Equinor slips to quarterly loss due to impairment charges

Norwegian oil and gas major Equinor’s financial performance in 4Q 2019 was impacted by lower oil and gas prices and huge impairments despite record production during the period. 

Equinor on Thursday reported adjusted earnings of $3.55 billion for the fourth quarter 2019, down 19% from $4.39 billion in the same period in 2018. Adjusted earnings after tax were $1.19 billion, down 23% from $1.54 billion in the same period last year. Lower prices for both liquids and gas impacted the earnings for the quarter.

Equinor’s net loss in the fourth quarter of 2019 was $0.2 billion compared to a profit of $3.4 billion in the same period of 2018.

IFRS net operating income was $1.52 billion and the IFRS net income was negative $0.23 billion, following net impairments of $1.41 billion.

Net operating income was impacted by net impairment charges of $1.41 billion, of which $1.28 billion relates to assets on the Norwegian continental shelf, mainly as a result of change in method for including tax uplift in impairment evaluations.

Equinor’s revenues decreased by 32% in 4Q 2019 totaling $15.2 billion compared to $22.4 billion in 4Q 2018.

Eldar Sætre, President and CEO of Equinor, said: “Record high production, reduced costs and continued strong capital discipline contributed to solid results in a quarter with lower commodity prices. For the year we delivered competitive returns and strong growth in capital distribution. Going forward, we expect to grow production, returns and cash flow from a world-class project portfolio, representing 6 billion barrels to Equinor with an average break-even oil price below 35 dollars per barrel. The board proposes an increase in the quarterly dividend of 4% and the launch of the second tranche of our 5 billion dollar share buy-back programme, based on an even distribution for the rest of the period.”

For the full year, Equinor’s adjusted earnings were $13.5 billion, down from $18 billion in 2018.

Record high production

Equinor delivered record high total equity production of 2,198 mboe per day in the fourth quarter, up 1% from the same period in 2018.

The flexibility in the gas fields was used to defer production into periods with higher expected gas prices. Successful start-up and ramp-up of new fields as well as new well capacity, contributed to growth in production.

The Johan Sverdrup field was put in production on October 5, 2019, and is currently producing more than 350,000 barrels per day from eight wells. The field is expected to reach plateau during the summer of 2020.

Sætre said: “Equinor is already delivering competitive returns, and we expect to grow production, returns and cash flow going forward. We are investing in a world class project portfolio coming on stream towards 2026, representing 6 billion barrels to Equinor with an average break-even oil price below 35 dollars per barrel. In addition, Johan Sverdrup phase 1 will contribute to strong growth at the Norwegian continental shelf. High quality projects like Bay du Nord in Canada, Rosebank in the UK and BM-C-33 and Bacalhau in Brazil will deliver high profitable growth internationally.”

Looking ahead, Equinor expects average annual organic capex of $10-11 billion in 2020 and 2021, and around $12 billion for 2022 and 2023. The company expects to deliver around 7% growth in production in 2020, and an average annual production growth of around 3% from 2019 to 2026. The company’s exploration activity in 2020 is projected to be around $1.4 billion.

Also on Thursday, Equinor revealed its plan to reduce net carbon intensity by at least 50% by 2050.

Offshore Energy Today Staff

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