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Thursday, July 18, 2024

Earnings boost a sagging Equinor

Twenty years after Norway partially privatized its biggest state-owned firm Statoil, the company now known as Equinor could once again deliver strong first-quarter earnings this week. Now the company needs to boost its reputation, too, after scandals tied to huge losses abroad, accidents, safety concerns, climate and environmental violations, and suspected corruption.

There’s been a lot of upheaval among executives working here at Equinor’s main offices here at Fornebu outside Oslo during the past year. Now the company needs to regain public confidence after heavy losses abroad, accidents and other problems. PHOTO: Møst

Last year was a terrible year for Norway’s biggest company. This year is at least getting off to a better start financially, with Equinor reporting operating earnings that were double those in the first quarter of 2020. The company’s first-quarter results released Thursday morning (external link) were aided by much higher oil and gas prices, but were also better than many analysts had expected.

It was the first full quarter with Equinor’s new CEO Anders Opedal at the helm, and he could claim that “the organization delivered solid operational performance” during the pandemic. That in turn could provide “a strong position for safe operations, value creation and cash flow generation in 2021” and beyond.

That’s all sorely needed as Equinor tries to recover and regain the public’s trust. Not only did the company have to admit last year to losing more than NOK 200 million on its deeply troubled US operations and many elsewhere, it’s still in trouble over longstanding suspicions of corruption in Angola and faces regulatory hearings on maintenance and safety issues at home in Norway. A succession of oil ministers have also faced criticism over how they’ve been monitoring and following up Equinor’s operations.

This year started with more hearings in Parliament over Equinor’s disputed operations abroad. They continued with questions over what happened, for example, to more than NOK 700 million that the former Statoil paid out in “social contributions” in order to do business in Angola. “We remain uneasy,” editorialized newspaper Dagsavisen in March, also after former Equinor CEO Eldar Sætre admitted that the company “today wouldn’t enter into such agreements.”

Equinor’s new CEO, Anders Opedal, could report much better profits during the first quarter but still has lots of “cleaning up” to do. PHOTO: Equinor

Opedal himself has had to appear before petroleum safety authorities and Equinor has been rebuked over excessive use of overtime, maintenance deficiences, extensive oil leaks at its huge Mongstad refinery and a major fire that’s shut down its Hammerfest LNG gas plant on the island of Melkøya. State authorities found what they called “a gap between what management officials claim they expect and what actually is revealed during inspections.” Last month, newspaper Dagens Næringsliv (DN) reported that state environmental authorities were so dissatisfied with Equinor’s plans to clean up after years of oil leaks at Mongstad that they sent the company back to the drawing board. Some claim there’s been a culture of arrogance at Equinor that must change.

This week, Member of Parliament Lars Haltbrekken of the Socialist Left party (SV) asked both Norway’s government ministers in charge of oil, energy and labour to address Parliament over all the problems at Equinor’s facilities on land. It’s another attempt to regain some state control over the company after the petroleum authories had issued yet another highly critical report on “serious regulatory violations” prior to the fire at Melkøya.

“There have been several accidents and calamities at Equinor during the past year,” Haltbrekken wrote in a letter backed by the Labour Party’s energy policy spokesman Espen Barth Eide. “We believe it’s time for the government to report what it’s doing to ensure that Equinor takes its responsibility for health, environmental and safety matters seriously.” Both Oil Minister Tina Bru and Labour Minister Torbjørn Røe Isaksen responded that the authorities had uncovered serious flaws. “It’s clearly Equinor’s responsibility to follow up,” they said, agreeing to come to Parliament when called.

Issues of control
Equinor keeps promising improvements as the political debate continues over how the state, which still holds 67 percent of Equinor’s stock, can exert better control over the company. Opponents of the partial privatization during Labour Prime Minister Jens Stoltenberg’s first government in 2001 worried it would result in a loss of control.

“We didn’t think it was a good idea when it happened and we think history has shown us to be right,” Jan Olav Andersen, leader of a major trade union federation, told news service FriFagbevegelse this week. The partial privatization “made (the former) Statoil a commercial company that to an increasing degree has looked beyond Norway for business, taken risks with the public’s money and generated large losses for all of us.” He claims Norway would have been “better served” if Statoil/Equinor had remained a wholly state-owned company.

Others disagree. “There are both advantages and disadvantages with a partial privatization, but it did indeed open up many new doors for the company, also as Europe’s most important supplier of gas,” said Frode Alfheim, leader of another large trade union federation in Norway.

The Norwegian state remains, at any rate, Equinor’s largest shareholder that the company needs to keep happy. Now Equinor is heavily promoting and investing in efforts to make its operations “greener” through wind power and other more climate-friendly energy projects both at home at abroad. It’s still drilling for more oil, recently reporting a large new discovery in the Fram area of the North Sea, but aims to be climate neutral by 2050 while remaining profitable.

Equinor leaders have also given up their contractual rights to collect bonuses for 2020, which some might interpret as sign of humility after a tough year. The stated reason in the company’s new annual report, however, was tied to “the market situation that came as a result of Covid-19 … and to strengthen the company’s financial situation.” Berglund



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