Equinor ASA (EQNR) Q1 2021 Earnings Call Transcript

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Equinor ASA (EQNR 0.29%)
Q1 2021 Earnings Call
Apr 29, 2021, 5:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Equinor Analyst Call Q1. Throughout today's presentation, all participants [Operator Instructions]

I would now like to turn the conference over to Mr. Peter Hutton, Senior Vice President. Please go ahead.

Peter Hutton -- Senior Vice President Investor Relations

Hi, thanks, and thanks everybody, welcome to the Equinor call as you heard for the first quarter of 2021. I'm pleased to welcome Svein Skeie, Acting CFO, who will present the results for around 15 minutes, and then we will move to the Q&A. This call will last for a maximum of one hour, I know there are a number of companies reporting today.

Also joining the call, we have going on Orjan Kvelvane, Head of Accounting; Rune Karlsen, Acting Head of Performance; and Mads Holm, Head of Finance.

And with that, let me pass immediately over to Svein to start the presentation. Many thanks.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Peter, and good morning, everyone. I very much appreciate you joining us, especially on what we know is a busy day, as Peter said. Today, we present our best quarterly results since 2014. This is of course driven by better commodity prices, but we also capture value from strong operational performance, continued cost improvements and strict capital discipline.

In 2014, the oil price was close to $100 per barrel. We now deliver results that is high-end, high-level with an average oil price, overall $60. We booked gain on divestments within renewables and we are of course also helped by Johan Sverdrup's major contribution to these results.

A year ago, we saw a rising uncertainty in the markets, and we implemented our operational and financial contingency plans. Now, we see a clear improvements in the world economy and some countries are starting to reopen. However, in other areas like Brazil, where we have large operation, the situation is still very demanding and unpredictable. The status on infections and restrictions also affect manning at construction yards in several countries and may have further impact on the progress of our projects in execution. But I continue to be impressed and grateful for all our employees and suppliers, who have kept our operations running safely, supplying energy to people around the world during these difficult times.

The Troll A platform, has provided enormous amount of gas to Europe, delivering a total of more than NOK1.6 trillion in revenue to date, and still we expect the remaining potential to be significantly above this. Last week, we delivered the plans for the fuel and postural electrification of the Troll B and the Troll C platforms, cutting almost 500,000 tons of CO2 per year from 2024 and onwards.

Troll B will start production this autumn, adding a total of more than 2 billion barrels of oil equivalent and at a breakeven below $10. And for three of our commercial discoveries in first quarter, tie back to Troll B or Troll C is an option. The same technology used to build enormous Troll A structure is now being developed to build the 100 meters Troll small sub structures for the 11 floating wind turbines of Hywind Tampen. This is a great illustration on how we exploit value creating synergies between offshore oil and gas and offshore wind.

Hywind Tampen, will be the world's largest floating wind farm providing electricity for the five [Phonetic] Snorre and Gullfaks platforms. And it's an important step in commercializing this technology. We also continue to mature our offshore wind project in the U.S.

During the quarter, Equinor and our strategic partner, BP, were selected to provide renewable energy to the State of New York from our assets Empire and Beacon Wind. We completed the divestment of 50% of these wind assets in the quarter as well as the farm down of the 10% of Dogger Bank A and B, and booked an aggregated gain from renewable transactions on nearly $1.4 billion.

The Board of Directors has increased the dividend for the first quarter 2021 to $0.15 per share, up from $0.12 last quarter. This is consistent with our statements that the Board will assess the dividend on a quarterly basis reflecting assessments on the Company's financial position and funding requirements, investments in our competitive portfolio, the market conditions and the commodity price expectations.

Before discussing our safety performance this quarter, I want to remember our 13 colleagues and friends, who five years ago on April 29, lost their lives in the Turoy accident on their way home from the Gullfaks B platform. Our thoughts go to their families.

The safety and security of the thousands of people working at our plants, projects and offices, and the integrity of our operations is Equinor's top priority. The fires at Hammerfest LNG and Tjeldbergodden last year, were fortunately without personal injury, but we see these as serious incidents. And after the fires, we have started several initiatives to improve on safety across the Company. We will learn from previous incidents to avoid new ones.

For the last 12 months, we've reported a serious incident frequency of 0.5 and our total recordable incident frequency of 2.3 per million working hours. This is an improvement from the first quarter of last year.

And now on to our financial results. The financial results this quarter reflect the increase in oil and gas prices. Our realized liquids price was up 28%, and invoiced European and U.S. gas prices up 64% and 46%, respectively. Underlying upstream operating costs were down 4% in the quarter. The continued cost control and solid operational performance position us to capture value from the price increase.

IFRS net operating income was $5.2 billion and net income $1.9 billion. Adjusted earnings before tax were strong at $5.5 billion, up from $2 billion in the same period last year. The group tax rate this quarter was 51.3%, and for the upstream business in Norway, the tax rate was 72.6%, due to the strong results, giving less impact from the tax package.

Now to comment to each of the reporting segments. E&P Norway delivered its best quarterly result since 2014. In 2014, E&P achieved this quarterly result with a Brent price of around $100 per barrel, but is now making it at just about $60; a true testament to the major improvements done over the last years. The production efficiency was strong and this together with other improvements secured a reduction of 3% in underlying operating cost. Sverdrup and Snorre are the largest contributors, but we see strong deliveries across the board. In the quarter, we had four high value discovery wells on the NCS, close to existing infrastructure, adding a total of around 19 million barrel of oil equivalent net to Equinor.

E&P International delivered a strong result with $382 million in adjusted earnings before tax. Adjusted earnings after tax are negatively affected by a non-recurring effect in Angola impacting the tax rate. The continuing efforts to reduce cost by ourselves and our partners are rewarded, as underlying operating expenses are down 6% in the quarter. Our business in Brazil is impacted by the Peregrino field not producing, due to the pandemic impacting the repair of the resource [Phonetic] and delivers a negative bottom line in the quarter. We will drill two exploration wells toward the summer with a potential financial exposure -- of around $150 million, including signature bonuses.

Our U.S. upstream segment delivered adjusted earnings of $192 million and a strong cash flow from operations of around $600 million. The sale of Bakken closed on Monday, and therefore both production and revenues from Bakken are included. E&P USA is continuing to reduce cost, and the investment level has been significantly reduced compared to the same quarter last year.

So to the MMP. MMP delivered adjusted earnings of $61 million in the quarter. Last year, we decided to move sales of some gas volumes from 2020 to summer 2021 and so on beyond, taking advantage to capture higher prices. With the impacts of colder weather in Asia and Europe and a draw of greater LNG volumes into Asia, European gas prices were even better than anticipated. The increase in gas prices was positive for the Group overall, as reflected in upstream results this quarter, but it also means that MMP report losses on derivatives for gas forward sales, against the stronger prices seen at the end of the quarter.

Refinery margins were weak in the quarter, and affected the results negatively. And the shutdown of Hammerfest LNG also impacts the results. However, we delivered solid results within liquids trading, especially within the LPG and the light ends.

So to renewables, the new segment, and we report our renewable business as a separate segment this quarter. The structure of this segment differ from the older ones in important ways, affecting how we report. It has been a common practice to establish separate companies to develop and to operate the renewable assets. This combined with us often having ownership share of 50% or less leads to equity accounting being common in this segment. Both project financing and portfolio optimization are key parts of our value creation strategy in renewables. And like other renewable companies, we will therefore not adjust for profits and losses from transaction in this segment. We will, however, continue to provide full visibility how we consolidate and report gains and proceeds from transaction. In addition, I would like to remind you that on equinor.com, there is further information about our renewable assets. Our share of the results from renewable assets in production was $24 million in the quarter. Including the cost associated with maturing over renewable project pipeline and gains from transaction, adjusted earnings for the segment was $1.34 billion.

So to the production, and I will start with the oil and gas. This quarter, we delivered stable and safe operations with high regularity despite COVID restrictions and strict infection control measures. Our equity production was 2,168,000 barrels per day in the quarter, slightly down from the record production in the same quarter last year. Production is negatively affected by the outage at our Hammerfest LNG plant and at Peregrino, partially offset by higher production at Johan Sverdrup and production ramp up at Snorre expansion. To capture additional value from high gas prices, we also had high production from our flexible gas fields in Norway and from our U.S. gas operation.

So to the renewables production. Our offshore wind farms had high availability and stable operation throughout the quarter. In March, Hywind Scotland, was named the U.K. offshore wind farm with the highest capacity factor for the third time. However, there was less wind this quarter than expected for the season and the production ended at 450 gigawatt hours, down from 558 gigawatt hours in the same quarter last year.

In the quarter, we delivered a strong cash flow from operations of $6.6 billion and a very strong net cash flow of $5.2 billion after net investments and dividends. Driving the cash flow were continuous improvements and strong capital discipline combined with proceeds from divestment. We paid cash tax of $78 million in the quarter as NCS and will pay around $160 million in the second quarter based on the 2020 results. Based on the first quarter results, we expect increased tax payments in the second half of 2021. The strong cash flow helped to significantly improve our net debt ratio by 7.1 percentage point down to 24.6%.

So going toward the end and let me end with our outlook. We expect annual organic capex in 2021 and 2022 at $9 billion to $10 billion, and 2021 exploration is kept at around $0.9 billion. The expected annual average production growth from 2020 to 2026 is around 3%, while the rebased production growth for the current year is expected to be around 2%.

Thank you very much for your attention, and I look forward to your question and pass it back to you, Peter.

Peter Hutton -- Senior Vice President Investor Relations

Many thanks, Svein. So with that, I pass it through to the operator to open up for polling and then we'll be taking the first question.

Questions and Answers:

Operator

[Operator Instructions] First question is from the line of Biraj Borkhataria from RBC. Please go ahead.

Biraj Borkhataria -- RBC Capital Markets -- Analyst

Hi, thanks for taking my question. Two, please. The first is on shareholder returns, where do you want your gearing or net debt to be before you can return your dividend back to pre-COVID levels, as you previously planned it? And then second question is actually on maintenance. Just thinking about the portfolio as a whole and depending on the country you're in, the rules around personnel distancing, etc. will be different, so I was just wondering, if you look at your maintenance activities for 2021, are you on track as it sounds today or is it maybe taking longer to complete some of these things? And also can you confirm if you're still completing the same level of preventative -- maintenance now, as you maybe would have planned six, 12 months ago? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Biraj, and thanks for good questions. Regarding the dividend, as we have said, over the last quarter, when the Board is then doing the assessment on the dividend level based on a quarterly basis, it's an assessment of the Company's, the financial position that we are in, the funding requirements ahead of us, investments that we have at hand, and from our good advantage portfolio, the market condition, but also the commodity price expectation. So those are the things that we are taking into account. And so what the Board has done and on the evaluation, we see that there are some better market conditions out there. We have been able to reduce the debt by 7.1 percentage point or below 25%. So the assessment that has been done in this quarter is that we increased the dividend by $0.03 to $0.15 per share. There is no clear views on when we will get into exactly this level of net debt ratio, then we will then do a further assessment, but it's the totality that really, really matters here, and the Board is doing that assessment on quarterly basis, as we have communicated.

Well, regarding then the maintenance for 2021, and as you might remember in 2020, we then deferred quite a bit of the maintenance due to the COVID situation. We had some more maintenance for example on NCS toward the end of the year, normally, in second and third quarter. This year, we have also focused a lot on the maintenance being on track, so what we now see in -- and expect in the second and third quarter is that we will have more maintenance and for the totality for the year, we expect turnaround FX overrun of around 50,000 barrels oil equivalent per day. The major part of it will then come in second, and a little bit less we expect an interim. We are following the COVID restrictions there and doing good planning with the people on board on there, so that we are able to prioritize and do the maintenance as we go along.

Peter Hutton -- Senior Vice President Investor Relations

Okay. Operator, can we have the next question?

Operator

The next question is from the line of Oswald Clint from Bernstein. Please go ahead.

Oswald Clint -- Bernstein -- Analyst

Thanks, Peter and Svein. Thank you. Hammerfest another six months delay. I just want to, firstly, understand the insurance, so is it a $100 million a quarter, but it looks like $60 million of that is from the captive, so is that how we should think about that, it's kind of net $40 million each quarter, sorry, each quarter. And then principally my question is, are there any critical milestones here to ensuring this starts up by the end of March next year? I know there is 180 kilometers of cable to arrive this summer and then replace, does that need to be in before the winter period this year? Just any color around that would be interesting, please.

And then secondly, you mentioned integrity of operations, and just with that in mind, Orsted I think this good morning took a pretty sizable warranty provision on cable protection around their wind turbines and it's all around scouring just in terms of the rock. So I imagine with your offshore experience, you probably plan for these issues, but is there any reason to expect that you might be susceptible to similar issues now or in the future? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Oswald. On the Hammerfest as you referred to it, that's a -- we had an income from the insurance coming into the DPN segments this quarter of around $100 million, and part of this is coming from our captive and around $60 million is then estimated to come from the captive, while the remaining will come from external sources. This is then based on totality and not done on the quarterly impact of it. Going forward, with Snohvit and Melkoya in this perspective, it's then quite a lot of cable and work that needs to be done. It's been -- we are working on getting the full overview here, but, so it's man hours than required, has been some limitation also here due to the COVID and to get people into the facility there, but we are also working on that one. So our best estimate now is that we will have a start-up within end of the first quarter next year.

On the totality with the seasons into [Indecipherable], the Harbor it's, since we have the gulf stream, it's not ice place, so it's possible to operate with both in and out at all time. On the wind part of it, as you alluded to, we will not comment on Orsted's statements there, but what we are following on the totality is that we are utilizing in general the competence that we have from our offshore oil and gas in an extensive way for the development of the -- of the areas and those things, and we are also working closely with our suppliers for the wind turbines to also make sure that we have that in good place. So no new updates from us on this one.

Oswald Clint -- Bernstein -- Analyst

That's great. Thank you.

Operator

Next question is from the line of Teodor Nilsen with SB1 Markets. Please go ahead.

Teodor Nilsen -- SB1 Markets -- Analyst

Good morning, and thanks for taking my questions. I have two questions. First one is on Johan Sverdrup, this morning Lundin out and commenting on that platform for Phase II could exceed the current guidance of 720,000 barrels per day. I guess that's not a shocking news, but could you please comment on that, what should we expect after first oil at Phase 2? And the second question is regarding, you said that or I think as far as I understood, the earnings from the U.S. activity includes Bakken in first quarter. I just wonder how much of the earnings, $190 million is related to Bakken? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Teodor. On Johan Sverdrup, no, we are then working to lift the production on Phase 1 then to 535,000, and we expect that will happen before the summer. On the totality for the full field for Johan Sverdrup, our best estimates today is still done, the 720,000 barrels in the full capacity. It has been very -- has been worked in studies and those things, but our best assessments, where we are today is that the capacity is 720,000 on Johan Sverdrup. Regarding Bakken, the impact on the Bakken there in the results, on into the net operating income is a little bit less than $50 million in the quarter.

Teodor Nilsen -- SB1 Markets -- Analyst

Okay. Thank you.

Operator

Next question is from the line of Mehdi Ennebati from Bank of America. Please go ahead.

Mehdi Ennebati -- Bank of America -- Analyst

Hi, good morning, and congratulations on those very strong results. So, two questions. First one from the working capital variation, please. So this is the first quarter --, where you have a working capital outflow. So I imagine that the reasons are different every quarter, but my question is, how do you explain the working capital outflow in the first quarter and should we expect part of that working capital outflow to reinvest [Phonetic] soon?

Second question is about your natural oil and gas production in Norway. So it has been down roughly 3% versus Q1 last year. I understand that you have been impacted by COVID production shutdown, but I thought that you might have been able you need to boost production from fields, where you have comforts are unique, given that the natural oil and gas price has been very strong. So have you been able to boost that production from the fields, where you have a compression or not -- and why, and if I may on gas, would you say that the demand in Europe is currently high on it? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you for your questions. Regarding the working capital, what we are then seeing then from fourth quarter, is that mainly related to the price impact, there was not that much volume impact, in fact that we are working on them to take that further down and then looking into the totality there, of course, dependent on the market outlook, [Indecipherable], so it's been taken into consideration. But Orjan, will you like to give some more details?

Orjan Kvelvane -- Head of Accounting

Yeah, so we see in -- from fourth quarter to first quarter that we have increase in prices, and but there are decrease in volumes that has impact on the inventory. And also on the trade and other receivables, we see increased and related to both prices, and that is related to activity in December and March, and then limited effect on the trade and other payable.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Orjan. On the oil and gas in Norway, this new impact is around 40,000 barrel oil equivalent per day, and that can also explain some of the reason why the production is slightly down on the Norwegian Continental Shelf. In the first quarter on our flex gas fields, both Oseberg and Troll, we have been running those at high capacity taking advantage of the gas prices that we have seen in Europe. And in totality, you saw that invoiced gas price is around $6.7 per million Btu in Europe. So by having the good capacity and utilizing those two fields in the best possible way, we have been able to capture strong values from there.

Regarding the European gas market, prices then going up and being at a high level, it has been strong demand in Asia, cold weather in Asia also then driving the demand for LNG that has meant that less LNG has come to Europe, it has also been a cold weather in Europe, so and then also a little bit less than supply from all the sources into Europe that has meant that gas prices has been strong, and this is something that we are then taking advantage of utilizing the capacity that we have at our fields to gain this value then for our business. So we are then well supported by the higher prices there, but of course, we also see currently that the prices are at a high level and currently there is then filling of storages and those things, which is ongoing and then always the competition for the LNG with Asia, also currently having high prices.

Mehdi Ennebati -- Bank of America -- Analyst

Perfect. Thank you very much.

Orjan Kvelvane -- Head of Accounting

Mehdi, if I could just make one clarification just hopping on that, in fact if you look at the gas production in this quarter in Norway was 7.23 a year ago, it was 7.45. So actually the smooth it, reduction more than makes up the difference, excluding that one, underlying gas production was actually higher.

Mehdi Ennebati -- Bank of America -- Analyst

Yeah, yeah, I have noted [Phonetic] that. Thank you. Thank you very much.

Operator

Next question is from the line of Thomas Adolff from Credit Suisse. Please go ahead.

Thomas Adolff -- Credit Suisse -- Analyst

Hi, good morning guys. Two questions for me. Just one going back to the dividend, and you've obviously mentioned in the past that the dividend needs to be competitive with peers, and over the past 12 months, we've seen many of your peers introduce a variable component with a lower base dividend and obviously, you've got a good starting point there. And I guess you don't have to really comment on what you're thinking, but is it fair to assume that we will get a new distribution policy announced with your Analyst Day in the middle of June? And I guess secondly on flex volumes for gas, I believe there is an annual quota, I'm not quite sure how exactly it works from one quarter to another, but perhaps you can talk about the seasonal flexibility you have in the second quarter and the third quarter, please? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Thomas. On the -- on starting with the dividend there and just to also repeat what I said earlier, it's -- the Board is done during the assessment on the quarterly basis there on the -- based on the outlook, the projects that we have in hands, the volatility that we are seeing in the market. So that's what we will also then continue to do. We will have the Capital Market Day that we are -- we will have in June, there we will update our strategic outlook for the portfolio and that also include financial -- overall financial framework to it. So that's where we are there, but the Board is deciding on a quarterly basis on the dividends.

With the volumes for the gas, it's then -- it's -- they mainly related then to the total oil field, and to -- that was where we have the flexibility. So on Oseberg, we are then utilizing the quotas and the production permit in the best possible way. So we are then running and optimizing based on the prices that we are seeing. So then being able to capture the value then from the flexibility. If you look at compared to last year, you have seen that it's done then for the flex gas in totality, due to the fact that we saw that were high prices now that we then to get advantage for, but the production permit is for totality on total especially, there is production permit, which also means that we can run that at the high level. So comparing them with the gas last year, you saw that the Troll was mainly at the similar level, while the Oseberg, where we produce it over a shorter period, we took the advantage of having high production in the first quarter and onwards.

Thomas Adolff -- Credit Suisse -- Analyst

Okay. Thank you.

Operator

Next question is from the line of Yoann Charenton from Societe Generale. Please go ahead.

Yoann Charenton -- Societe Generale -- Analyst

Hello, everyone. Two question, if I may, regarding the taxes pulling the USA, which is not reflected on the balance sheet, are you able to touch upon the possible implications of these farm downs and the Bakken asset sale for the size of these tax losses pool, please? And the second question would be on turnarounds. So you are guiding for 120k BOED in the second quarter, -- the impact of maintenance, are you able to say how much of this stems from Norwegian gas versus Norwegian oil, please?

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you. On U.S. and the tax positions there, by doing the farm downs, for example as we did now on Empire Wind and Beacon Wind, we are able then to utilize our tax position in U.S., which means that we are able then to do this without having to pay tax for -- on the transaction. So we are utilizing that one in a good way. And it's also similar on the Bakken that we can utilize the positions there when we are, then doing the divestments. When we are looking down at the turnarounds then in totality, as we said around 120 for the quarter, on NCS, I will say around two-third-ish will then be related to the gas, and then around one-third related to liquid of the turnaround in Norway as part of the of the totality of 120. And, Orjan?

Orjan Kvelvane -- Head of Accounting

Just to comment on the Bakken, so we keep the tax carry-forward position within Equinor, yeah.

Yoann Charenton -- Societe Generale -- Analyst

It's very clear. Thank you.

Operator

Next question is from the line of Anders Holte from Kepler Cheuvreux. Please go ahead. Mr. Holte, can you please unmute your telephone?

Anders Holte -- Kepler Cheuvreux -- Analyst

It is now unmuted. Sorry for that. Actually my questions are largely concentrated around the new segment, the renewables segment. Now you've been very helpful in providing your production per field for the oil and gas assets. I wonder if you will do the same for your renewable assets on a quarterly basis. And also, while you mentioned the Hywind Tampen in your introduction, I noticed there, but is there any chance you can give some flavor on what you think levelized cost of energy will end up at, when it comes to Hywind Tampen? Thank you.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Could you repeat your first question, because the line was not that good. If it was then, production per...

Anders Holte -- Kepler Cheuvreux -- Analyst

So the first question is related to the production of renewable power in the quarter. For oil and gas, you report on a field by field basis for the quarter, which is extremely helpful. And it's a very good set of numbers that you provide on a quarterly basis. So I'm just wondering will you do it -- will you do the same for the renewable assets?

Svein Skeie -- Executive Vice President and Chief Financial Officer

On that one, we are now in the build up of the renewable portfolio. It is still early days, but those are things that we actually will then look into going forward, hold to provide good information also then for each of the wind parks that we are then building up. So that is something that we are all looking into and will then continue to look into.

On your second one, on the Hywind Tampen part of it, I do not have the exact levelized cost of energy on that one, but what we are seeing is that, then -- when we started off with the first Hywind windmill, just outside Stavanger, then moving over to Hywind Scotland with six windmills there, we saw a significant decrease in the cost and the levelized cost of energy there. And we saw that further into the Hywind Tampen. We have the estimates for the Hywind Tampen of the total capex figures, and it is -- we are within this, so but I do not have the exact levelized cost of energy for it.

Anders Holte -- Kepler Cheuvreux -- Analyst

All right, thank you, and congrats.

Operator

Next question is from the line of Martijn Rats from Morgan Stanley. Please go ahead.

Martijn Rats -- Morgan Stanley -- Analyst

Yeah, hi, good morning. I also have two if I may. I wanted to ask you about the EU Taxonomy. I guess I founded the topic that is sort of a little hard to gauge, so I recognize the question is sort of quite broad. But what do you think sort of EU Taxonomy, sort of means for Equinor, and particularly this decision that we're all anticipating later in the year, whether natural gas may come under EU Taxonomy or not? Can you talk a bit about what that may mean for Equinor? It may mean very little, but I'm just trying to figure it out.

And the other one, I wanted to ask you is that, I noticed that Equinor New Energy has a separate credit rating of its own or at least from Moody's, it does not from the rest, but from Moody's, it does. And I was wondering, if you could talk a little bit about, exactly what is in this entity? I would imagine it's, of course, your sort of renewables projects, but if you can sort of describe that will be helpful. And also why is the credit rating of this particular company lower than the main credit rating from Equinor? And does that mean that financing renewables projects via an entity like this is somehow at a sort of cost of capital disadvantage?

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you. I will start with the EU Taxonomy and I will ask Orjan, if he would like to add something, and also on the rating, Mads, can you also then prepare for that one for the New Energy company. What we see in the EU Taxonomy and it's then part of then overall then reporting requirement, which is then is incoming, we have been reporting with the Sustainability Report for quite a lot of years, and try not to give overview of important impacts from our operations and how we are doing. So what we will now do is, awaiting the final legislation to follow that one from EU and then also then toward the Norwegian legislation, which will come. And but what we see as an overall, that taxonomy aligns well with our strategic direction and also the mission of shaping the future of energy. And in that context, ESG has and will be an important part. Orjan, will you add something?

Orjan Kvelvane -- Head of Accounting

Yeah, so we got some important clarification last week, so we are in the middle of assessing these, and but I don't think we are in a position right now to comment any further, but we need to come back to that on a later quarter.

Svein Skeie -- Executive Vice President and Chief Financial Officer

So supporting into it and driving the strategic direction there. And Mads, some of the rating of the -- on the rating on the New Energy company?

Mads Holm -- Head of Finance

Yes, thank you very much, Svein. So on the rating side, so I can say that Equinor New Energy is containing most on the renewable business, but most importantly, it does not include the U.S. onshore waiting at this point in time. The rating is slightly lower than Equinor ASA, and that's not because it's not solid, but that's a little bit about how we rate these entities and set it up. Thank you.

Martijn Rats -- Morgan Stanley -- Analyst

All right, wonderful. That's really great.

Operator

Next question is from the line of Jon Rigby from UBS. Please go ahead.

Jon Rigby -- UBS -- Analyst

Thank you. How's it going? Two questions, actually rather more granular, I guess. The first is, you made some comments about how problematic the pandemic effects are in Brazil, so I just wanted to check in on both the Peregrino work and the Bacalhau FID, are the conditions in Brazil could allow you to sort of proceed with both of those on schedule or should we just be a little bit cautious on that? I guess it depends on how much work you have to do in country. And the second is, and forgive me for asking about this, could be the tax rate on the NCS has been a bit all over the place since the tax concessions last year, and it's popped back up to something that looks more akin to where we were before on those concession. So and I guess, as I understand it, it's got much to do with the oil price, so if oil prices continue in the kind of range we've seen year-to-date, is the tax rate on the NCS that we saw in the first quarter, a good number to be thinking about going forward? Thanks.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thanks, Jon, for the question. Let me then start with Brazil, and as you all know, Brazil has been then hit hard by the pandemic there. So what is our main priority is the safety and security for our people, and that means that we are following this very closely, making sure that we are not having more people on board, then is absolutely critical, then to do the development. There has been very hard limit -- also limitations in Brazil on then hold them to be able to -- on a number of people that we are having on board. So that is the main priority. And that means that it's a bit hard and to say how this has developed going forward. And that means that we just need to follow it, make sure that the safety is well taken care off, and when there are possibility then to do something and have more people on board, then we will then have more people on board. That's for the Peregrino main, but it's also impacted on the Peregrino Phase 2. Peregrino Phase 2 was on plan and then to deliver with the start up by end of last year, but following this pandemic situation, it is also that this has been also been delayed following the pandemic there and also on the repairs on Peregrino main, so that means that we have now a later start-up. But it's still a challenging situation in Brazil, so it means that we need to follow it closely and make sure that the safety is well taken care of, and then we also need to come back then later on when we see that is going back to more normal again to come with the exact date for this one. So no update on it.

On the tax rate, on Norwegian Continental Shelf, and the taxes paid in Norway on the Norwegian Continental Shelf is then this quarter coming from the results that we made in 2020 and it was $78 million that we paid. However, when we look at taxes payable, which will then impact the second quarter, that is then increasing. And as you said, Jon, on the tax rate, on the NCS, it's now, then, close to 72 percentage point. That's impacted by the strong results that we have been able then to generate on the Norwegian Continental Shelf. So then high earnings, and this is the highest quarterly results since 2014 with the current prices. So with the high prices, we also see then less impact from the tax package. So that's the totality on it. So of course dependent on investment level, that has an impact with the increased uplift, but with high results in the E&P Norway segments, the impact from the tax package will then be less than what we saw in last year, when we had lower results, and then you had much more impact from the tax package.

Jon Rigby -- UBS -- Analyst

Okay, super. Thanks for that.

Operator

Next question is from the line of John Olaisen from ABG. Please go ahead.

John Olaisen -- ABG -- Analyst

Hey, good morning, gentlemen. My question is actually more like of a request for some comments on it. The renewable business, it's great that you start reporting it as a separate segment. Of course, when your doing the equity accounting as main principle, the revenues, EBITDA or EBIT numbers will be missing, or at least being useless, and these numbers are really important to look at when we really try to evaluate the underlying performance or try to value that part of the business. I just wonder if it would be possible to at some point to go over to more proportionate accounting, similar to what you do in oil and gas business. I think it would be more useful for us to judge. The next few quarters your revenues from that segment will be zero, unless you have any sales, of course, any asset sales. And also finally on the same renewable business, it would be great to get some more insight into the financing of the individual wind farms. So, I guess, that's more of a request, but I wonder, if you could comment a little bit on those issues, I'm sure you thought about it.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thanks, John, for the questions there. And this quarter we have done reporting renewables first time as a separate segment, following then the accounting rules there, and as you said is then several of the companies is then equity accounted and that we are in a way following. We tried then also then to give some more visibility on part of the totality, as they also have been doing earlier on an annual basis, also some of the commercial terms and then as well as descriptions of the totality is then also then given at equinor.com. So there are some more information there. And then also, we have tried to give some, for example on Dogger Bank, when the financing was in place, we also released some information around that one. So I think it's, it's not -- it's a segment in development.

Orjan Kvelvane -- Head of Accounting

Just a comment from my side, so...

John Olaisen -- ABG -- Analyst

Thank you.

Orjan Kvelvane -- Head of Accounting

Okay.

Peter Hutton -- Senior Vice President Investor Relations

Okay. Next one.

Operator

Next question is from the line of Lydia Rainforth from Barclays. Please go ahead.

Lydia Rainforth -- Barclays -- Analyst

Thank you, and good afternoon. Two questions if I could. The first one on cost. If I look Norway being down, the 3% year-on-year and then International and U.S. [Indecipherable] year-over-year, are they broadly in line with what you would expect at this stage, and I just want to know if Norway could go a little bit further? And then secondly, on the hydrogen side and the Kirby project that you announced during the quarter, is the idea that the Equinor Natural Gas going into that project under that, ends up being a long-term contract, and that essentially has then zero carbon gas and the way that you're thinking about it? Thanks.

Svein Skeie -- Executive Vice President and Chief Financial Officer

Thank you, Lydia. Let me then start on the cost side and the totality there. As we then also comment a bit on in the run rate of the segments, the underlying operating costs are down then both in the E&P Norway and E&P International, as well as in the U.S. We see that there are 3% underlying cost down in the E&P Norway and it's then, we are able to capture on the improvements that we have been doing over the last years, so that is then, and there is high focus on it in the organization. Looking at the totality, when you look at the absolute numbers on Norway, it will, since we are reporting in U.S. dollar and the quite a lot of the costs are then in Norwegian Kroner, there will be a currency impact on it. But what we're then trying now to focus on, on the online and we're trying to take out that impact, and there we see the improvements that we're getting with around 3% in -- related to -- not to go as the -- since the impact coming from that.

On the international part of it, in E&P International totality, we have still a strong focus there, both ourselves as well as then all partners there, so we see that both we and but not also, where we have partners, that operators are also having strong impact on the cost and good focus to take that further down. On the hydrogen part of it, as you asked, Lydia, we have done separate unit within the MMP segment, it's called low carbon solutions. And we in this quarter, we have then been able then to have progress on several things. We have releases that we have related and to around the Humber in U.K. So we are maturing and working on that one, as well as the MOU that we have with the -- for Netherlands, Belgium, and France. So that is handled by the low carbon solution group in MMP.

Lydia Rainforth -- Barclays -- Analyst

That's it. Thank you.

Operator

[Operator Instructions]

Peter Hutton -- Senior Vice President Investor Relations

I'm actually going to interrupt that, actually, because we do have to get away. So I think I saw anyway there are no further questions. So I'd like to take this opportunity to thank Svein and our colleagues for covering those, and for all of you who have joined the call this morning. And as always, if you have any follow-up, please don't hesitate to call us in Investor Relations. I also take the opportunity to remind you that it's our Capital Market Day, as Svein said, on the June 15th, so we look forward to talking to you then as well.

So with that, I'd like to pass on my thanks. Stay safe and best regards. Many thanks indeed.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Peter Hutton -- Senior Vice President Investor Relations

Svein Skeie -- Executive Vice President and Chief Financial Officer

Orjan Kvelvane -- Head of Accounting

Mads Holm -- Head of Finance

Biraj Borkhataria -- RBC Capital Markets -- Analyst

Oswald Clint -- Bernstein -- Analyst

Teodor Nilsen -- SB1 Markets -- Analyst

Mehdi Ennebati -- Bank of America -- Analyst

Thomas Adolff -- Credit Suisse -- Analyst

Yoann Charenton -- Societe Generale -- Analyst

Anders Holte -- Kepler Cheuvreux -- Analyst

Martijn Rats -- Morgan Stanley -- Analyst

Jon Rigby -- UBS -- Analyst

John Olaisen -- ABG -- Analyst

Lydia Rainforth -- Barclays -- Analyst

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