Equinor Makes 20-30% Cuts to 2020 Spending

Norway's Equinor has followed other European majors in making 20-30% cuts to spending, in order to boost cash flow during what could be a prolonged downturn.

The state oil giant has slashed its organic capital expenditure budget for 2020 to around $8.5bn, from $10-11bn, it announced on March 25. Its capex in 2019 came to $10bn.

Equinor said it would lower planned exploration spending from $1.4bn to $1bn. Its exploration spend in 2019 totalled $1.85bn. It is also targeting a $700mn reduction in operating costs this year. 

The company will halt all US onshore drilling and completions, deferring production and substantially cutting investments in 2020, it said.

Earlier this week Equinor also suspended its buyback scheme, and it has set up a new crisis-response department to try and mitigate Covid-19's impact on its business and consider its longer-term implications.

"Equinor is in a strong financial position to handle market volatility and uncertainty," CEO Eldar Saetre explained. "Our strategy remains firm, and we are now taking actions to further strengthen our resilience in this situation with the spread of the corona virus and low commodity prices."

The company suffered a difficult fourth quarter, swinging to a $230mn net loss from a $3.37bn profit a year earlier, as revenues fell steeply because of weaker prices. However, it said it was well-prepared for the downturn, requiring an average oil price of only $25/b during the rest of the year to be organic cash flow neutral. In 2014, prior to the last oil market crash, Equinor needed $100/b oil to break even.

Equinor did not say whether its production guidance would change as a result of the cost-cutting measures. It produced 2.074mn boe/d in 2019, and forecast in February that its output would rise 7% in 2020 thanks to the ramp-up of the Johan Sverdrup oil project. It said it expected average growth of 3% annually between 2019 and 2026.