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Saturday, July 13, 2024

Equinor’s results surprise market

Norwegian state oil company Equinor reported second-quarter results on Friday that were way below last year’s but nonetheless better than analysts had expected. They’d been predicting far more losses, not least on US operations, but the bottom line was positive and Equinor shares rose on the Oslo Stock Exchange.

Equinor CEO Eldar Sætre blamed Equinor’s much-lower results mostly on the Covid-19 pandemic, but they were better than expected. PHOTO: Equinor/Arne Reidar Mortensen

It hadn’t been a matter of whether Equinor would log losses, but how much. The company, which remains 67 percent-owned by the Norwegian government, has been pounded by harsh criticism recently after losing enormous amounts of money on ill-fated oil and gas projects in the US, and then downplaying them for many years. Calls for investigations continue.

Now, after the Corona crisis and various global conflicts cut the price of oil earlier this year, some analysts were expecting losses at Equinor of as much as NOK 2.5 billion. They also expected Equinor to cut its oil price expectations like other oil majors have done, affecting the value of oil assets. Shell, BP and Eni, for example, have all cut price predictions to around USD 55-60 a barrel, while Equinor kept it at USD 80.

It thus came as a surprise when Equinor CEO Eldar Sætre kept Equinor’s oil price expectations on Friday at as high as USD 77 a barrel in 2025 and USD 80 in 2030. Newspaper Dagens Næringsliv (DN) reported how that allowed Sætre to avoid even more large writedowns, even though the company did write off more than NOK 3 billion. The quarter’s relatively low oil and gas prices cut Equinor’s results dramatically but its adjusted operating results of USD 354 million and positive bottom line were thus better than expected.

To see Equinor’s own earnings report, click here (external link to Equinor’s own website).

Many had predicted net second-quarter losses at Equinor, of as much as USD 222 million (more than NOK 2 billion) according to numbers collected by Infront for news service TDN Direkt. The results actually reported remain a fraction of those reported for the same quarter last year, however, after total revenues were cut in half by the oil price collapse and low demand, but also strong results from trading operations in volatile markets.

“The big headline here is an adjusted operating result that’s positive, but tied to a division (trading) that’s not looked at the most,” Teodor Sveen-Nilsen, an oil analyst at Sparebank1 Markets in Oslo told DN. “MMP (the division responsible for all trading of oil and gas and Equinor’s refineries) delivered better than expected, while the areas we follow the most (Norwegian and international operations) both did worse than expected.”

Equinor did resort to writedowns of USD 374 million (NOK 3.4 billion), but a large portion of that was tied to a gas processing facility in Norway and to exploration.

US operations still in the red
Equinor, under pressure from all the criticism over its US operations after DN revealed their shocking accumulated losses this spring, also reported US results separately for the first time. They generated a loss of USD 341 million in the second quarter, compared to reported profits of USD 150 million last year. DN reported that the loss on US operations was nearly as large as total losses in all other countries outside Norway.

DN has revealed how internal audits conducted from 2013 to 2016, when Equinor was still called Statoil, showed how the company had all but lost control over its US operations. Former Statoil CEO Helge Lund has been a target of much of the criticism, but so have Sætre and the leader of Equinor’s board, Jon Erik Reinhardsen.

They now claim that they have a grip on the problems and that they’ve been rectified, even though an internal investigation is underway. Members of Parliament critical over how the state-controlled Equinor has operated abroad will decide after the summer holidays whether the Parliament’s disciplinary committee will hold a hearing on the US losses and why they weren’t uncovered by the state Oil & Energy Ministry over the years. Berglund



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