Page 6 - Euroil Week 44 2020

EurOil COMMENTARY EurOil

Equinor, operator of the
giant Johan Sverdrup
field (pictured) has
suffered five straight
quarterly net losses.

prices. It will pay no more than the floor level Shell
in 2020. Like BP, Royal Dutch Shell also returned to
positive earnings in the third quarter, deliver-
Equinor ing a net income of $489mn. This represents
Norway’s Equinor suffered a $2.02bn net oper- a dramatic turnaround from $18.1bn in losses
ating loss in Q3 2020, or four times the loss it it suffered during the previous three months,
sustained in Q3 2019, after writing $2.93bn off when it booked a $16.8bn impairment on
the value of its assets. write-downs. But the profit was very modest
The charges were booked after Equinor cut compared with the $5.88bn it earned in Q3
its long-term oil and gas price forecasts. Its peers 2019.
took this step earlier in the year. The biggest hit Shell cut its dividend for the first time since
was a $1.38bn write-off in the US, mostly relating the 1940s in April, by two thirds. Discussing its
to the company’s loss-making onshore shale oil latest results, the company sought to encourage
and gas business. investors by increasing its dividend for the quar-
Equinor sees Brent averaging $64 per barrel ter by 4%. It expressed hope that the payment
between 2021 and 2050, which is higher than would continue rising by this amount on an
the $55 forecast by BP and the $60 predicted by annual basis moving forward.
Royal Dutch Shell. The company also lowered its Shell’s current cost of supply (CCS) earnings,
gas price outlook substantially. which exclude impairments and other identified
Equinor reported a net loss of $2.12bn for Q3 items, reached $955mn in the quarter, up from
2020, marking its fifth quarterly loss in a row and $638mn in Q2 2020 but down from $4.77bn in
nearly double the loss it made in the year-earlier Q3 2019. But its cash flow from operations was
period. The company’s adjusted profit before strong, reaching $10.4bn, versus $2.56bn in Q2
interest and tax (EBIT) slumped 70% y/y to 2020 and $12.3bn in Q3 2019.
$780mn. Free cash flow (FCF) was similarly solid,
“Our financial results are impacted by weak totalling $7.57bn in the three-month period,
prices as regions across the world are still severely compared with $243mn in Q2 2020 and $10.1bn
affected by the pandemic,” Eldar Saetre, who in Q3 2019.
stepped down as CEO on November 2, com- “Our sector-leading cash flows will enable us
mented. He will be replaced by Anders Opedal. to grow our business of the future while increas-
Lars Bacher also left the post of CFO on Novem- ing shareholder distributions, making us a com-
ber 1, replaced by Svein Skeie. These changeovers pelling investment case,” CEO Ben van Beurden
come at a time when the state-owned producer told investors. “We must continue to strengthen
is facing scrutiny from the Norwegian govern- the financial resilience of our portfolio as we
ment over the hefty US impairment charges it make the transition to become a net-zero emis-
has booked. sions energy business.”
Equinor’s production averaged 1.994mn Like BP, Shell’s earnings were weaker y/y
boepd in Q3 2020, up from 1.909mn boepd a owing to lower oil and LNG prices, as well as
year earlier. reduced refining margins and cuts to produc-
The company raised its dividend to $0.11 tion. Its output averaged 3.08mn boepd in the
per share from $0.09, although this represents a quarter, down from 3.38mn boepd in Q2 2020
meagre sum compared with the $0.27 it paid for and 3.56mn in Q3 2019.
Q4 2019. It said it would resume its $5bn share Shell booked a further $1.1bn in impairment
buyback programme, put on hold earlier this charges, but they were partly offset by $0.5bn in
year, once market conditions allow. gains on the fair value accounting of commodity

P6 www. NEWSBASE .com Week 44 05•November•2020