Norway’s state-controlled oil company Equinor gave in on Thursday to demands for more detailed reporting of its troubled division in the US. Equinor’s board leader also acknowledged massive criticism over the company’s high-flying US operations in the boom years before oil prices took a dive in 2014.
Current CEO Eldar Sætre, who succeeded Helge Lund in October 2014, announced at the company’s annual general meeting Thursday afternoon that the company will now change the manner in which it reports on the financial performance of its US operations. Instead of lumping them together with all of Equinor’s other international operations, the US division will finally be singled out after years of encouragement to do so from analysts and Norwegian regulators.
“We will make changes,” Sætre said, to make the US operations more transparent in quarterly reports. The changes will begin now, in the second quarter, when the US will be reported on as its own operating segment within international exploration and production.
The changes come after newspaper Dagens Næringsliv (DN) has revealed how Equinor has lost the equivalent of NOK 200 billion on its US operations over the past 20 years. While Sætre and other company officials have tried to link the losses mostly to the fall in oil prices in 2014, DN could document how the company then known as Statoil also paid huge salaries, spent large amounts on company parties and business-class air travel, and lacked control over internal operations not least at oil shale projects in which it had invested. Most of them ended up logging large losses as well.
Sætre and his colleagues have been bombarded in recent days with criticism and questions from analysts, government officials, investors and media commentators. While they claimed they’ve been “open” about the losses, no one else was aware of the extent of them, and DN‘s report came as an unwelcome surprise to many. Former CEO Helge Lund, who now serves as chairman of BP, has refused comment on his role in all the losses and management chaos from around 2011 to 2014.
Sætre, on the other hand, and Torgrim Reitan, head of Equinor’s international operations, have been grilled repeatedly and on national TV in Norway. They’ve also been summoned to answer questions from major investors like the pension fund KLP in Oslo and Oil Minister Tina Bru, who will meet with company officials on Monday. The Norwegian government still holds a 67 percent stake in what began as a wholly owned state oil company, and remains Equinor’s biggest shareholder.
Equinor officials and board members have now acknowledged that the high pay levels at the company’s offices in Houston and Austin, Texas were “unacceptable,” and Sætre said the US operations may now be set up as an “independent reporting segment.”
Equinor’s board leader Jon Erik Reinhardsen also expressed regret at Thursday’s annual shareholders’ meeting for a “cost culture in parts of the American organization that absolutely was not good.” After acknowledging all the unwanted attention on the cost levels, lack of internal control and loss of capital in the US, he told shareholders that “we quite simply can’t have that in Equinor.” He said the “weaknesses” had been “on the board’s agenda since they were identified,” and followed up since.
Shareholder proposals all rejected
Labour unions at Equinor had complained about all the losses and big spending in Houston on state broadcaster NRK’s nightly national newscast Wednesday, and strongly criticized Reitan as head of international operations. Both Sætre and Reinhardsen expressed confidence in Reitan, however, claiming he had been sent out to Houston to “clean up” operations there, and done so.
In other events at Equinor’s annual meeting, a proposal initiated by the environmental organization Greenpeace to ban oil drilling in vulnerable and frontier areas was not approved. Nor were minority shareholder proposals to set short-, medium- and long-term net carbon intensity targets, to consider the health effects of global warming because of fossil energy in the company’s further stratey, to halt all oil and gas activities outside the Norwegian continental shelf, and to set a new direction for the company including phasing out all exploration activities within two years.