Page 7 - EurOil Week 07 2021

EurOil COMMENTARY EurOil

failed to do so because of regulatory delays and US shale producers were left reeling after the
difficulties agreeing investment terms with the 2014 oil price collapse, and again last year, when
Tanzanian government. the coronavirus (COVID-19) induced price
Cash flow from operating activities before crash led to a series of bankruptcies across the
tax and working capital items shrank 26% to sector.
$3.84bn in Q4 2020, while the full-year flow “The Bakken does not compete,” Opedal said.
came in at $14bn, representing a 35.5% drop “We have chosen to sell the Bakken to reinvest
versus the previous year. that money into other parts of our portfolio,
The company slashed its capital expenditure where we get a higher return.”
for 2021 and 2022 to $9-10bn each year, from Equinor has written off some $11.5bn in
$10bn and $12bn respectively previously. But total from its US shale assets, including $8bn
it cited a strengthening of the Norwegian krone at Bakken and the remainder at the Eagle Ford
against the US dollar as a partial factor. formation in Texas. It sold the latter opera-
tions to Spain’s Repsol for $325mn in late
Bakken withdrawal 2019.
Equinor also revealed it had struck a deal to sell Unsurprisingly, the state company has come
its interests in the US Bakken formation in North under political scrutiny as a result of these failed
Dakota and Montana to Grayson Mill Energy, investments, which were mostly made when
supported by US private equity firm EnCap Helge Lund was CEO. Lund left the role in 2014.
Investments, for $900mn. Opedal only took up the position last November,
The sale involves all Equinor’s operated replacing retiring boss Eldar Saetre.
and non-operated permit areas and associated Lawmakers in Norway’s parliament have
midstream assets in the area, which delivered a accused the government of failing to properly
combined 48,000 boepd for the company in the oversee Equinor’s management, and have called
fourth quarter. Equinor has also entered a pur- for greater transparency regarding the oil com-
chase deal for crude offtake with Grayson Mill. pany’s decision-making. But Equinor’s failures in
The transaction, if completed, will draw a line the US were far from unique and were caused
under billions of losses that Equinor has sus- mainly by lower-than-expected oil prices. Many
tained from its US investments over the years. other firms investing in US shale took similar
The $900mn price tag is a mere fraction of what hits.
the company paid for the assets nearly a decade However, in a PwC report published last
ago. October concluded that Equinor had underesti-
“We should not have made these invest- mated the complexity and risk of working in the
ments,” Equinor CEO Anders Opedal said in a US onshore, and had overstretched itself. Fur-
conference call on February 9. When the deals thermore, management had not addressed these
were made “higher oil prices were expected difficulties in time.
in the future, a high consumption of oil was “Equinor’s growth strategy came at the
expected.” Instead, the global oil market has suf- expense of value and control,” the PwC report
fered two turbulent downturns since then. stated. ™

Week 07 17•February•2021 www. NEWSBASE .com P7