Johan Sverdrup field - Equinor

Equinor sinks deeper into the red amid market turmoil

Norwegian oil and gas giant Equinor saw a massive increase in its fourth quarter of 2020 net loss amid market turmoil caused by the coronavirus crisis as its production dropped by 7 per cent compared to the same period of 2019.

Johan Sverdrup field; Source: Equinor

According to its quarterly report on Wednesday, Equinor recorded adjusted earnings of $0.76 billion in the fourth quarter, down from $3.55 billion in the same period in 2019.

Adjusted earnings after tax were negative $0.55 billion, down from $1.19 billion in the same period last year. Low prices for liquids impacted the earnings for the quarter.

IFRS net operating income was negative $0.99 billion in the fourth quarter, down from positive $1.52 billion in the same period in 2019.

IFRS net income was negative $2.42 billion in the fourth quarter, compared to negative $0.23 billion in the fourth quarter of 2019.

Net operating income was negatively impacted by net impairments of $1.30 billion, mainly relating to a refinery as a result of reduced margin assumptions and some increase in cost estimates, and to an operated unconventional onshore asset in North America due to reclassification as held for sale.

For the full year 2020, Equinor booked a loss of $5.5 billion compared to a loss of $1.85 billion in 2019. Norwegian news site e24 said that this was Equinor’s biggest loss ever.

Equinor saw its revenues drop by 22 per cent in 4Q 2020 to $12 billion from $15.3 billion in 4Q 2019. The decrease was mainly due to lower average prices for liquids and gas and lower production, especially for liquids.

For the full year, Equinor’s revenues dropped by 28 per cent to $45.9 billion from $63.3 billion in 2019.

Equinor launched an action plan of $3 billion in March 2020 to strengthen financial resilience, including a reduction in operating costs of $0.7 billion.

According to the company, the delivery on the plan resulted in savings of more than $3.7 billion, including a reduction in fixed operating costs of around $1 billion.

Equinor output down

In the E&P Norway segment, Equinor realised weaker liquids prices and the production was reduced mainly as a result of turnarounds moved to fourth quarter due to the ongoing pandemic.

Results in the E&P International segment were impacted by low prices and the impairment of the Tanzania LNG project of $0.98 billion.

The E&P USA segment was also impacted by weak prices, partially offset by significant reductions in operating costs.

Equinor delivered total equity production of 2,043 mboe per day in the fourth quarter, down 7 per cent from 2,198 mboe per day in the same period in 2019, with a minor increase in gas share due to high flexible production in gas fields.

The decrease mainly due to expected natural decline, turnarounds for several fields especially on the Norwegian continental shelf (NCS), and the shutdown at the Hammerfest LNG plant.

Anders Opedal, President and CEO of Equinor, said: “Our results are impacted by the market turmoil during the year, but with strong cost improvements and capital discipline we delivered positive net cash flow for the quarter and the full year.

“During 2020 we have delivered more than 3.7 billion dollars in savings, well above our ambition for the action plan we launched in March to strengthen financial resilience. We are well-positioned for value creation and strong cash flow in 2021 and the coming years”.

Equinor’s organic capital expenditures are estimated at an annual average of $9-10 billion for 2021-20227.

Equinor intends to continue to mature its attractive portfolio of exploration assets and estimates a total exploration activity level of around $0.9 billion for 2021, excluding signature bonuses, accruals and field development costs.

Production for 2021 is estimated to be around 2 per cent above 2020 level.

Also on Wednesday, Equinor revealed it had agreed to divest its interests in the Bakken field in the U.S. of North Dakota and Montana to Grayson Mill Energy, backed by EnCap Investments, for a total consideration of around $900 million.