Efficiency Gains Boost Equinor Earnings
Norwegian Equinor reported October 25 adjusted earnings of $4.8bn and $2.0bn after tax in the third quarter of 2018. After-tax earnings were $0.8bn in the same period last year. IFRS net operating income was $4.6bn and by the same measure net income was $1.7bn. The third quarter was characterised by the debt gearing falling to 25.7% and continued strong cost focus.
CEO Eldar Saetre (below) said the "strong" results were due to "solid operational performance and production efficiency." But the results would have been better but for the higher maintenance this year than last.
“We have achieved significant cost improvements in recent years, allowing us to capture more value from higher prices. We will continue with a strong cost focus to further strengthen our competitive position. As a result of capital discipline and efficient project execution, we are able to reduce our organic capex guiding for 2018 to around $10bn,” said Saetre.
“Project activity remains high, and we have submitted development plans for the next phases of the high value, low carbon Johan Sverdrup and Troll fields. In October we announced the acquisition of a 40% operated interest in the Rosebank field in the UK and the divestments of two non-core assets in Norway. We also continue to develop our portfolio within renewable energy,” he said.
Higher prices for both liquids and gas, coupled with high production, contributed to the increase. Adjusted for new fields in production and portfolio changes, underlying operating costs and administrative expenses per barrel are up slightly compared to the same quarter last year, mainly owing to increased turnarounds and preparation for start-up of new fields.
Equinor delivered total equity production of 2.066mn barrels of oil equivalent/day in the third quarter, up 1% from 2.045mn boe/day in the same period in 2017. The increase was primarily due to start-up of new fields, portfolio changes and additional wells coming on stream, partially offset by high maintenance. Data from the Norwegian Petroleum Directorate showed a drop in gas output overall January-September 2018; oil and liquids output were both much lower this year than in the same period last year.
As of third quarter 2018, Equinor had completed 15 exploration wells this year and made seven commercial discoveries. The appraisal of the Cape Vulture discovery confirmed the doubling of the remaining reserves at Norne, extending the life and value of the field. Adjusted exploration expenses [5] in the quarter were $239mn, down from $416mn in the same quarter of 2017, mainly owing to a higher capitalisation rate and lower drilling activity.
Cash flow provided by operating activities before tax amounted to $20.4bn in the first nine months of 2018 compared with $15.2bn for the same period last year.