Kim Fustier

Kim Fustier asked about Shell's strategy for its chemicals business, questioning if the announced cost reductions are sufficient for a prolonged downcycle and what prevents outright capacity shutdowns. She also inquired about the logic behind potentially divesting assets like Vaca Muerta in Argentina, given Shell's upstream longevity focus and unconventional experience.

Answer

CFO Sinead Gorman clarified that reports of divesting Vaca Muerta are 'fake news,' stating Shell has not made any such announcement. CEO Wael Sawan confirmed that Shell is actively considering unit-by-unit shutdowns in chemicals based on cash costs, leaving 'nothing off the table' to achieve free cash flow neutrality during severe margin realities. He emphasized maximizing value from every dollar and actively looking to redeploy capital from lower-returning assets.

Kim Fustier asked about Shell's chemicals business, questioning if 'several hundred million dollars' in cost cuts would be sufficient for a prolonged downcycle and what prevents outright capacity shutdowns. She also sought clarification on reports of Shell selling its Vaca Muerta asset in Argentina, given its potential and Shell's unconventional experience.

Answer

CFO Sinead Gorman denied reports of selling the Vaca Muerta asset, stating Shell has not made any such announcement. CEO Wael Sawan addressed chemicals, confirming that nothing is off the table, including unit-by-unit shutdowns based on cash costs, to achieve free cash flow neutrality during severe margin conditions. He emphasized that Shell is exploring all opportunities to address the business's performance.

Kim Fustier inquired about Shell's management of the LNG Canada feed gas gap, specifically the split between equity tight gas production and grid supplies, and the ability to shift based on prices. She also requested an update on the chemicals business restructuring, including the planned Monaco turnaround in Q4 and remaining work.

Answer

Shell CEO Wael Sawan explained that Shell's trading organization sources feedstock for LNG Canada, optimizing between equity gas (Grand Birch) and third-party supply based on economics, as demonstrated by turning down equity gas when AECO prices went negative. For chemicals, Sawan acknowledged the deep trough and the need for further cash preservation measures, aiming to take out hundreds of millions more in OpEx and CapEx, with Monaco's Q4 maintenance being part of the ongoing work to reach full capacity.

Kim Fustier asked about Shell's management of the LNG Canada feed gas gap, including the split between equity production and third-party supplies, and an update on the chemicals business restructuring, including Monaca's Q4 turnaround.

Answer

Shell CEO Wael Sawan explained that Shell's trading organization optimizes LNG Canada feedstock sourcing, leveraging third-party supply when more economic, and noted Train 2 is days away. He detailed the chemicals business's deep trough, outlining plans for hundreds of millions more in OpEx and CapEx reductions to achieve cash preservation, with impacts expected in 2026, and mentioned broader capital reallocation in the Renewables and Energy Solutions (RES) segment.

Kim Fustier of HSBC inquired about the new hydrogen electrolyzer in Germany, asking if it's primarily for regulatory compliance or revenue, and why Shell chose to produce it. She also asked about the business model for the Polaris CCS project and its strategic importance amid shifts in other low-carbon ventures.

Answer

CEO Wael Sawan explained that CCS is a critical part of Shell's own decarbonization journey, and the Polaris project is de-risked and creates value through Canadian government credits. CFO Sinead Gorman added that the Refine-2 hydrogen project in Germany is supported by government incentives and will initially supply their own facilities, lowering the carbon footprint of their products and making them more attractive to customers, while also avoiding costs.

Kim Fustier asked for more color on the reorganization of Equinor's NCS business along centralized functional lines (e.g., subsea drilling) and how it prepares the company for a future with more small developments, and requested an update on the pre-FID projects Wisting and Bay du Nord.

Answer

President and CEO Anders Opedal explained that the NCS reorganization is a significant change to streamline work processes for smaller, subsea tie-in developments, aiming to reduce time from discovery to production from 5-7 years to 2-3 years and increase efficiency. He stated that for Wisting, Equinor is working to simplify the challenging project, aiming for concept conclusion in 2026 and DG3 in 2027, but is not schedule-driven. For Bay du Nord, concept selection (DG2) is approaching, with good engagement with Canadian authorities, aiming for an investment decision in the coming years if successful.

Kim Fustier asked for more details on the reorganization of Equinor's NCS business along centralized functional lines and how it prepares the company for a future with more small developments. She also requested an update on the pre-FID projects Wisting and Bay du Nord.

Answer

CEO Anders Opedal explained that the NCS reorganization is a significant change, streamlining 70 work processes from drilling to development, grouping decisions, and reorganizing onshore functions to enable faster execution of smaller, subsea tie-in projects. The goal is to reduce time from discovery to production from 5-7 years to 2-3 years and achieve 200-300 efficiency gains. For Wisting, he noted it's a challenging project, aiming for concept conclusion in 2026 and DG3 in 2027, emphasizing a focus on the right financials over schedule. For Bay du Nord, he mentioned approaching concept selection (DG2) with good engagement with authorities and suppliers to reduce costs, potentially leading to an investment decision in the coming years. Both projects, if successful, will contribute to high production beyond 2030.

Kim Fustier asked for Equinor's views on the outlook for the Norwegian Continental Shelf (NCS) supply chain and cost inflation, given concerns from competitors about a potential lack of projects after the current high activity driven by tax incentives.

Answer

CFO Torgrim Reitan acknowledged the current high activity on the NCS, partly due to the COVID tax incentive program, and the natural expectation of lower activity thereafter. He stated Equinor's job is to adapt and adjust. He highlighted the 'NCS 2035' project, which aims to maintain production levels by focusing on more but smaller discoveries, quicker developments, and lower costs. This includes drilling 30 exploration wells and undertaking 6-8 subsea developments annually, which is more than current levels. He expressed optimism that Equinor's approach, including new ways of working with suppliers, will significantly contribute to maintaining high activity on the NCS.

Kim Fustier from HSBC Holdings plc noted concerns from a Norwegian competitor about a potential lack of projects on the NCS to sustain a healthy domestic supply chain within a year or two, and Equinor's shift from large greenfield to smaller brownfield projects. She asked for Equinor's views on the outlook for the NCS supply chain and cross-inflation.

Answer

Torgrim Reitan, CFO, acknowledged that a period of high activity driven by tax incentives is naturally followed by lower activity. He highlighted Equinor's 'NCS 2035' project, aiming to maintain production levels through more but smaller discoveries, quicker developments, and lower costs, including 30 exploration wells and six to eight subsea developments annually. Mr. Reitan expressed optimism that Equinor's approach will significantly contribute to maintaining high activity and supporting the Norwegian industry.

Kim Fustier asked about the recent cancellation of the blue hydrogen project with RWE, inquiring why it was not viable and what Equinor's next steps are for its hydrogen strategy.

Answer

Executive Torgrim Reitan explained the project was paused because the necessary conditions—an economic framework, a significant customer base, and a functioning market—are not yet sufficiently in place. He stated that Equinor is now re-evaluating different approaches to establishing a blue hydrogen value chain in Europe.

Kim Fustier from HSBC asked for an update on the Wisting and Bay du Nord projects, the current cost environment in the offshore contracting market, and the company's seriousness about its recent small investment in a U.S. lithium project.

Answer

Executive Torgrim Reitan stated that Wisting is being matured towards a 2026 final investment decision, and Bay du Nord is progressing towards concept selection. He acknowledged a tight and inflationary contracting market but noted Equinor has good control over sanctioned projects. Regarding lithium, he described the investment as taking an early, small position in an interesting future commodity, citing synergies with existing subsurface expertise.

Kim Fustier of HSBC asked about the rapid production ramp-up at the Johan Castberg field, questioning if the performance was better than expected and what factors contributed to the success.

Answer

EVP & CFO Torgrim Reitan confirmed that the Johan Castberg ramp-up was 'remarkable' and even quicker than the company had planned, reaching its plateau production of 220,000 barrels per day in less than three months. He noted this performance will be a significant contributor to the company's 4% production growth target for the year and attributed the success to factors including a good installation of the assets on the field.

Kim Fustier of HSBC asked about the remarkably fast production ramp-up of the Johan Castberg field, inquiring if it was better than expected and what contributed to the success.

Answer

EVP & CFO Torgrim Reitan confirmed the ramp-up to plateau production of 220,000 barrels per day in less than three months was 'remarkable' and even quicker than planned. He attributed the success to good installation and execution, noting it will be a significant contributor to the full-year production growth target.

Kim Fustier asked about BP's successful Venture Global LNG arbitration case, why it was successful, and the timing for receiving the reported EUR 1 billion in damages.

Answer

Murray Auchincloss (CEO, BP) expressed satisfaction with the arbitration result but declined to comment on other cases. He clarified that the reported EUR 1 billion in damages was not BP's number and that the next phase for determining damages is being organized with the arbitration panel, with no date set yet. He stated BP would update the market when more information is available.

Kim Fustier asked why BP's Venture Global LNG arbitration case was successful, unlike some peers, and inquired about the expected timing for receiving the reported $1 billion in damages.

Answer

Murray Auchincloss (CEO, BP) expressed satisfaction with BP's successful arbitration but declined to comment on other cases. He clarified that the reported $1 billion damages figure was not BP's and that the next phase for determining damages is being organized, with no specific date set yet.

Kim Fustier from HSBC asked about the drivers behind the impressive underlying cash flow (ex-working capital) and inquired about the status of the farm-down process for the Kaskida and Tiber assets in the Gulf of Mexico.

Answer

CEO Murray Auchincloss confirmed that BP is in conversations regarding a farm-down of Kaskida and will consider a partner for Tiber after reaching a final investment decision, with the goal of maximizing shareholder value. CFO Kate Thomson attributed the strong quarter-on-quarter growth in operating cash flow primarily to higher underlying earnings, especially from trading, and lower cash tax payments.

Kim Fustier from HSBC asked about the drivers of BP's strong underlying cash flow, which grew more than net income, and inquired about the status of the farm-down process for its Kaskida and Tiber assets in the Gulf of Mexico.

Answer

CEO Murray Auchincloss confirmed that discussions for a Kaskida farm-down are ongoing and that a Tiber farm-down would be considered after a final investment decision is made later this year. CFO Kate Thomson attributed the strong cash flow primarily to higher underlying earnings, especially from trading, and lower quarter-on-quarter cash tax payments.

Kim Fustier from HSBC asked about capital expenditure flexibility, noting the recent reduction for 2025 and questioning if further cuts were possible on a 12-month view in a weaker oil price environment. She also pointed to recent project cancellations as potential downside to the transition CapEx guidance.

Answer

Executive Murray Auchincloss confirmed the CapEx cut from $15 billion to $14.5 billion was a prudent measure given the macro environment, emphasizing a returns-driven approach. He stated there is no change to the overall guidance from Capital Markets Day but highlighted $2.5 billion in further CapEx flexibility if prices fall significantly. He noted this would be achieved by adjusting activity in onshore rigs and refining, but such cuts would challenge long-term growth and are not planned at this stage.

Kim Fustier from HSBC asked if the recent active replenishment of the upstream portfolio signals a change in the company's view on peak oil demand, and whether recent disposals like Bonga and Argentina shale were opportunistic or a core part of the cash flow cycle.

Answer

Patrick Pouyanné, Chairman & CEO, explained that the company continues to seek first and second quartile opportunities (low cost, low breakeven) to ensure profitability long-term, regardless of the timing of peak demand. He characterized the disposals as a consistent strategy of portfolio management, prioritizing capital allocation to larger, operated projects and divesting non-operated, higher-cost assets to maintain capital discipline.

Kim Fustier of HSBC asked about the target proportion of U.S. LNG offtake to be covered by upstream gas assets and requested details on the commercial terms (slopes) and renegotiation schedule for new oil-linked LNG contracts.

Answer

CEO Patrick Pouyanné specified a target of securing around 1 Bcf/d of equity gas production in the U.S. to hedge LNG costs. He declined to disclose confidential commercial terms like contract slopes but noted that roughly one-seventh of their long-term LNG portfolio comes up for renegotiation annually as part of normal business operations.

Kim Fustier from HSBC asked about the impact of revoked U.S. licenses on Eni's Venezuelan operations and its ability to lift crude. She also had a housekeeping question on where to find the EUR 3 billion from the Enilive disposal in the Q1 cash flow statement.

Answer

Executive Guido Brusco explained that Eni's Venezuelan operations primarily produce gas for the domestic market and they are engaging with U.S. authorities to find a compliant payment solution, expressing confidence in a resolution by year-end. Executive Jon Rigby acknowledged the cash flow query and offered to clarify the item's location in the statement offline.

Kim Fustier of HSBC asked about the derivation of the final valuation for the Ithaca combination, given the apparent discount and recent slide in Ithaca's share price. She also inquired about the potential impact of reimposed U.S. sanctions on Eni's activities in Venezuela.

Answer

Executive Francesco Gattei stated the Ithaca deal's valuation was based on long-term strategic factors like synergies and cash flow, not short-term stock movements, and noted it generates a book value uplift of over €200 million. Guido Brusco, Head of Natural Resources, commented that despite sanctions, Eni expects to continue lifting its equity crude from Venezuela through a separate, established procedure for credit recovery.