Equinor Q2 Core Earnings Lag Forecasts

July 26, 2018

World Energy Reports LLC.
Credit - Bo B.jpg

Norwegian oil and gas firm Equinor said on Thursday second-quarter adjusted operating income rose from a year ago but missed forecasts due to higher maintenance costs at its Norwegian fields.

The company formerly known as Statoil also said it was too early to follow peers, such as Shell and Total , with share buyback programmes as it had investment plans to fund.

"We did not feel it was natural in the second quarter (to launch buybacks) because we have big projects and increased working capital. We need to come back to the question at a later point," Chief Financial Officer Hans Jakob Hegge told Reuters.

Due to acquisitions and working capital increase, the company's net debt ratio rose to 27.2 percent in the second-quarter from 25.1 percent in the first quarter.

Equinor's executives previously said their near-term priority was to reduce gearing before launching any buybacks.

The company offered a quarterly dividend of $0.23 per share as forecast and has previously said it expected to maintain that in the third quarter.

Some analysts expect Equinor to pay more to its shareholders in the longer-term.

"Despite some headwinds into 2018, we expect to see the company generate significant cash flow growth over 2019-21, which suggests the potential for increased returns to shareholders over the next few years," Biraj Borkhataria at RBC Capital Markets said in a note.

Equinor's adjusted earnings before interest and taxes rose to $4.3 billion in the second quarter from $3 billion a year ago, missing a forecast for $4.6 billion in a Reuters poll.

Earnings from the biggest of the company's three divisions, the Norwegian exploration and production, were affected by "higher turnaround activity", Equinor said.

New fields, higher maintenance work and quarter-specific items contributed to an increase in costs, the company added.

Chief Financial Officer Hans Jakob Hegge said higher operational costs were expected at some Norwegian fields and from suppliers in the United States, but he said Equinor still had "good control on costs".

"This underlines the importance of continued cost focus across the organisation," Chief Executive Eldar Saetre said in a statement.

The Norwegian company has maintained its guidance on capital spending and production growth, but it now sees a bigger impact on its full-year production due to higher maintenance.

Equinor expected maintenance work to pull down output by 35,000 barrels of oil equivalent per day (boepd) for 2018, instead of the 30,000 boepd it previously saw.

Equinor's equity production stood at 2 million boepd in the second quarter, up 1.6 percent from the same quarter a year ago.

The increase was underpinned by higher output in the United States, which was once a struggling operation for the company but has now turned around.

Equinor's shares traded 0.3 percent down by 0806 GMT. (Editing by Gwladys Fouche and Sherry Jacob-Phillips Editing by Edmund Blair)

Floating Production Week delivers unrivaled overview, insight and analysis to the Offshore Floating Production Systems and Technology market

Floating Production Systems Report And Online Database

  • Monthly reports -- Our monthly reports provide a detailed snapshot of the business sector as of the middle of each month. More than 80 pages of data and industry analysis each month. Excel spreadsheets with each report enable subscribers to tailor the data presentation to their needs. In October of each year we provide a detailed five year forecast of production floater orders. In March of each year we fine tune the forecast and make revisions as needed.
  • Online database -- The online database is updated every day – with information direct from primary sources. In the database are details for 240 planned projects, 370 installations in service, 70+ floaters on order and 20+ floaters available. The database is fully searchable. Customized charts and spreadsheets can be directly produced from the database.
  • Customer support -- We are available to assist with technical questions about information in the database and reports -- and assist with any questions about using the database search tools.

Here's what you get!

Request Free Trial