Lower oil & gas prices take a bite out of Norwegian energy giant’s profit

Norway’s state-owned energy giant Equinor has recorded a solid profit and performance in the second quarter of 2023, however, the profit was cut by more than half year-on-year from the record-high level seen last year due to significantly lower oil and gas prices.

The global energy crisis created a one-for-the-books year for the oil and gas industry in 2022, embracing price volatility, as energy prices jumped to all-time high levels amid high demand and tight supply. These bumper profits, which oil and gas players, raked in during 2022 are nowhere in sight this year. This is demonstrated by Equinor, as the Norwegian giant more than doubled its annual profit in 2022 but the adjusted earnings of $19.5 billion from 1H 2023 indicate that this has now fallen by 45 per cent, compared to $35.4 billion in 1H 2022.  

Equinor reported on Wednesday, 26 July 2023, that it delivered adjusted earnings of $7.54 billion in the second quarter of 2023, compared with $11.97 billion in the previous quarter. This is down 57 per cent from $17.57 billion in the second quarter of 2022. The firm’s adjusted earnings after tax were $2.25 billion in 2Q 2023, down from $5.3 billion in the same period in 2022.

The Norwegian giant’s net operating income was $7.05 billion in 2Q 2023, down from $12.52 billion in the first quarter of 2023 and $17.73 billion in the same period in 2022, while net income was reported at $1.83 billion in 2Q 2023, down from $4.97 billion in 1Q 2023 and $6.76 billion in the second quarter of 2022.

According to Equinor, it realised a price for piped gas to Europe of $11.5 per mmbtu while the realised liquids price was $70.3 per bbl, down by 58 per cent and 34 per cent, respectively, compared to the second quarter of 2022. This is down from the same quarter last year mainly due to the lower prices for liquids and gas.

Anders Opedal, president and CEO of Equinor, commented: “Equinor delivered solid earnings in a quarter affected by turnarounds and energy prices down from the extraordinary levels last year. We have increased the production capacity of Johan Sverdrup and achieved record production from the field. Our international portfolio had strong production in the quarter. We continue with significant capital distribution and expect a total distribution of 17 billion dollars in 2023.”

The firm’s cash flow provided by operating activities before taxes paid and working capital items amounted to $10.5 billion for the second quarter. Thanks to the strong 2022 earnings, Equinor paid two NCS tax installments, totaling $10 billion. In the second half of the year, NCS tax instalments are related to expected 2023 results and consist of three instalments of around $3.75 billion, of which one is to be paid in the third quarter.

Equinor maintains a strong financial position with adjusted net debt to capital employed ratio at negative 35.1 per cent by the end of the second quarter, from negative 52.3 per cent at the end of the first quarter of 2023.

Furthermore, the Norwegian player delivered total equity production of 1,994 mboe per day for the second quarter, slightly above the 1,984 mboe per day in the same quarter of 2022. The company explains that increased capacity for Johan Sverdrup to 755,000 boe per day, and high production from the Peregrino field in Brazil contributed to the strong liquids production in the quarter, partially offset by gas production on the NCS being reduced by planned maintenance, the temporary shutdown of Hammerfest LNG and fields connected to the third-party operated Nyhamna gas process facility.

On the other hand, the production from renewable energy sources was 345 GWh in the quarter, up from 325 GWh for the same quarter last year. The increase was mainly driven by production from the floating wind farm Hywind Tampen on the NCS and new solar plants in Poland. The total power production – including gas-to-power production in the UK – ended at 947 GWh for the quarter.

“In the quarter we made good progress on our project portfolio. Together with our partners, we took the final investment decision on the BM-C-33 project in Brazil. Development of two subsea tie-back fields on the NCS was approved, both are expected to quickly contribute to new production to the market with low costs and emissions from production. Last week we entered into an agreement to acquire the renewables company Rio Energy, and we expect first power from Dogger Bank during the summer,” added Opedal.

Moreover, the company completed seven exploration wells offshore with three commercial discoveries in the quarter while ten wells were ongoing at the quarter-end. Equinor also continues to develop low-carbon value chains in collaboration with industrial partners. To this end, the firm agreed with Engie to cooperate and explore co-investments in decarbonised thermal power production in France, Belgium, and the Netherlands.

At the world’s largest offshore wind farm, Dogger Bank in the UK, the first turbine components are being loaded out and the first power is expected during summer. The full commercial production for Dogger Bank A is expected in the third quarter of 2024.