thomas Adolff, there we go. Good to see. Thank you.

Thomas Adolff -- Credit Suisse -- Analyst

Thank you, Thomas Adolff from Credit Suisse. Two questions from me as well please. If we go back to Slide 14. That's the one on the net carbon intensity and you showed five buckets how to get there. And the second one is the oil and gas split and scale. And I wondered whether you can be a bit more specific on what types of portfolio shaping moves are necessary to really hit this second bucket. Will overall production be lower versus today or will it be simply a shift toward more gas from oil?

And then second question, maybe also linked to the first question. Obviously, the upstream business today pays for your dividend and also for the nice buyback you're doing. And your longer-term targets for the renewable business of 12 gigawatt to 16 gigawatt, and correct me if my math is wrong, probably can offset a $10 decline in the oil price at the operating cash flow level, but of course, renewables is long lived as you've highlighted and it's lower capital intensive.

So together with the comments on oil and gas, whether it's a lower productive -- production base, how should one think about the capital intensity of the business longer term, and the capacity to basically pay the dividend as it stands today? Thank you.

Eldar Saetre -- President and Chief Executive Officer

So first on the net carbon intensity and the oil and gas part of that, I indicated in my introduction that there is a lot of optionality, and there is no way of prescribing exactly what this will look like. But I also said that, we will in a low carbon future -- in this scenario, there will be less oil and gas. IEA scenario tells us that the world will need approximately half the oil and gas compared to what it does today in a well below 2 degree scenarios. And we will have to sort of be part of that, and it will be reflected in our portfolio. That's what we expect, but exactly what this will mean is, it's really hard to say.

What will have the biggest impact on this KPI, which is an intensity KPI, is basically reflecting the energy that we produce. If we don't produce it, it doesn't go into this intensity factor. So basically, renewables is by far the biggest component into this. But as you say, shifting between oil and gas will have an impact, because there is lower Scope 3 emissions on natural gas. We do see that our portfolio over time actually will be more gassy than oily looking at the portfolio that we actually have, because gas assets typically are longer-lived assets than oil assets. So that's part of what will happen, and then sort of, to what extent that will sort of change compared to our current portfolio, it's hard to say. We know it is possible to do, but it will have that kind of impact.

And we also know that scale will have some kind of impact. And we also know that actually the operational efficiency is very much related to what we have put targets forward on that. And it's also going to have a big impact when we produce oil and gas, but I can't be more precise. It's impossible for us to be more precise on exactly how this will look like. We know the components. We know how they will work, and we know that renewables is definitely the most important part of this equation to get this target.

On the composition and the profitability here, we see an impressive portfolio ahead of us when it comes to oil and gas. And we have indicated very competitive returns compared to the risk group, if you look at the risk reward balance within renewables. And we have seen and we have tested many scenarios, have seen at what kind of cash generation capacity comes out of this gradual transition where we do more renewables, and different scenario is also lower oil and gas. And they all come out with a strong cash generation capacity, but it has to do how you actually combine this portfolio and what are the speed of this transition going forward and -- 6% to 10% real return and on top of that, the equity component and the nominal component, that is going to give us a quite substantial capacity to deliver continued shareholder distribution and competitive as well. I don't know if you have any comments to this, Lars Christian.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Just one, because it's so easy to compare the returns on renewables projects with the oil and gas project. But please remember that there are some associated costs in addition to running an oil and gas company that you don't have for the renewables business. So we are very comfortable to your point for the period of time that we are showing here today. And beyond, it's going to be very dependent on the levers and what the composition of the Company looks like going forward. But we will keep you posted on it, but very strong outlook toward 2026.

Peter Hutton -- Senior Vice President, Investor Relations

We got some questions coming over here. So I'm going to start with Alwyn who is the gentleman there.

Alwyn Thomas -- Exane BNP Paribas -- Analyst

Hi, good morning. Alwyn here from Exane BNP Paribas. I guess just to start with, could you maybe quantify or discuss some of the risk to cash flow ambitions this year due to what's happening in Asia and obviously low gas prices, and some of the impacts it might have around trading, as well as other parts of the business. Just some commentary, that would be helpful.

And spilling out your capex guidance, particularly the step-up toward $12 billion in the long-dated era, is that equity capex after project financing, and maybe could you just say a little bit around whether you are stepping up R&D or research spend within that as we move toward new energies, new technologies, and perhaps beyond that, whether you'll be splitting out the renewables or new energy solutions part of the business in terms of earnings or cash flows. Thank you.

Eldar Saetre -- President and Chief Executive Officer

You managed a lot of questions in one go there.

Alwyn Thomas -- Exane BNP Paribas -- Analyst

I've got a few more.

Eldar Saetre -- President and Chief Executive Officer

Okay, so I'll cover some of this. So let's start with the gas prices. We know where we are on gas prices. We're down there. It's been -- it's cyclical. We see that the gas -- the global gas business is becoming sort of one-one, it's not a regional business anymore. It's really a global commodity. Looks more like the oil transition that we saw many years -- many years back. And right now, we -- and we are -- also last year, we were heavily impacted by a lot of new LNG capacity, it was predictable, not a surprise. We know sort of time lines and also slightly muted demand growth in Asia in particular.

High, no -- right now, really high storage levels all over. And on top of that, the temperatures, that sort of stimulate demand. So the combination of the current situation is really -- keeps muted and a low market, weak market. Now, we expect that to be the situation for a while. So this year, also deep, at least deep into '21, you can see that basically from -- it could be surprise from temperatures, but you can see that from the new LNG projects being fed into the supply side. Then this will start drying up and demand will continue to grow, and there are many factors that has come into this, but we do see a more balanced gas market going forward and as we are heading deep into '21 and into '22. So that is pretty robust projection from our side. I don't know if Irene, do you want to add something to the gas perspective here. You make money on top of it still.

Irene Rummelhoff -- Executive Vice President of Marketing, Midstream & Processing

No, I think it's a very good summary. The only thing I would add is that low prices does create demand and we've seen additional demand come in, in Europe, and we've seen additional demand, for instance, in Pakistan and Bangladesh. So there is some good news to the story as well, but it's a pretty dire picture for the next year and a half at least.

Eldar Saetre -- President and Chief Executive Officer

Thank you, Irene. Then the question on capex guidance on equity and project financing. So maybe, you comment on that, Lars Christian.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Yeah, I mean we do this growth out of strength. And we have the capacity, both when you look at the balance sheet to do it. We have the capacity, if you look at the organization to do it, and we have the opportunity set, our portfolio set of opportunities, we already have in-house to build that pipeline. And back to my comment earlier, $6 billion around that is what we need to just sustain the production level of 2019 toward 2026. Everything on top of it is still grow in oil, gas and renewables.

To your question on whether renewables should be a segment or not -- sort of separated out, it's too early to say that we will report it as a segment. It is not material enough. Yet, we understand that there is a sort of urge for giving you more information and insight into it. And that is why you see this year that we provide you with more visibility. This is about the production base availability, production outlook, capacity outlook, capex outlook, portfolio achieved prices, which was around GBP160 [Phonetic] per megawatt hour, returns, both existing portfolio producing and the forward looking one. So, we are going to provide you a bit more and more visibility as this business grows; no plans of separating this out.

Eldar Saetre -- President and Chief Executive Officer

I guess, there could also be an implicit question in that, are we planning to split up the business? And we are not, definitely not. I think Pal highlighted very much the synergies and the strength that gives us, actually coming from the oil and gas competence and integrating that and benefiting from that into the renewable space where we focus, that is so strong that we will have -- do the best, pick the best from what we have -- our legacy, our competence; at the same time, finding what is unique for this business. So that is not an idea that we are pursuing. R&D, maybe Anders should be thinking a little bit about that now, so he can offer some comments on that.

Anders Opedal -- Executive Vice President of Technology, Projects & Drilling

Yeah, we are going to spend NOK2.8 billion in 2020 on R&D, and also remember that we are testing new technology in our projects and our wells as well. We are not guiding any R&D beyond 2020. But as we ramp up production in Brazil and Canada, there will be more obligations, and then we will have R&D in line with that. For 2020, also 25% of our spending at R&D will be in low carbon solutions.

Eldar Saetre -- President and Chief Executive Officer

Pal, any comments from you?

Pal Eitrheim -- Executive Vice President of New Energy Solutions

One of the main points that I made was very much around the benefits of being part of a broad energy company like Equinor. And if you're very specific, I have access to the full technical capability of Anders on Arne Sigve, Jannicke on the digital side. I have full access to again commercial people on the market side and the power trading, and if I -- I used a very simple example sometimes. If I need a 20% material engineer, I buy that from Anders; I don't hire 100% and use him/her every Friday.

Peter Hutton -- Senior Vice President, Investor Relations

I know I've got some questions around the same table. But I'm trying to take these in the order I saw them, so it's the gentleman in the front row there, and then we'll come back to that table.

Anders Holte -- Kepler Cheuvreux -- Analyst

Thank you. Is this mic on? Yeah. There we go. It's Anders Holte from Kepler Cheuvreux. Thanks for a solid presentation. I guess robust is the keyword for this year's CMU. Just a few questions if I may. First of all, I know you've refrained from giving a break-even oil price required to cover all of your capex, and also your shareholder distributions for 2020. I'm guessing you're going to try to refrain from answering it, because there's a lot of moving parts. And I think we realize that, but at least at what oil prices does -- Lars Christian feel the heat a little bit, before he starts to tap into the net debt figure.

And then second question is more on Dogger Bank. You mentioned that the returns. And I think the returning guidance of 6% to 10%, it's a solid figure, but also you mentioned that you have already locked in quite substantial cost reductions on Dogger Bank. I'd just like to pick your brain in terms of how much are we actually talking about here in terms of the original investment regarding guidance provided by you previously.

Eldar Saetre -- President and Chief Executive Officer

So if you talk about oil price, and where we are now is complex. We know sort of the pressure points and there is a lot of responses, OPEC response and so on. We know that last year, the Brent plan was almost $64 per barrel. And we saw a lot of volatility throughout the year, and that's also been part of this year. So basically, we -- resilience is the recipe for us and robustness as you said. And we illustrate $50, $65 and $80 [Phonetic] to give you sort of the wide range, and that is mainly the mentality where we are, build our business and build our operational efficiency. So I think that is -- you want to comment more specifically?

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Yeah, a couple of years, we have done the numbers and showed you, and based on a $70 and now we're taking it down to $65. Average last year was $63.8. So it's kind of where we are over the last year or so at least. When we done the calculations for 2019, if you exclude the share buyback, we were around $50 when it comes to being cash flow positive after --- according to then what we guided. So we're very comfortable with the composition.

Eldar Saetre -- President and Chief Executive Officer

Pal, on the second question.

Pal Eitrheim -- Executive Vice President of New Energy Solutions

Yeah. On Dogger Bank, the short answer is, there is no updated sort of guiding on cost. The number that is out there should not be treated as a sort of a firm estimate. It's a ballpark number to give people a sense of where we are and what we are is chasing every value pocket and every cost there is. And we will do that all the way from now till we start production, so there is no updated number for you, sorry.

Peter Hutton -- Senior Vice President, Investor Relations

Another couple of questions from those. Then we're going to take a couple from the phones and then Josh.

Medina Betty -- Bank of America -- Analyst

Good morning. Medina Betty, [Phonetic] Bank of America. So I will ask two questions, please. Follow up one on the capex and one on the share buyback. So regarding the capex, you guided on a $10 billion to $11 billion capex in 2020-2021, then growing to $12 billion. So I just wanted to know if the capex growth will only come from the renewables, meaning that you intend to keep the upstream capex at the same level, and still deliver a 3% production growth with the same, roughly the same upstream capex until 2026.

And second question regards with the share buyback, you've announced it in September. Since then, the hydrocarbon prices have been moving a lot, so you provided maximum, let's say, share buyback program of $5 billion, but you never said what would be the minimum. So if the hydrocarbon prices, meaning oil and gas prices remain at the current level for a couple of years, would you still be realizing the share buyback of $5 billion or revising it down?

Eldar Saetre -- President and Chief Executive Officer

Okay. So on the capex guiding, this -- we have indicated in Pal's presentation, what will be the capex spend over the next few years. $0.5 billion to $1 billion on -- of this year and next year, and then $2 billion to $3 billion. Now that is a gross number for '21 and '22 -- or '22-'23. So you will have project financing that goes into that. So into our capex number, you will have a lower investment number, but we'll definitely -- and taking off 15% to 20% of our capex within two to three years. So it will definitely be a bigger portion of our capex spend when we start guiding at $12 billion. So roughly speaking, you're right. You are pretty much in the same range -- not as precisely., but in the same range on the oil and gas part and then you have renewables part, but it's not a precise answer, but in roughly in that range, given the guidance that we gave on renewables and capex spend on renewables.

On the buyback, so we are very confident on the buyback program. Obviously, we state that if -- given circumstances, we might sort of change the program, but there is no plans, and we are very comfortable with the price levels that we have seen and see today to continue on the buyback program. But there is a lot of factors that goes into this, but I'm not opening up any uncertainty at all in the current environment and what we see. And we've showed you resilience, robust that we can actually do the buyback program even in a $50 environment, that would be very comfortable in relation to our debt ratio.

So there is no concerns in the current environment and an even lower environments on our capacity willingness to pursue the buyback program, and it's -- to increase the predictability, we simply say now instead of sort of just picking a number, we say now we front-loaded with numbers you introduced, and then now we say an even distribution depending on how many trading days there are into each of the tranches. That is sort of the kind of principle that we are pursuing now. Lars Christian?

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

The way I look at it, you should read the second tranche announcement as not only visibility, but also confirmation for the remaining period until 2022.

Peter Hutton -- Senior Vice President, Investor Relations

The question from...

Yoann Charenton -- Societe Generale -- Analyst

Thank you. Yoann Charenton from Societe Generale. To recast some of the question we ask at this table, on capex, it's clear that you have demonstrated that the level of activity across the group is pretty high versus history, but at the same time, if we look at the past few years, from a pure financial perspective, you have consistently underspent versus guidance, and you save billions. So, I would like to better understand how we should think about the capex guidance you commented on today. And if we should look at this guidance with the same sort of lenses, we have to look at your prior guidances.

Then on production, just to come back on to very short-term sort of implications of the situation you described with extremely low gas prices across the Northern hemisphere. We can remember that in 2019, you had to defer significant volumes of gas. Gas was aimed at supplying Europe. How much is built in, in terms of gas volume deferral in your 2020 guidance, please?

Eldar Saetre -- President and Chief Executive Officer

So, on the deferral of gas, we are very cautious to give volumes and definitely not guidance, because that would be sort of the market information. And basically, when we predict the future, we don't sort of add any assumptions and that is basically deliver what is the base assumptions in the production permits. Production permits gives us some flexibility, but we don't sort of take that into account. But it is something that, if there are deviations from this, we will explain that and introduce it as part of decision that we make continuously, but it's not part of sort of our guidance as such. On the capex?

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Yeah. On the capex side, I mean, it's been a privilege to report that in many ways, have come under the guiding over the last couple of years. Thanks to an excellent project execution. And hopefully we will be able to replicate, at least that's what Anders and his team is trying to do, that is in oil and gas. On behalf of Arne Sigve, Margareth, Torgrim or Pal in the renewable space. And not only that, we want to be even better. But this is based on our best estimate, the numbers that we provide you, and that's a 50-50 number. So, I can't sit down here and say that it will come under -- below, because then I should give you another number. So, I guess, I could just invite you to be part in the breakout session. And you will hear -- talk -- how we talk about both the digital, the savings that we have done on Johan Sverdrup, for instance, and how we perform on drilling -- performance compared to the industry, on project development compared to the industry, and they would show you that is quite impressive number. So, it's this performance that is actually giving us that. And I -- starting point, start of the year, we give you what the best estimate, I can assure you.

Peter Hutton -- Senior Vice President, Investor Relations

We've got one more to come from the floor, but with first come first serve, I think we're just going to take a short break, take a question from the phones.

Operator

We will take the question from Anne Gjoen from Handelsbanken. Please go ahead. Your line is open.

Anne Gjoen -- Handelsbanken -- Analyst

Thank you. I wonder if you will do some term of inorganic investments. Do you still -- if you find it economically attractive, will you still be interested in kind of opportunities when it comes to shale in the US or in Argentina also or could be more rule that out because you have so many opportunities elsewhere and because of environmental reasons? Thank you.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Okay. So, generally speaking, we always look for value creation opportunities. Sometimes we see that when it comes to acquiring assets. We see we can do better, we can do more, we can create value on top of what we buy. Other times, it's about divestments. We see that others can do better than we can. We divested Eagle Ford, for instance, [Indecipherable] can do that. They think they can do a better job and let them give that a try. So this is really what this is about. And we'll pursue this kind of opportunity generally within quite big space. And I will now ask Al actually, it might not be prepared, but give it a chance at least to comment on how we think about that from his perspective because he's running that part of the business.

Eldar Saetre -- President and Chief Executive Officer

Thanks. I think the first thing to say is, though we look at each acquisition on a case by case basis, we screen them primarily on value, and then we also have a separate screening process for climate, for carbon emissions and for safety and a few other factors as well. I think, in some sense, you can see the direction we've been in. Over 2019, you've seen the acquisitions we've done strengthening our position in some of our core areas, the additional equity in Johan Sverdrup, the growing position that we're building in Argentina, the growing position that we're building in the Gulf of Mexico, and you'll see that those assets demonstrably add value building our core areas that are also in line with the direction we're taking on climate change and on reducing our global carbon intensity.

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Thank you, Anne Gjoen. On shale, more specifically, so we did a transaction as I mentioned during last year, high grading our portfolio within the shale. We also built shale business activities in Argentina, building a position there. It has very high quality acreage that we are working on. I think it fits nicely into our portfolio. It has the flexibility that is very useful in our portfolio both from a capex spend perspective but also from a commodity perspective. We can decide when we would like to sort of produce these volumes from a commodity perspective.

Svein [Phonetic], you might want to add something what you are doing till now to that business.

Eldar Saetre -- President and Chief Executive Officer

So thanks. So we all know that the history of US onshore has been a bumpy road for Equinor. We have made significant impairments as we have acquired assets in a very high price environment, and that didn't stand the test then and prices collapsed. We'll just need to start with that when I talk about the US onshore activity. When that is said, I mean that business has been through significant improvements over the years, and more recently hydrating the portfolio. So that part of the business is contributing positively to the bottom line and has done that over the last few years. So, competing fairly well compared to others but we clearly we have much more to do to improve this business even further. And clearly it is something that will aim to -- that business to cultivate very positively to the future of Equinor. So, particularly if we see in the Northeast, in Appalachia, that business still makes money even if we are seeing gas prices around $2 per MBTU. So thank you.

Peter Hutton -- Senior Vice President, Investor Relations

Thanks very much. I'm going to come back into the, we've got at least couple of questions. Three, and then we maybe be calling it a day. Josh?

Joshua Stone -- Barclays -- Analyst

Thank you. It's Joshua Stone with Barclays. I just had one question on your renewables capacity -- available capacity -- available target in 2026 of 4 gigawatts to 6 gigawatts. It looks like that's an outcome of your existing projects and ultimately to what extent you see actually it's an upside that number from future license trends coming up. And are you making any assumptions in there where it continues to sort of farm down of your projects as your development. Thanks.

Eldar Saetre -- President and Chief Executive Officer

So, I hand it directly over to Irene [Phonetic] that business.

Irene Rummelhoff -- Executive Vice President of Marketing, Midstream & Processing

You're right. It does to a large extent reflects the existing portfolio and projects that we have accessed already. And then, as I said in my introduction, there are -- we are positioning for additional lease rounds in the core areas because we see a lot of value actually in concentrating that growth to some areas to get the economies of scale in those particular areas. But it will not prevent this from sort of positioning for new opportunities in different parts of the world with Asia coming now in a very significant way and is likely to become the new sort of engine of growth in that area. The portfolio management bit -- optimizing portfolio will be a part of our business model. But I won't sort of conclude on if and when and what assets etc., but it is a key source of value creation for us going forward.

Peter Hutton -- Senior Vice President, Investor Relations

Valeria from UK?

Valeria Piani -- UBS -- Analyst

Thank you. Valeria Piani for UBS Asset Management. Firstly, big congratulations for your new ambitions on climate change. It's great to see this step up from the past. I have a question on your ambitions on almost zero emissions for the Norwegian Continental Shelf what is blocking you to do the same for international operations?

Eldar Saetre -- President and Chief Executive Officer

Okay. So, I may have touched upon it briefly in my introduction basically. In Norway, we have the framework. First of all, you need energy to produce oil and gas, and the Norway Electricity can be picked up from the grid and it's the renewable grid basically. It's all about renewable energy, and we have actually more renewable than we use in Norway. So we have a surplus that is available for our industry. So -- and we also have a price on carbon.

On top of that we pay EU ETS quotas. So we have a double tax in a way, and generally also a framework conditions in terms of the tax system that incentivize investments into these type of efforts. So, that's why this actually makes sense. The sum of these components makes it profitable. This enhances the value of our portfolio in Norway internationally, basically depending where we are, but we don't have that electricity, it's not available. We don't have now the same type of costs related to carbon emissions. And that in some case is not the overall framework -- financial framework be there.

So it's a different situation depending on where we are in different countries. So basically when we work internationally, it's really about addressing how we produce the oil and gas, what we do with the gas, do we inject it at this energy, how the economics of that work, the energy efficiency overall into our operation, to turbine, the compressors and so on. So it's very much down through the configuration on the shaping of project. So it's becoming more important how we actually shape our project. But we will be vigorous on the international portfolio, and we will take down our footprint also internationally. You will hear more about that ambition later today actually how we work on that. So -- but the tool box is slightly different. So we look just as hard. And the overall combined target for us now is 8 kilos per barrel produced globally in the corporate portfolio as we are heading toward actually zero of [Indecipherable] confidential. But that is a journey from where we are now to zero by 2050, 40% will be taken out by 2030.

Peter Hutton -- Senior Vice President, Investor Relations

Anders, would you like to comment?

Anders Opedal -- Executive Vice President of Technology, Projects & Drilling

Yeah, yeah. I want to comment on the international part because we are planning for having carbon intensity as below 10 in 2025 for all internal operation also for portfolio internationally. And then, we do not have the same levers as Norwegian Continental Shelf, but still we manage to do some very good CO2 reduction projects. For instance on [Indecipherable] we are importing gas instead of using diesel. This is less cost and it's less emissions. So in this project, we are reducing 4 kilos per barrel or so. So, we are assigned to use -- all the confidence and to bring Equinor also internationally.

Eldar Saetre -- President and Chief Executive Officer

And just my highlights methane emissions I gave a number of zero. That is a very low number globally. And it goes across our whole business. And obviously, you don't want to have high methane flow into -- on any place where you actually do your business. And by the way because we sell that in the market or used for product meaningful purposes. So, that's -- philosophy that's very strongly embedded in how we -- how we shape our business and projects. Also in the US -- part of my business.

Peter Hutton -- Senior Vice President, Investor Relations

One more question from the floor -- Kate in the middle.

Kate O'Sullivan -- Citigroup -- Analyst

Kate O'Sullivan from Citi. Thanks so for presentation. So just a quick one probably for Lars Christian. As we ramp up Johan served through 2020, how can we think about the tax impact? Do you have any more detail on that?

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

The tax impact?

Kate O'Sullivan -- Citigroup -- Analyst

Yeah. So...

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Yeah. The cash tax -- cash contribution after tax for Johan Sverdrup is very, very robust and expect it to be around $50 in 2020 for this year per barrel. That's at [Speech Overlap] cash cost is $2 per barrel.

Eldar Saetre -- President and Chief Executive Officer

Less than $2.

Peter Hutton -- Senior Vice President, Investor Relations

Ladies and gentlemen, we bring this part of the session to a close. Just as a reminder, there'll be an opportunity now for the media to talk with the speakers for the analysts and investors, it's a short break, there's lunch, and then we will reconvene. We'll take you to the various breakout rooms, and we'll kick off people in place ready for 12 o'clock.

Eldar, would you like to...

Eldar Saetre -- President and Chief Executive Officer

I just want to -- we're probably not coming in after the breakout session. So I just want to say, now I really appreciate that you are here today, all of you. And I brought the whole team here because we think this is a really important event. So they're available for you on various occasions to have the breakout sessions, so hopefully we'll be able to join them and go through a lot of interesting material. So, I will not repeat the story line that we told you today. That is really a strong proposition. Just look at it. Get into the numbers and see what this actually tells us about our capacity to generate cash returns going forward and also how we relate to the transition and how committed we are to capital distribution. So, make sure you capture what we are telling you today.

Thank you very much.

Duration: 115 minutes

Call participants:

Peter Hutton -- Senior Vice President, Investor Relations

Eldar Saetre -- President and Chief Executive Officer

Pal Eitrheim -- Executive Vice President of New Energy Solutions

Lars Christian Bacher -- Executive Vice President and Chief Financial Officer

Irene Rummelhoff -- Executive Vice President of Marketing, Midstream & Processing

Anders Opedal -- Executive Vice President of Technology, Projects & Drilling

Jon Rigby -- UBS -- Analyst

John Olaisen -- ABG Sundal Collier -- Analyst

Thomas Adolff -- Credit Suisse -- Analyst

Alwyn Thomas -- Exane BNP Paribas -- Analyst

Anders Holte -- Kepler Cheuvreux -- Analyst

Medina Betty -- Bank of America -- Analyst

Yoann Charenton -- Societe Generale -- Analyst

Anne Gjoen -- Handelsbanken -- Analyst

Joshua Stone -- Barclays -- Analyst

Valeria Piani -- UBS -- Analyst

Kate O'Sullivan -- Citigroup -- Analyst

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