Eldar Sætre, chief executive at Norway’s suddenly troubled oil company Equinor, has to face shareholders later this week at the company’s annual meeting. He now claims that both he and Equinor’s board paid close attention to problems unfolding at the company’s operations in the US right after he took over as CEO in 2014.
“There were very demanding internal control challenges we had to work on for a long time, actually,” Sætre told newspaper Dagens Næringsliv (DN). “I have followed the work closely and the board has followed the work closely, and the operations now are in completely different shape.”
Sætre defended his role in addressing what many have called both the “industrial scandal and investment scandal” that arose after Equinor, when the company was still called Statoil, invested heavily in shale oil and shale gas projects in the US. Its purchase of Brigham Exploration for USD 4.4 billion, made by Sætre’s predecessor Helge Lund in 2011, ranked as one of Norway’s biggest acquisitions ever. The price of the deal, done at the top of the market, turned out to be too high, however, and the expansion into the “unconventional” oil and gas project in North Dakota highly prolematic.
Sætre claims the problems emerged quickly, even though the first highly critical report by internal auditors wasn’t delivered until 2014. “We had quite considerable challenges with internal control,” he told DN in an interview after initially commenting only briefly on DN‘s documentary on the scandal that’s also been picked up by most Norwegian media.
Blaming ‘back office functions’
DN has detailed big spending and management chaos that Sætre now links mostly to “back-office functions:” bills weren’t paid or sent out, there was little if any overview of bank accounts at Brigham, and equipment disappeared on the prairie in North Dakota. Sætre puts most of the blame on Brigham, even though several of Statoil’s top executives in Houston including Norwegians received huge salaries and bonuses, drove fancy cars and spent heavily on entertainment and company parties to promote Statoil’s name.
Statoil had also been operating in Houston for quite a while when it acquired Brigham along with other fracking operations and land-based oil wells. “We took over an organization and a way of doing business, and when we got an overview, things were not the way we want them, not at all,” Sætre said. He claims it was “an extremely demanding job to get the organization up and going,” and that “we put internal control on this, with audits, lots of audits, to reveal (what was going on) in full scale, and then we put in resources to correct it. This has gone on for a long time, because they were quite fundamental and powerful steps we had to take to get things in order.”
Writedowns in the first quarter
Equinor officials have been accused of withholding the extent of its losses in the US. They wrote down the value of its onshore assets there by around USD 800 million in its recent first-quarter report. Most aren’t profitable at today’s low prices.
Equinor has now written off onshore assets in the US by more than USD 10 billion, but Sætre thinks the shale oil projects still have a place in Equinor’s portfolio. They broke even in the first quarter and generated a positive cash flow. Pre-tax profits for the company as a whole were cut in half during the first quarter, meanwhile, to USD 2.05 billion from USD 4.19 billion last year.
Lund continues to refuse comment on what one auditor called the “utter fiasco” that resulted from the shale oil and gas acquisitions he oversaw. Lund left Statoil in October 2014 to take a more lucrative if short-lived job at British Gas, and now serves as chairman of BP.