Equinor ASA (EQNR) on Q2 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Equinor Analyst Call Q2. Throughout today’s presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. And I would now like to turn the conference over to Mr. Peter Hutton, Senior Vice President. Please go ahead. Peter Hutton: Hi, and thank you, and welcome, everybody, to, as we say, Equinor’s 2Q 2021 Results Call. I’m Peter Hutton, Head of Investor Relations, and with us today, I’m very pleased to introduce Ulrica Fearn, who, as you know, started as CFO just over a month ago and who will take us through the results and the main points. And then we will open up for questions and answers. The operator has just ran through the process, but she’ll give a reminder after this presentation. And we expect the call to finish within around the hour. Also joining, as on previous calls, we have: Svein Skeie, Head of Performance and Risk; Orjan Kvelvane, who’s Head of Finance and Accounting; Mads Holm, Head of Treasury and Tax. So with that, let me – I’m very pleased to pass over to you, Ulrica, to start it off. Thanks, Ulrica. Ulrica Fearn: Well, thank you very much, Peter, and thank you all for joining the call today. It’s a pleasure to be making this what is my first quarterly results call for Equinor, having started mid-June. As Peter said, this has been a good opportunity to get insight into the key drivers of performance in the organization. And while this call is by phone, I do look forward to the discussion and hope to have a chance to meet with you more directly in the near future. So this is a good quarter, where we delivered strong financial results in which we were able to capture value through strong operational performance and cost focus. And this enabled us to deliver strong net cash flow, strengthening our resilience in an uncertain and volatile market. Compared with the last – same quarter last year, the price environment could hardly be more different. Last year has demonstrated clearly the volatility that can impact the industry. But it has also demonstrated the advantages of being a resilient company with strong execution plans and a clear long-term strategy that also provides flexibility. With uncertainty still substantial, volatility remains, as seen last when, for example, Brent went from $76 to $68 over just a few days in July. The path of the economic recovery, development of commodity prices and inflation of some of the elements playing into the volatility. Equinor has delivered solid and stable production through the pandemic. And last spring, restrictions prevented us from conducting planned maintenance on the NCS, leaving us with a catch-up effect and high level of maintenance this quarter. Despite this, we delivered high production with low unplanned losses at stable underlying costs. We have run our flexible gas fields at full capacity to capture additional value from the higher gas prices of the quarter. Peter Hutton: Great. Thanks, Ulrica. And I will actually pass straight through to the operator to remind on the polling of the questions and take us through those. Operator: And the first question comes from the line of Biraj Borkhataria of Royal Bank of Canada. Please go ahead. Biraj Borkhataria: Hi, thanks for taking my question and best luck with the new role. I’ve got two questions, please. The first one is on the gas portfolio. You talked about the hedging and the derivative losses. Could you say from this point forward what proportion of your European gas sales are hedged? And the second question is based on your comments on maintenance and the catch-up effect. Are you able to give any color on how long you expect the catch-up phase to kind of continue on for and when we get back into a more normal maintenance cycle? Thank you. Ulrica Fearn: Thank you, Biraj, for your questions. Yes, so let’s start on gas and the impact from this point forward in the proportion. What I can say is a small proportion on the gas on the NCS shelf, we took a position away from forward sales and it is reducing. And what I can say is it will have an impact on the next half. But I will say it’s a small proportion. And I will also highlight that overall, high gas prices is very positive for our overall portfolio. And with the strength of that overall is very beneficial to the company. On the sort of maintenance catch-up, we have done most of the maintenance catch-up in the quarter that we’ve – we did a planned catch-up – planned maintenance but also the catch-up. There was a little bit left in the next quarter but mainly in international. So I think we’re pretty much up to where we need to be at the moment. Biraj Borkhataria: Okay, great. Thank you. Operator: The next question is from the line of Teodor Nilsen of SB Markets. Please go ahead. Teodor Nilsen: Hello, and thanks for taking my questions and first one, on cash flow and net debt that you highlighted, Ulrica. The net debt has come substantially down recently. I just want – going forward, will you prioritize to buy back before cash dividends going forward? Or will you consider to increase cash dividend substantially? And second question is just on CapEx. I note that based on your full year guidance, this far, you have only spent around 40% compared to what you can to, to spend this year. Is it fair to assume that you will end the full year in the lower end of the guide – the range of $9 billion to $10 billion? Ulrica Fearn: Thank you for your question, Teodor. On the dividend with the low net debt ratio, yes, we do have – we’re pleased to see our net debt ratio where it is. And we have stated what our overall share buyback sort of framework looks like and that it does add some flexibility to our overall capital distribution framework. But we also did say that the Board will assess the overall environment based on not any one trigger individually. We have three main factors that needs to be assessed. And one is around Brent oil prices, which needs to be within or above the range of $50 to $60 per barrel. It is also, as you say, the long-term net debt target ratio, where we’re within but are in the bottom end of the 15% to 30% range at the moment. And we also need to see supportive commodity prices. So we are very pleased today to announce and start our share buyback program. We will continue to monitor these factors, but we will monitor them as a whole. And the Board will make a decision when they’re all supportive for a substantial amount of time. On the CapEx ratio, yes, I think it does look a little bit low in this half. We are seeing some increased activity in the second half. And we are, as you heard, reiterating our guiding of the $9 billion to $10 billion. So we are seeing some increased activity in half two. And the majority of that will be in E&P International and on major development projects. And we’re sort of starting spending in half two on Bacalhau. And there are various other increases across international that you’ll see a little bit of a tick-up. And I think that probably answered that question. Yes. Teodor Nilsen: Thank you. Yes, absolutely. Operator: Next question is from the line of Yoann Charenton of SG. Please go ahead. Yoann Charenton: Hello, Enrique, and team, I will have two questions. So one is coming back on to this impact of gas forward sales. I’m looking for some more color on the actual cash flow impact. If we look at your cash flow statement in the past two quarters, we can see that you posted an unusually large move of about $750 million, which is showing basically the move in net derivative instruments. So I just want to know if there is any anything basically to draw from this amount as for the future cash impact of your gas forward sales, assuming that, of course, the forward curve remains steady versus the end of the second quarter? The second question, coming back to one of the points you made about the upside distribution potential, you referred to a sustained trend that will basically be a trigger for more distribution. So how many quarters to make that sustained trend, please? Ulrica Fearn: Thank you very much, Yoann. I will start on your question on the gas forward sale. And I’ll start by saying MMP trading reflects a complex trading in multiple position. And there are many gains and losses on various positions here. The impact on the summer sales has partly been offset by gains in other positions and to isolate one in our derivatives results is very, very difficult. What I can say is that those specific positions will – we expect those to continue to have a negative impact in the second half. And the indication we’re giving is that the MMP trading will be toward the bottom end or below normal guidance to give you a bit of sense of it. And this is also depending on volatility in the market. I should also note that the MMP trading has also been impacted by other factors, such as the low refinery margins and LNG sort of the shutdown of Hammerfest. So there’s a few factors there that points us from a sizing point of view down toward the below or just at the bottom of the normal guidance. On the upside on distribution and triggers and how many quarters, I think we’ve been very careful in a very volatile environment to not be too specific on this. This is a holistic assessment that the Board does. But I think it’s important to also say that we have introduced some possibility for flexibility with our share buyback program. We have consistently increased our base dividend over the last four quarters and we’ve added a share buyback program, so – and we have committed to our long-term ambition to grow the annual dividend in line with underlying earnings. And generally, historically, the increases have taken place in Q4. And again, the Board of Directors will take all of those factors into account when they do the assessment as we go forward here and use the toolkit we now have to assess the right level. Yoann Charenton: Thank you. Ulrica. Ulrica Fearn: Thank you. Operator: Next question is from the line of Peter Low of Redburn. Please go ahead. Peter Low: Hi, thanks. The first is another one on gas price realizations. If I look at your average invoiced gas price in Europe, it has not increased as much sequentially, either your internal gas price or benchmark hubs like NBP and TTF. I thought the hedging impact was all taken in MMP, so it wouldn’t come through here. Is there something else that means you haven’t captured all the upside we see in spot gas prices? And then the second question is just on the operating and admin expense in E&PN. You talk about them being stable in the presentation. But it actually looks like they’ve increased a bit quarter-on-quarter despite lower production and it’s what might have expected from FX alone. Are there any other moving parts there you can flag? Ulrica Fearn: Thank you very much, Peter, for your questions. In terms of your second question, I’ll start there. There is – I mean, FX is the big driver. We’ve seen the exchange go from NOK10 to down to NOK8.6 or something like that at the moment. And that is, by far, the biggest movement in it. We have seen stable costs and a real cost focus on the rest of the portfolio. So I wouldn’t highlight any other section there. And your first question was around – remind me on the specifics of it? Peter Low: Yes. It was on your reported average invoiced gas price in Europe, which I thought affected – yes, the actual price we’re realizing in the EP&N haven’t increased as much as we might have expected, given kind of what spot prices have done. Ulrica Fearn: So our – I think our adjusted prices increased mainly due to higher prices. But they are also slightly offset by other – by a few other factors. I’m going to hand over to Svein to share with you a few of those. Svein Skeie: It’s a blend, and as the invoice prices has been impacted of the total gas realization price that we are doing, both in the total curve that we are selling, including the positions. So on the internal price, what you typically do there, you have the coverage for cost. But then also you pay on a basket then, which is then fixed 70% on a day ahead and around 30% then a month ahead. And when these are developing and when we have some position, there could be some deviation coming out there. But we’re also now seeing that the prices are also then increasing in line with the curves as they are moving upwards. Peter Low: Thank you. Operator: Next question is from the line of Anders Holte of Kepler Cheuvreux. Please go ahead. Anders Holte: Yes. Good morning, thanks for taking my questions. Actually, most of my questions have been asked. But I do have one that I would like to pick about, Ulrica. And I guess, when we look at the strong cash flow the last couple of quarters from oil and gas division, obviously we’re all seeing the price movements for renewal, especially liquid equities, over the past six, seven months. And you point to – you want to have a more stable trend before. Do you think that there will be any more dividends coming as I interpret you? But is kind of M&A higher up on your list of priorities? Or is that something still that you will view a bit further down the wish list in terms of how you distribute the excess cash that you're now seeing? Ulrica Fearn: Yes. We were – it was only a month ago, we looked at the – we shared with you what our overall strategy was looking like. And we are basically completely in line with that. We did – in terms of cash, how we use it, we were – there were sort of – in theory, there are four main options for that CapEx. And there, we provided guidance on expected level of CapEx spending. It's a very full portfolio. It's very – of very advantageous projects. On M&A, we did state that our future was based on organic activities. Some opportunities, if they arise, but basically our ambitions and guidance was based on organic activities. We will continue to take an opportunistic approach. But that's completely in line with what we said before. And also, I should point out that, that opportunistic approach could see us as net sellers in the M&A space. And then of course, as you say, we've got the reduction of debt, where we're at the bottom of the range at the moment, and then return to shareholders. But that's how M&A fits in the overall portfolio. Anders Holte: Okay, thanks. Operator: And the next question comes from the line of Martijn Rats from Morgan Stanley. Please go ahead Martijn Rats: Yeah, hi. Hello. I wanted to ask you two. They're somewhat unrelated. First of all, I just wanted to ask what your response was to the EU Fit for 55 program that was announced. I mean, it's an enormously broad set of measures. And then I was wondering if there was something in there that was specific to Equinor perhaps that drew your attention? And secondly, yes, look, I guess, the answer is no but just to tick this one off. Any signs of any inflationary pressures in the upstream? Ulrica Fearn: Yes. Thank you, two great questions. So the EU Fit for 55 question first. Well, the first part of the Fit for 55 package was presented in July. And it included few elements of priority for Equinor, which is the revision of EU emission trading system and the proposal for a carbon border adjustment mechanism, also the amendment that they did to the renewable energy directive and the regulation on reducing methane emissions in the energy sector. And I mean, it's difficult to give firm statements on any of these implications at this part because they all – the second part of this will be presented in the fall. But we are clearly working to understand that and work that through. There's a long answer to that. I think we can talk about it separately, but those are the main sort of areas. And on the unrelated outlook and signs of inflation. Well, yes, we are continuing to focus on costs very, very attentively. We're seeing several developments there. I think clearly, we are aware that global demand is picking up across categories. And as COVID-19 impact eases, and historically, this has increased risk of inflation, so we're very much watching this. It's a very good question. We see some mixed signals as well though, which reduces that risk recently on metals pricing. And we tend to focus on – with supply with a healthy back order backlog and strong balance sheet. So we're best positioned to take advantage of the recovery, which will help. Other few things we're seeing, we're seeing rig utilization. It's down from last quarter but flat rig rates. And we're seeing a clear trend toward renewable and low-carbon focus among suppliers. And I mean, another one to watch from a cost point of view, I guess, is the NCS tax package. And the packages had a positive trend rather than sort of a rush in a bottleneck. And we've seen positive activity on the NCS on the back of that. And then finally, on steel and metal, I guess, I should mention as well that steel and metal – steel prices have remained high due to strong demand and continued supplies constrained. And the price rally, however, we sort of see expected to have reached its peak. So those are the few areas where we're sort of watching within. But it's an uncertain world. And what was history might not apply to the future, but that's what we're watching at the moment, Martijn. Martijn Rats: Okay. Wonderful. Thank you. Operator: The next question comes from the line of John Olaisen of ABG. Please go ahead. John Olaisen: Thank you, good morning recount welcome in your new position. My question is regarding the reporting for Renewables business. Due to the equity accounting principle, I would argue that we get limited insight into the increasingly important part of your business, the Renewables business. I just wonder, do you have any plans to provide us with some more details? It would be great to see some, call it, proportional figures on the like proportional revenue, EBITDA, not the least cash flow numbers, and also to get more insight into the financing situation, the debt structure of the Renewables business. Ulrica Fearn: Thank you very much. And thank you, John. Yes, the Renewables business is – what I can say is this is a business in rapid buildup. And as we mature multiple projects, we clearly expect value recognition to increase. And – but in the near term, as you see, we've got fairly high development cost that will impact those earnings for some time to come. And it's going to take quite a long time for us to sort of really stabilize that business. At this point in time, I'm not sure how much value there would be. There's not much trends to be taken out of them. Over time, of course, we will be looking at disclosures. There are some more on our website. And I'll refer you to those. But as this business matures, yes, we will be looking into disclosing more. But at this point in time, given the immaturity of it and the rapid buildup, this is where we will stay. John Olaisen: Yes, sure. I recognize that it's an early phase, but just building up the numbers, watching them over time will give us a better – give a better position to evaluate these important CapEx numbers that you put into these figures over time. So it's more like a request from me, would be great at some time. Ulrica Fearn: Yes, we will be watching them grow, too. And we are very much looking forward to that journey as well. John Olaisen: Thank you. Operator: The next question is from the line of Christyan Malek of JPMorgan. Please go ahead. Christyan Malek: Hi. It's Christyan Malek here. Yes, best of luck with the new role and congrats. Just two questions. One, sort of following on from Martijn on inflation but just flipping it to just Brazil, we've had some clearly a little execution issues holistically owing to what's been going on there with the coronavirus. I want to know whether you have any sort of line of sight now in terms of just improving around the supply chain, but you are also seeing inflation there and how confident you are in terms of sort of deliveries, particularly given some of the delays. So just more of your sort of top-down around Brazil would be very useful. And second question turns back to the annuities business. And just wondering more kind of philosophically how you feel this business is being valued, whether it's being valued appropriately as within the conglomerate. And now you're in the new seat, are you comfortable with how the market views that business within your portfolio? Or do you think something needs to happen, whether it be to greater disclosure or potentially spin-off IPO? I'd love to get your initial thoughts on that. Ulrica Fearn: Very good. It was very hard to hear that, unfortunately. So I'm a little bit unclear on your second question. I think the first one is more of an overall Brazil assessment and where we're at. I think I'll answer that sort of high level. And so since the beginning of the COVID pandemic in Brazil, we have put in place preventive and protective measures to safeguard our people and several of that go beyond the authorities. And we are sort of moving forward on that very, very well. And even though all strict measures have been put in place, it's not prevented us from having some issues there, but I think we are monitoring and continuing those safeguards around Brazil. I don't know if there's anything else – I'm looking around the table here, if you heard anything else around that. Svein Skeie: Yes. If you look at the totality there, we're also then working then to get – working with Peregrino, getting that up and running again. I expect then start-up over New Year on that one in the first half of 2022. And then again, Peregrino Phase two will then come and we're working on that continuously. And on the Bacalhau, which we recently have a final investment decision on that, that's also then going according to our plans there. And we communicated around that one as you also might remember at the Capital Markets Day with a breakeven for that one, for the Phase one. Ulrica Fearn: So Christyan, I hope we answered your question there. Christyan Malek: Yes. That's great. Yes, so I'll put my second question, hopefully it's clearer. I was just using my useless AirPods. So the second question is regarding sort of the Renewables business. And it's sort of maybe early days to ask you this, but how you view it being valued within your conglomerate. Clearly, disclosure will always improve. But how do you see it sort of as you sort of move into the seat? Do you see it better placed through a sort of a carve-out? Or are you comfortable with it sitting within the portfolio? Just your initial thoughts on just how you think Renewables business is being appropriately valued, given sort of, to some extent, the question whether investors are really going to turn up for kind of hybrid status in the current market? Ulrica Fearn: Thank you, Christyan. Yes, I mean, in terms of appropriately valued, I mean, it's interesting to see the value of these businesses develop – the pure businesses develop outside of Equinor, having such strong values and then sort of tapering off a little bit. I think it's a difficult market to value. There's clearly an opportunity here that everybody can see. And the track record of what actually it takes to succeed in that market is clearly not that explored. I think, that sort of means that I think we're going to see some values going up and down, depending on very small pieces of new information as we move forward. And that will go for pure companies as well as companies like Equinor. I do – the reason we're in the Renewables segment is because we believe Equinor has got some very crucial capabilities that really helps us to be a leader in this transition, which helps us to drive this Renewables business forward. And that's our strategy and that's how we will position ourselves in this business going forward as part of our overall strategy. Christyan Malek: Thank you. Ulrica Fearn: Thank you. Operator: The next question is from the line of Nash Cui of Barclays. Please go ahead. Nash Cui: Hey, morning top well congratulations for your new role. Two questions, if I may. The first one is during your presentation, it's interesting that you've said share buybacks could be used more extensively. So just wonder if cash returns will be higher? Will a higher level of share buybacks be a priority over a dividend increase? So that's my first question. And my second question is do you expect Equinor's production to decline materially in the long run in order to meet net zero target? If yes, when do you expect production to plateau? Ulrica Fearn: Well, thank you for those questions Nash, I’ll come back to the – on the capital distribution. I mean, we, there is no expectation at this point in time, I’ve shared with you what the sort of parameters are that we will work around to assess the situation as to how much level of capital distribution we will – the Board will decide on. I will say that Equinor is very committed to long-term shareholder value, and capital distribution is an important part of what we want to drive for and give shareholders back in the future. So, taking all those factors into account, we did introduce a new flexibility part of the dividend. I think we need to look at it as a whole. There is a core dividend that we’ve said we’re going to grow in line with earnings. And then we’ve got a more flexible side when we see the factors I’ve shared with you around oil prices, the net, that target ratio, and a supportive commodity prices that we can then use when we see it’s appropriate to turn back more, but those are the two forms we will be using. On production – longer-term production, I mean, we’ve clearly been indicating that our guiding stays where it is, but in the very long-term, I’ll hand over to Svein to give some more color on that. Svein Skeie: Yes. What we then also on the Capital Markets Day, having given the guiding for the 2021, but we also said the portfolio outlook up to 2026 is the same as well said earlier 3% growth. And then and the 2020 – target 2030 production is then expected then to be around the same level as we saw in 2020. So, we are working with our advantage portfolio with a breakeven below $35 for the projects then coming on stream up until 2030, generating a significant cash flow in that perspective. Unidentified Analyst: Perfect. Thank you very much. Operator: The next question is from a line of Anders Rosenlund of SEB. Please go ahead. Anders Rosenlund: Thank you. I’d like to ask your license question once more, just trying to heard differently, because the renewables and low-carbon solution is an important part of Equinor’s future. And as we’ve been touched upon it’s being brought as associated companies. The operational and financial exposure is currently very poor. So instead of asking whether you will view changes to reporting, will you be an advocate of making such changes to provide more transparency in this business segment, which you rightfully spent a lot of time on addressing in connection with the Capital Markets Day months ago. Ulrica Fearn: Very good. Well, it’s a good question. I mean, it clearly, yes, an important sort of assessment of our business going forward. And it’s a difficult area we’re in as it’s growing and we’re building the business and, yes, we have had some thoughts around this and I’m going to hand over to Orjan to share some of those thoughts. Orjan Kvelvane: No, it it’s just a reminder that when we had the significant investment in Lundin, then we had a separate disclosure that gave exactly what you are looking for. And that is something that we assess going forward as well as we build up this portfolio. But we take note of the request and the information that we get. Ulrica Fearn: Yes, absolutely. Thank you very much, Anders. Anders Rosenlund: Okay. Operator: Next question is from the line of James Hubbard of Deutsche Bank. Please go ahead. James Hubbard: Hi. good morning. Good afternoon. Hey guys, just one question. So we had the ruling against Shell in The Hague in May brought by various environmental groups. And obviously that for now is a one-off ruling and they’re appealing and who knows what will become a bit, but it does seem likely that such cases will proliferate across Europe and perhaps to Norway. And I’m wondering, how do you feel about your strategy as it is, which basically involves oil production growth over the next handful of years. And as you just mentioned, flats over the decade, so Scope 3 flats, no matter what happens to Scope 1 and 2. Scope 3 possibly up, because you’re going to become a little bit more oil biased. Now, how do you – when you see a court case like that, and you think about central proliferation, how do you feel about your strategy now in the context of maybe a few years from now a similar ruling being brought against yourselves. Thank you. Ulrica Fearn: Thank you very much. Yes, so it’s a big ruling. I will say, what I can say is this is that we don’t like to speculate whether the likelihood for Equinor to be engaged in something like that has increased or decreased. What I will say is, we’ll note is that we are seeing some differences in the legal situation in Norway. And our strategy going forward and your question about the implication of that, we are very clear that we want to be a leader in the energy transition, which I think is fully in line with what we need to be and how we need to drive forward and being a strong leader and driving the transition as we laid it in the Capital Markets Day. Thank you. James Hubbard: Yes. Sorry. Could I just ask a follow on? Ulrica Fearn: Yes. James Hubbard: The – I understand you want to be a strong leader, but people can just look at your oil production profile and your gas production profile, and conclude that at a Scope 3 level, your emissions are going to be rising. So, do you think that qualifies as leadership in the sector? Ulrica Fearn: Well, we are taking – we’re moving as our ambitions were fast-tracked and accelerated, and we have, what we had before we’ve accelerated and we continue to look at how fast we can move in this transition. And at this point in time, we’ve assessed in a strategy that is it’s quite ambitious, and we got real actions to get to it. And that’s what we need to continue to strive for and actually and it’s hard to do that we can get to. James Hubbard: All right. Thank you. Operator: Next question is from the line of Jon Rigby of UBS. Please go ahead. Jon Rigby: Hello, Ulrica, and I’ve got two questions for you, small ones I think not sort of big picture that we’ve mainly focused on. The first is, if I look at your gas results – gas trading results in MMP, the U.S actually looks pretty good, and I’m aware that there’s been some infrastructure issues and so on in the U.S. this year and particularly in the second quarter. So, I just wondered whether there’s anything unusual going on in the U.S. around your sort of infrastructure position and production positions that helped you this quarter? And then the second is just on the balance sheet. You have very cash generative in the quarter and you seem to have squirreled most of the away into financial investments. I just wondered whether that’s a – just a timing difference or whether there’s a sort of strategy around liquidity positioning of where you want to see sort of cash balances versus gross net debt as your net debt overall begins to fall. Ulrica Fearn: Very good. Thank you for those Jon. On the U.S., the U.S. gas looks good in the MMP segment. That’s – it’s a right observation, it’s it tends to get overshadowed by the other factors, but I’ll let Svein comment on some of the details on the back of that. Svein Skeie: Yes. Also in U.S., then we have a transfer price between then the EMP U.S. and then MMP. So MMP buys it at local liquid hubs there. And we have seen that on those one the prices has not developed in a similar way as the Henry hub has developed, but since we don’t have a infrastructure and the ability to take it out of the area. We are able also to generate then extra profit. Then as you discussed on the coming up with a decent profit, as we said, Jon, in the second quarter here. So, sorry, it’s also shows the value of then having the value chain focus there on totality and the positions that we have other earlier taking pipeline capacity in both to the East Coast and Manhattan, as well as up to the Toronto, which we are now gaining on us as the company. Ulrica Fearn: And on your cash position question, Jon, yes, you’re right. There’s a buildup of cash, especially looking as you say, across financial investment and cash and cash equivalent, and they must be seen together. They do reflect the overall liquidity of the group, which of course, you might recall, we built up in times of uncertainty and there were many ways of doing that, and this is what we did. And so that’s there is to it. We take that into account net debt, it’s clearly the – where we counted in. So, we have indicated the range that we’re happy from a long-term point of view, which is the 15% to 30%. This is just part of the same conversation as I’ve had now, which is we need to take that liquidity profile into consideration in the net debt and with other factors, and then assess how much capital we keep in the business versus hand back or spend on the basis of those three factors I shared before. Jon Rigby: All right. Thank you. Ulrica Fearn: Thanks. Operator: And there are no more questions at this time. I would like to hand back to Mr. Peter Hutton for any closing comments. Peter Hutton: Okay. Thank you. Well, actually, I just like to thank Ulrica, do you have any closing comments, Ulrica, that you want to pass? Ulrica Fearn: No. Well, thank you all. It’s great to meet you. I’m sure we’ll meet as I said upfront hopefully a little bit more face-to-face at some point in time. It’s been a good quarter. I think it’s important to recognize that yes, there’s been strong prices, but I think it’s important to sort of highlight that Equinor is taking advantage of those with strong production and holding the cost pressure where it needs to be. It’s a volatile market going forward still. It looks a bit stable. We keep that in our mind, and there’s some very good question around volatility and costs that we need to sort of take into account with this strong results, which will give us an interesting next half to get through to understand what the world looks like. But I’m hoping we shared with you today that we’re setting Equinor up the best we can to capture whatever opportunity there is an in a resilient way to capture if there should be any downside. So with that, Peter, I think that’s it. Peter Hutton: Perfect. Well, thank you very much, everybody for joining us. Really appreciate it. I know there is more results to come from some of our peers for the rest of the week. So, I wish you luck with those. And of course, any further questions, please, don’t hesitate to contact as an investor relations. With that thanks to everybody who participated on the call and all the best. Thank you. Operator: Ladies and gentlemen, the conference has now concluded. You can disconnect your telephone. Thank you for joining. And have a pleasant day. Goodbye.
EQNR Ratings Summary
EQNR Quant Ranking
Related Analysis

Equinor ASA (EQNR) Quarterly Earnings Preview and Financial Analysis

  • Equinor ASA (NYSE:EQNR) is set to release its quarterly earnings with an anticipated EPS of $0.82 and projected revenue of $24.4 billion.
  • The Johan Sverdrup oilfield's recent power outage could impact Equinor's revenue and earnings projections.
  • Equinor's financial metrics suggest potential undervaluation with a P/E ratio of 6.98 and a price-to-sales ratio of 0.62.

Equinor ASA, listed on the NYSE as EQNR, is a prominent player in the energy sector, primarily involved in oil and gas exploration and production. As the company prepares to release its quarterly earnings on February 5, 2025, analysts anticipate an earnings per share (EPS) of $0.82 and projected revenue of $24.4 billion. This report will be available before the market opens.

The Johan Sverdrup oilfield, a key asset for Equinor, recently faced a power outage lasting approximately eight hours, as reported on the Nord Pool website. This incident could affect operations at one of Equinor's significant oilfields, potentially impacting the company's revenue and earnings projections.

Equinor's financial metrics provide insight into its market valuation and operational efficiency. With a price-to-earnings (P/E) ratio of 6.98, the market values Equinor's earnings relatively low compared to its peers. The price-to-sales ratio of 0.62 further indicates a low valuation in relation to its sales, suggesting potential undervaluation.

The company's enterprise value to sales ratio of 0.84 and enterprise value to operating cash flow ratio of 4.33 highlight its overall valuation and cash flow efficiency. An earnings yield of 14.33% suggests Equinor offers a substantial return on its earnings relative to its share price, appealing to investors seeking returns.

Equinor's debt-to-equity ratio of 0.67 reflects a moderate level of debt, while a current ratio of 1.45 indicates a strong liquidity position. These metrics suggest Equinor is well-positioned to manage its short-term liabilities and maintain financial stability amidst operational challenges.

Equinor ASA Downgraded by Santander Amid Environmental Concerns

  • Santander Equinor downgrades to underperform due to environmental policy scrutiny and alignment with global climate goals.
  • The company's stock fluctuates between $28.495 and $29.035 on the announcement day, reflecting market sensitivity to its strategic direction and environmental commitments.
  • Equinor faces pressure from investors, including Storebrand Asset Management and KLP, to align its strategy with the Paris Agreement.

On Monday, May 13, 2024, Santander downgraded its rating on Equinor ASA (NYSE:EQNR) to Underperform, marking a significant shift from its previous Neutral stance. This downgrade comes at a time when Equinor, a major player in the oil and gas sector, faces increasing scrutiny over its environmental policies and alignment with global climate goals. The company, headquartered in Norway, is a key contributor to the country's status as a significant oil and gas exporter. However, it is also under pressure to adapt its strategies to meet the objectives of the Paris Agreement and reduce greenhouse gas emissions.

The downgrade by Santander to Underperform from Neutral, with Equinor's stock priced at $28.53, as reported by TheFly, reflects broader market concerns. These concerns are not only about Equinor's financial performance but also about its environmental commitments and the potential impact of global climate policies on its operations. The company's stock has seen fluctuations, trading between a low of $28.495 and a high of $29.035 on the day of the announcement, indicating market sensitivity to news affecting Equinor's strategic direction and investor sentiment.

Adding to the complexity of Equinor's situation are the actions of two of its top ten investors, Storebrand Asset Management and KLP. These investors have publicly supported a shareholder resolution initiated by UK-based Sarasin & Partners. This resolution, set to be voted on at Equinor's annual general meeting, urges the company to ensure its strategy is in line with the Paris Agreement. Specifically, it demands transparency on how Equinor plans to develop new oil and gas reserves without compromising global climate goals. This move underscores the growing demand from investors for oil and gas companies to demonstrate a clear commitment to environmental sustainability and climate action.

The tension between Norway's economic interests as an oil and gas exporter and its environmental commitments is at the heart of the challenges facing Equinor. The upcoming vote on the shareholder resolution reflects a broader trend where investors are increasingly vocal about the need for greater climate action. This trend is particularly relevant in the context of recent energy crises and rising fuel prices, which have heightened the debate over the future of fossil fuels and the transition to renewable energy sources. Equinor's ability to navigate these complex pressures will be critical in determining its future financial performance and its role in the global energy landscape.