Equinor capitalised on high prices for gas and liquids by posting earnings of US$15bn and recording free cash flow of US$25bn in Q4 2021.
Alongside increasing production of piped gas to Europe – around a third of exports are sold to the UK – the Norway state gas giant progessed its renewables project pipeline, and is striving for an installed capacity of 12-16GW by 2030. It follows Shell and bp in announcing strong Q4 results.
President and CEO Anders Opedal said while it experienced operational impact from the pandemic last year, markets recovered with high prices, especially in the second half of the year.
“In Europe the energy prices reached record levels impacting industries and societies,” he said. “In the quarter, we took the final investment decision on Dogger Bank C, the third phase of the world’s biggest offshore wind farm and sold a 10% interest in the project. The plan for development and operation for Troll West electrification was approved by the Norwegian authorities, which means that oil can be produced from the prolific Troll- and Fram area with low emissions.”
The Board proposes increasing Q4 quarterly cash dividend to 20 cents per share, increasing the share buy-back programme up to US$5bn for 2022, and announce an extraordinary quarterly cash dividend of 20 cents per share for four quarters.
Strong operational performance across all segments despite high oil and gas prices
All E&P segments benefitted from the higher prices for gas and liquids. The Marketing, Midstream and Processing segment results were impacted by negative effects from price risk management of bilateral contracts offsetting gains from prior quarters in 2021. The negative effects were partially offset by strong results from Danske Commodities. The Renewable segment benefitted from a production increase compared to the same quarter last year with higher availability from offshore wind assets and higher power prices.
Increased production and solid cash flow
Equinor – which is targeting around 2% growth in production in 2022 – delivered a total equity production of 2,158mboe per day in Q4, up from 2,043 mboe per day in the same period in 2020. Production from Troll phase 3, Martin Linge and increased production from Johan Sverdrup, as well as solid production efficiency and optimised gas production contributed to the growth.
Equity production of renewable energy for the quarter was 526GWh, up from 480GWh for the same period last year, benefitting from the production from the Guanizuil IIA solar plant in Argentina.
Last year Equinor completed 21 exploration wells with eight commercial discoveries and four wells were ongoing at year end. Adjusted exploration expenses in the fourth quarter were US$0.20bn, compared with US$1.25 billion in the same quarter of 2020. With 5.36bn barrels in proved reserves, Equinor’s reserves to production ratio (R/P) was 7.5 years.
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to US$18bn for Q4, compared to US$3.8bn for the same period in 2020.
Emissions targets and renewables pipeline
Equinor aims to reduce net group-wide GHG emissions by 50% (Scope 1 and 2) by 2030. Last year saw a slight improvement; average CO2-emissions from Equinor’s operated upstream production, on a 100% basis, were 7kg per boe in 2021, compared to 8kg per boe in 2020.
Opedal said its new ambition is aligned with the Paris agreement and a pathway to limit global warming to 1.5 degree Celsius. “This is a significant step that will demand a great effort,” he said.
In line with its rivals, Equinor must reconcile its environmental goals with oil and gas demand showing no signs of diminishing – forecasting its oil and gas portfolio can deliver above US$40bn in free cash flow towards 2026.
The Norwegian Continental Shelf will continue to be Equinor’s backbone, maintaining production and generating significant cash flow towards 2030, building on technology leadership and utilising existing infrastructure. Internationally we are progressing well on our Brazilian portfolio and we expect start-up of the Bacalhau project in 2024.
“Equinor has progressed on the focused strategy to optimise within oil and gas, high value growth in renewables and develop new markets in low carbon solutions. Within low carbon solutions we are developing a broad portfolio, with Northern Lights on track for commercial operations in 2024.”
Last year Equinor booked capital gains of US$1.4bn from renewables. By 2035, Equinor’s ambition is to develop the capacity to store 15-30mn tonnes CO2 per year and to provide clean hydrogen in 3-5 industrial clusters.
Its renewables installed equity capacity is 0.7GW. In addition to Dogger Bank C, Equinor has signed a cooperation agreement with Korean East-West Power for 3GW of offshore wind projects in South-Korea. Equinor expect project base returns of 4-8% real and remains determined to capture higher equity returns through project financing and farm downs.