Norwegian Equinor Grows Output, Reserves
Norwegian state producer Equinor reported February 6 adjusted earnings of $4.4bn for Q4 2018, up from $4bn in Q4 2017; and $1.5bn after tax in Q4 2018, up from $1.3bn in 2017. Under International Financial Reporting Standards its Q4 operating profit was $6.7bn ($5.2bn in 2017) and the absolute profit was $3.4bn ($2.6bn in 2017).
It saw record output over the quarter and the year as a whole with underlying growth of 2% and expects the same this year, but its reserve replacement ratio was also an all-time high at 213%. This coupled with higher oil prices enabled it to pay down debt, and gearing is now down to 22.2% from 29% the year before, it said. Its return on average capital employed was 12%.
CEO Eldar Saetre said it generated organic free cash flow well above $6bn for the full year at an average price of $71/barrel. Higher exploration activity and lower refinery and products trading margins impacted adjusted earnings negatively.
“In 2018 we sanctioned seven new projects, which will deliver more than 1bn barrels of resources to Equinor at an average break-even price of $14/b and very low CO2 emissions,” he said.
Equinor delivered total equity production of 2.170mn barrels of oil equivalent/day (boe/d) in Q4, up from 2.134mn boe/d in the same period in 2017. The increase was mainly due to portfolio changes and new wells especially in the US onshore, partly offset by field declines and lower gas off-take.
Cash-flow provided by operating activities before tax amounted to $27.6bn in 2018 compared with $21.0bn in 2017. Organic capital expenditure was $9.9bn for the full year of 2018.
It told capital markets that it plans to generate around $14bn in free cash flow from 2019 to 2021 -- this year it did more than $6bn -- and to make more than 14% return on average capital employed in 2021. Equinor can be organic free cash flow positive below $50/b from 2019 to 2021, it said.
It also plans to invest in a highly competitive portfolio of projects, expected to start production by 2025 and deliver 6bn barrels to Equinor with low emissions and an average break-even oil price around $30/b; and to deliver continued profitable growth on the Norwegian continental shelf, reaching a record in 2025. This year sees the start of the Johan Sverdrup field, which is expected to deliver a total production close to 300,000 b/d to Equinor at plateau, with a break-even price below $20/b. Brazil is another core area.
Equinor’s unit production cost is around $5/b and it hopes to sustain this until 2020. It has reduced the average break-even price of its non-sanctioned portfolio to below $40/b, and boosted the net present value of this portfolio by more than $7bn since 2017, it says.