EQUINOR ASA Second quarter 2021
Financial statements and review
Second quarter 2021 review
Equinor second quarter 2021 results
Equinor reports adjusted earnings of USD 4.64 billion and USD 1.58 billion after tax in the second quarter of 2021. IFRS net operating income was USD 5.30 billion and the IFRS net income was USD 1.94 billion.
The second quarter of 2021 was characterised by:
- Strong results due to higher prices, sustained value focus and strict capital discipline.
- Solid operational performance and progress in the project portfolio, some projects impacted negatively by Covid-19.
- Strong cash flow and significant improvement of adjusted net debt ratio(1) to 16.4%.
- Cash dividend of USD 0.18 per share and launch of share buy-back programme.
"We deliver a strong result in the second quarter. Solid operational performance and continued focus on value creation have enabled us to capture additional value from higher commodity prices. Strict capital discipline and a net cash flow of more than USD 4.5 billion, reduce our net debt ratio to 16.4 percent and make us robust for volatility in commodity prices going forward," says Anders Opedal, President and CEO of Equinor ASA.
"Systematic and sustained improvements on the NCS enable us to capture additional value in the quarter. We progressed our project portfolio with the Norwegian government's approval of the development plan for Breidablikk, start-up of Martin Linge on NCS and the final investment decision on Bacalhau Phase 1 in Brazil. Projects in execution are progressing despite the impact of Covid-19," says Opedal.
"We continue to accelerate within renewables through strategic positions and partnerships. In Poland we made significant progress with the award of the support regime for Baltyk II & III with a potential total capacity at 1,440 megawatts. We continue our efforts to reduce emissions. In this quarter we submitted the plan for development and operation of the Troll West electrification, and we have made good progress on Hywind Tampen, the world's first floating windfarm to power offshore oil and gas platforms", says Opedal.
Adjusted earnings [5] were USD 4.64 billion in the second quarter, up from USD 0.35 billion in the same period in 2020. Adjusted earnings after tax [5] were USD 1.58 billion, up from USD 0.65 billion in the same period last year.
IFRS net operating income was USD 5.30 billion in the second quarter, up from negative USD 0.47 billion in the same period in 2020. IFRS net income was USD 1.94 billion in the second quarter, compared to negative USD 0.25 billion in the second quarter of 2020. Net operating income was impacted by higher prices for gas and liquids, and net reversals of impairments of USD 0.28 billion including USD 0.11 billion impairment of exploration licences in the second quarter of 2021.
The results of all E&P segments are positively impacted by the higher commodity prices. Strong operational performance, continued improvement focus and strict capital discipline supported additional value creation.
E&P Norway benefited from improved prices and solid operational performance. Combined with taxes paid based on the low 2020 results this contributed strongly to the group cash flow.
Results from the Marketing, midstream and processing segment were impacted by losses on hedges of gas forward sales, shut down of the Hammerfest LNG plant and weak refinery margins.
Compared to the same quarter last year the Renewables segment experienced lower winds for the offshore wind assets, partially offset by improved availability. The segment delivered adjusted earnings of negative USD 31 million, down from negative USD 1 million in the second quarter last year.
Equinor delivered total equity production of 1,997 mboe per day in the second quarter, down from 2,011 mboe per day in the same period in 2020. High planned maintenance, divestment of Bakken and shut down of the Hammerfest LNG plant were partially offset by higher flex gas volumes to capture higher prices and increased production from Johan Sverdrup. Equity production of renewable energy for the quarter was 282 GWh, down from 304 GWh for the same period last year, impacted by lower winds than the same quarter last year.
At the end of second quarter 2021, Equinor had completed 11 exploration wells with 5 commercial discoveries and 12 wells were ongoing. Adjusted exploration expenses in the second quarter were USD 0.21 billion, compared to USD 0.28 billion in the same quarter of 2020.
Equinor second quarter 2021 2
Second quarter 2021 review
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 6.54 billion for the second quarter, compared to USD 2.36 billion for the same period in 2020. Organic capital expenditure [5] was USD 4.03 billion for the first six months of 2021. At the end of the quarter adjusted net debt to capital employed (1) was 16.4%, down from 24.6% in the first quarter of 2021. Including the lease liabilities according to IFRS 16, the net debt to capital employed was 23.2%.
The board of directors has declared a cash dividend of USD 0.18 per share for the second quarter of 2021. 28 July Equinor commences execution of the first tranche of around USD 300 million of the USD 600 million share buy-back program for 2021 announced 15 June.
The twelve-month average Serious Incident Frequency (SIF) for the period ending 30 June was 0.5 for 2021, and down from 0.6 in 2020. The twelve-month average Recordable Injury Frequency (TRIF) for the period ending at 30 June was 2.5, up from 2.2 in 2020.
On the Capital Markets Day on 15 June 2021 Equinor presented its updated strategy for accelerating its transition while growing cash flow and returns. Equinor's ambition is to deliver a competitive capital distribution and presented an updated programme for cash dividend and share buy-back. Equinor has an ambition to reach a 40% reduction in net carbon intensity by 2035, on the way towards net zero by 2050, and interim ambitions to reduce net carbon intensity with 20% by 2030.
Equinor expects gross investments [5] in renewables of around USD 23 billion from 2021 to 2026, and to increase the share of gross investments for renewables and low carbon solutions from around 4% in 2020 to more than 50% by 2030. Based on early low-cost access at scale, Equinor expects to reach an installed capacity of 12 - 16 GW (Equinor share) by 2030. Early access followed by targeted farm down is an integrated part of Equinor's value creation proposition. So far, Equinor has divested assets for USD 2.3 billion and booked a capital gain of USD 1.7 billion.
By 2035, Equinor's ambition is to develop the capacity to store 15 -30 million tonnes CO2 per year and to provide clean hydrogen in 3-5 industrial clusters.
Quarters | Change | First half | ||||||
Q2 2021 | Q1 2021 | Q2 2020 | Q2 on Q2 | (in USD million, unless stated otherwise) | 2021 | 2020 | Change | |
10,518 | ||||||||
5,298 | 5,220 | (472) | N/A | Net operating income/(loss) | (414) | N/A | ||
4,641 | 5,467 | 354 | >100% | Adjusted earnings [5] | 10,109 | 2,401 | >100% | |
1,943 | 1,854 | (251) | N/A | Net income/(loss) | 3,797 | (956) | N/A | |
1,578 | 2,662 | 646 | >100% | Adjusted earnings after tax [5] | 4,240 | 1,207 | >100% | |
1,997 | 2,168 | 2,011 | (1%) | Total equity liquids and gas production (mboe per day) [4] | 2,082 | 2,122 | (2%) | |
63.7 | 56.4 | 22.9 | >100% | Group average liquids price (USD/bbl) [1] | 60.0 | 33.6 | 79% | |
1 This is a non-GAAP figure. Comparison numbers and reconciliation to IFRS are presented in the table Calculation of capital employed and net debt to capital employed ratio as shown under the Supplementary section in the report.
Equinor second quarter 2021 3
Second quarter 2021 review
GROUP REVIEW
Second quarter 2021
Total equity liquids and gas production [4] was 1,997 mboe per day in the second quarter of 2021, down 1% compared to 2,011 mboe per day in the second quarter of 2020 mainly due to planned turnarounds, expected natural decline, divestment of an unconventional US onshore asset in the second quarter of 2021, in addition to the shutdown at the Hammerfest LNG plant. Higher flexible gas off-take and ramp-up of fields on the Norwegian continental shelf partially offset the decrease.
Total entitlement liquids and gas production [3] was 1,845 mboe per day in the second quarter of 2021, down 3% compared to 1,897 mboe per day in the second quarter of 2020. The production was negatively influenced by the factors mentioned above in addition to higher effects from production sharing agreements (PSA) [4]. The net effect of PSA and US royalties was 152 mboe per day in total in the second quarter of 2021 compared to 114 mboe per day in the second quarter of 2020.
Quarters | Change | Condensed income statement under IFRS | First half | ||||
Q2 2021 | Q1 2021 | Q2 2020 | Q2 on Q2 | (unaudited, in USD million) | 2021 | 2020 | Change |
17,462 | 17,589 | 7,603 | >100% | Total revenues and other income | 35,052 | 22,733 | 54% |
(7,399) | (7,166) | (2,750) | >100% | Purchases [net of inventory variation] | (14,565) | (10,146) | 44% |
(2,329) | (2,160) | (2,411) | (3%) | Operating and administrative expenses | (4,489) | (5,014) | (10%) |
(2,111) | (2,797) | (2,522) | (16%) | Depreciation, amortisation and net impairment losses | (4,908) | (6,959) | (29%) |
(326) | (247) | (393) | (17%) | Exploration expenses | (572) | (1,028) | (44%) |
5,298 | 5,220 | (472) | N/A | Net operating income/(loss) | 10,518 | (414) | N/A |
1,943 | 1,854 | (251) | N/A | Net income/(loss) | 3,797 | (956) | N/A |
Balance sheet information: The sum of equity accounted investments and non-current segment assets was USD 74,579 million at 30 June 2021, compared to USD 75,858 million at 30 June 2020.
Net operating income was USD 5,298 million in the second quarter of 2021, compared to negative USD 472 million in the second quarter of 2020. The increase was mainly due to higher average prices for liquids and gas, and net reversal of impairments in the second quarter of 2021 compared to net impairment losses in second quarter of 2020. Lower results from liquids trading compared to the second quarter of 2020 partially offset the increase in net operating income.
In the second quarter of 2021, net operating income was positively impacted by net reversal of impairments2 of USD 276 million, operational storage effects of USD 87 million, net overlifted volumes of USD 80 million, inventory hedge contracts of USD 67 million and unrealised loss on gas derivatives of USD 60 million. In the second quarter of 2020, net operating income was negatively impacted by impairments of USD 374 million.
2 For more information, see note 2 Segments to the Condensed interim financial statements.
Equinor second quarter 2021 4
Second quarter 2021 review
Quarters | Change | Adjusted earnings | First half | |||||
Q2 2021 | Q1 2021 | Q2 2020 | Q2 on Q2 | (in USD million) | 2021 | 2020 | Change | |
17,173 | 17,327 | 8,044 | >100% | Adjusted total revenues and other income | 34,500 | 23,014 | 50% | |
(7,531) | (7,071) | (2,798) | >100% | Adjusted purchases [6] | (14,602) | (10,653) | 37% | |
(2,287) | (2,173) | (2,351) | (3%) | Adjusted operating and administrative expenses | (4,461) | (4,796) | (7%) | |
(2,500) | (2,386) | (2,259) | 11% | Adjusted depreciation, amortisation and net impairment losses | (4,886) | (4,580) | 7% | |
(212) | (230) | (282) | (25%) | Adjusted exploration expenses | (443) | (584) | (24%) | |
4,641 | 5,467 | 354 | >100% | Adjusted earnings [5] | 10,109 | 2,401 | >100% | |
1,578 | 2,662 | 646 | >100% | Adjusted earnings after tax [5] | 4,240 | 1,207 | >100% |
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary disclosures.
Adjusted total revenues and other income were USD 17,173 million in the second quarter of 2021, compared to USD 8,044 million in the second quarter of 2020. The increase was mainly due to significantly higher average prices for liquids and gas, and higher gas production, partially offset by lower liquids production.
Adjusted purchases [6] were USD 7,531 million in the second quarter of 2021, compared to USD 2,798 million in the second quarter of 2020. The increase was mainly due to significantly higher average prices for liquids and gas in addition to higher third party volumes for gas in Europe.
Adjusted operating and administrative expenses were USD 2,287 million in the second quarter of 2021, compared to USD 2,351 million in the second quarter of 2020. The decrease was mainly due to lower transportation costs, especially in the MMP segment, primarily due to lower freight rates on shipping of liquids in addition to lower volumes. The NOK/USD exchange rate development partially offset the decrease.
Adjusted depreciation, amortisation and net impairment losses were USD 2,500 million in the second quarter of 2021, compared to USD 2,259 million in the second quarter of 2020. The increase was mainly due to higher investments and the NOK/USD exchange rate development. The increase was partially offset by higher reserves estimates especially in the E&P International segment, lower depreciation basis resulting from net impairments in previous periods, and a classification of a US onshore asset as held for sale.
Adjusted exploration expenses were USD 212 million in the second quarter of 2021, compared to USD 282 million in the second quarter of 2020. The decrease was mainly due to previously expensed wells being recapitalised this quarter due to related projects being matured, and lower drilling and other costs. This is partially offset by a lower portion of wells being capitalized this quarter and higher field development costs. For more information, see the table titled Adjusted exploration expenses in the Supplementary disclosures.
After total adjustments3 of USD 656 million to net operating income, Adjusted earnings [5] were USD 4,641 million in the second quarter of 2021, an increase of USD 4,287 million from the second quarter of 2020.
Adjusted earnings after tax [5] were USD 1,578 million in the second quarter of 2021, which reflects an effective tax rate on adjusted earnings of 66.0%, compared to negative 82.3% in the second quarter of 2020. The change in the effective tax rate was mainly caused by the effect of the temporary changes to Norway's petroleum tax system in the second quarter of 2020, and changes in provision for best estimates for uncertain tax positions in the second quarter of 2020.
Cash flows provided by operating activities increased by USD 6,275 million compared to the second quarter of 2020. The increase was mainly due to higher liquids and gas prices, decreased tax payments and a change in working capital.
Cash flows used in investing activities increased by USD 918 million compared to the second quarter of 2020. The increase was mainly due to increased financial investments, partially offset by increased proceeds from sale of assets.
Cash flows used in financing activities increased by USD 6,985 million compared to the second quarter of 2020. The increase was mainly due to bonds issued in the second quarter of 2020, partially offset by increased short-term debt and decreased dividend paid.
Total cash flows decreased by USD 1,628 million compared to the second quarter of 2020.
3 For items impacting net operating income, see Use and reconciliation of non-GAAP financial measures in the Supplementary disclosures.
Equinor second quarter 2021 5
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Equinor ASA published this content on 28 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2021 05:22:03 UTC.
