Equinor third quarter 2021 results
Equinor reports adjusted earnings of USD 9.77 billion and USD 2.78 billion after tax in the third quarter of 2021. IFRS net operating income was USD 9.57 billion and the IFRS net income was USD 1.41 billion.
The third quarter of 2021 was characterised by:
- Strong results due to higher prices and solid operating performance
- Very strong cash flow and continued improvement of adjusted net debt ratio(1) to 13.2%.
- Optimising gas production and Troll Phase 3 brought on stream
- Cash dividend of USD 0.18 per share and increasing second tranche of share buy-back from USD 300 million to USD 1 billion
“We capture value from the higher commodity prices and with a solid operational performance we deliver strong results. Strict capital discipline and a very strong net cash flow strengthen our balance sheet and improve our adjusted net debt ratio to 13.2%,” says Anders Opedal, President and CEO of Equinor ASA.
“The global economy is in recovery, but we are still prepared for volatility related to the impact of the pandemic. The current unprecedented level and volatility in European gas prices underlines the uncertainty in the market. Equinor has an important role as a reliable energy provider to Europe and we have taken steps to increase our gas exports to respond to the high demand,” says Opedal.
“The highly profitable Troll Phase 3 was brought on stream and Martin Linge has been ramping up, both supplying gas to Europe with low emissions from production. Our large offshore wind projects are progressing according to plan. Together with our partners, we reached an important milestone with the East Coast Cluster in the UK named as one of the two first carbon capture, usage and storage clusters in the country. In Norway, we launched a plan for industry cooperation for the transition of the Norwegian Continental Shelf as an energy hub in a low carbon future,” says Opedal.
Adjusted earnings [5] were USD 9.77 billion in the third quarter, up from USD 0.78 billion in the same period in 2020. Adjusted earnings after tax [5] were USD 2.78 billion, up from USD 0.27 billion in the same period last year.
IFRS net operating income was USD 9.57 billion in the third quarter, up from negative USD 2.02 billion in the same period in 2020. IFRS net income was USD 1.41 billion in the third quarter, compared to negative USD 2.12 billion in the third quarter of 2020. Net operating income was impacted by higher prices for gas and liquids, significant positive effects from derivatives mainly related to European gas, and net reversal of impairments of USD 0.51 billion including a reversal of USD 0.98 billion related to an offshore asset in E&P Norway and an impairment of USD 0.48 billion related to a refinery in the Marketing, midstream and processing segment.
The results of all E&P segments are positively impacted by the higher commodity prices. Strong operational performance, continued improvement focus and strict capital discipline supported additional value creation and strong cash flow. Based on updated estimates, taxes to be paid on the Norwegian Continental Shelf in the fourth quarter are expected at around USD 6.32 billion(2), of which USD 4.99 billion was paid on 1 October. Half of the petroleum taxes to Norway related to 2021 will be paid in the first half of 2022.
E&P Norway also benefitted from a positive contribution from new fields in production. With only one tax payment based on previously lower price expectations, E&P Norway contributed significantly to the group cash flow in the quarter.
The Marketing, midstream and processing segment delivered high results mainly due to the mark to market impact of derivatives related to gas sales to Europe. These gains will be followed by losses in the segment when volumes are delivered under the long-term contracts. The decision to take derivative positions has been beneficial to the group but created volatility in this segment. In addition to the effect from the derivatives related to the European gas market, the results were positively impacted by solid results from North American gas.
Compared to the same quarter last year the Renewables segment experienced lower winds for the offshore wind assets, partially offset by high availability and higher electricity prices. From the third quarter Equinor has decided to change its policy and will exclude gains and losses from sales of assets from the adjusted earnings for the Renewables segment.
Equinor delivered total equity production of 1,996 mboe per day in the third quarter, up from 1,994 mboe per day in the same period in 2020. Production from a new field and increased production from Johan Sverdrup, as well as solid production efficiency and optimised gas production was partially offset by the divestment of Bakken and the shutdown of Hammerfest LNG. Equity production of renewable energy for the quarter was 304 GWh, down from 319 GWh for the same period last year, impacted by lower wind than the seasonal average.
At the end of third quarter 2021, Equinor had completed 17 exploration wells with 6 commercial discoveries and 11 wells were ongoing. Adjusted exploration expenses in the third quarter were USD 0.21 billion, compared to USD 0.30 billion in the same quarter of 2020.
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 10.80 billion for the third quarter, compared to USD 3.34 billion for the same period in 2020. Organic capital expenditure [5] was USD 5.89 billion for the first nine months of 2021. At the end of the quarter adjusted net debt to capital employed(3) was 13.2%, down from 16.4% in the second quarter of 2021. Including the lease liabilities according to IFRS 16, the net debt to capital employed(3) was 20.2%.
The board of directors has declared a cash dividend of USD 0.18 per share for the third quarter of 2021.
In the quarter Equinor completed the market transactions of the first tranche of the share buy-back program for 2021 with a total value of USD 99 million. This corresponds to USD 300 million in total, including shares to be redeemed from the Norwegian State and annulled.
Based on favourable commodity price conditions, strong cash flow generation and an adjusted net debt ratio(3) of 13.2% the board of directors has decided to increase the size of the second tranche of the share buy-back, from an indicative level of USD 300 million communicated at the Capital Market Day in June, to USD 1 billion, including shares to be redeemed from the Norwegian State. The second tranche commences on 27 October and will end no later than 31 January 2022.
The twelve-month average Serious Incident Frequency (SIF) for the period ending 30 September was 0.4 for 2021, down from 0.5 in 2020. The twelve-month average Recordable Injury Frequency (TRIF) for the period ending 30 September was 2.5, up from 2.3 in 2020.
1 This is a non-GAAP figure. Comparison numbers and reconciliation to IFRS are presented in the table Calculation of capital employed and net debt to capital employed ratio as shown under the Supplementary section in the report.
2 Based on USD/NOK exchange rate of 8.78
3 This is a non-GAAP figure. Comparison numbers and reconciliation to IFRS are presented in the table Calculation of capital employed and net debt to capital employed ratio as shown under the Supplementary section in the report.
[5] These are non-GAAP figures. See Use and reconciliation of non-GAAP financial measures in the report for more details.
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Peter Hutton, senior vice president Investor relations,
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