Equinor Earnings Collapse in Q4
Adjusted earnings at Norway's Equinor plunged 79% year on year in the fourth quarter, as lower prices, weaker production and higher exploration expenses took their tool, according to company results published on February 10. The company also booked a $2.42bn net loss in the three months, versus a $230mn loss a year earlier, owing to impairments and other charges.
The company's earnings were also weaker than in the third quarter, when they came to $780mn, in contrast to other European firms like BP and Shell, which saw their numbers improve quarter on quarter on the back of higher oil prices. After tax, Equinor's adjusted earnings were negative $554mn, versus profits of $1.19bn in Q4 2019 and $271mn in Q3 2020.
Oil and gas production slumped 7% yr/yr to 2.043mn barrels of oil equivalent/day in Q4 2020, as growth at Norway's Johan Sverdrup field and other new projects was offset by decline elsewhere. The company's liquids prices averaged $40.6/barrel, down 28% yr/yr, while European gas prices were down 5% at $5.04/mn Btu, and North American prices down 11% at $1.99/mn Btu.
Company revenues fell 23% yr/yr to $11.75bn, and while most costs were down, exploration expenses surged to $1.57bn from $480mn a year earlier, causing Equinor to swing to a net operating loss of $989mn. The company was stung by a $982mn write-down at its long-delayed Tanzania LNG project, $1.3bn in net impairment charges and $315mn in inventory hedging losses.
Cash flow from operating activities before tax and working capital items was down 26% in Q4 2020 at $3.84bn. Full-year flow came to $14bn, marking a 35.5% slump compared with 2019.
Commenting on the results, CEO Anders Opedal noted Equinor had delivered $3.7bn in cost savings during 2020, well exceeding the amount it set out to save after Covid-19 was declared a pandemic in March. Output at Sverdrup is on track to reach 535,000 b/d by mid-year, providing Equinor with extra low-cost production. The company is also increasing gas extraction in response to a rally in prices towards the end of last year, the CEO said.
US Bakken exit
Equinor also announced on February 10 it was selling its interests in the Bakken formation in the US states of North Dakota and Montana to Grayson Mill Energy, backed by US private equity firm EnCap Investments, for $900mn.
The deal covers all Equinor's operated and non-operated acreage and associated midstream assets in the play. These assets delivered some 48,000 boe/d for Equinor in the fourth quarter. The Norwegian company will also enter into a term purchase agreement for crude offtake with Grayson Mill.
"Equinor is optimising its oil and gas portfolio to strengthen profitability and make it more robust for the future. By divesting our Bakken position we are realising proceeds that can be deployed towards more competitive assets in our portfolio, enabling us to deliver increased value creation for our shareholders," Opedal said.
Equinor did not say when the transaction would be closed, but it will be backdated to January 1 2021. The company has faced criticism from Norwegian authorities over the billions of dollars of losses it has sustained at its US investments over the years, with a damning report published last October. The government has demanded greater transparency regarding Equinor's international operations as a consequence.