‘Cash keeps coming’: Equinor profits top forecasts in strong first quarter


Norwegian energy giant Equinor has posted stronger than expected first-quarter results at a time it is playing a key role in European energy security.

Oslo-listed Equinor’s bottom line slipped from the record numbers seen in 2022 but remained historically elevated.

Adjusted earnings before interest and tax came in at $12 billion in the three months to the end of March 2023, down from $18 billion in the comparable period last year.

This moved Equinor ahead of the $11.2 billion analysts had projected, according to a Reuters poll.

Adjusted earnings after tax also raced ahead of analysts’ expectations, with the $3.5 billion figure 12% clear of consensus, according to Redburn.

Equinor chief executive Anders Opedal said: “Equinor delivered strong earnings and cash flow across the business and remains a safe and reliable provider of energy to Europe.”

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Lower liquids and gas prices led to the year-on-year fall in profit. However, Equinor highlighted crude, products and liquids trading pushed results from the marketing, midstream and processing segment well above guidance.

‘Love’ of cash drives shares higher

Giacomo Romeo of Jefferies said the results represented a solid beat to consensus across all key divisions. “Higher than expected volumes appear to be the main driver,” he said in a flash note.

Teodor Sveen-Nilsen at Sparebank 1 Markets said the good results were particularly driven by the Norwegian continental shelf.

“In sum, there is very little to pick on here,” the analyst told Upstream’s sister title DN.

Shares in Equinor edged up marginally after the opening bell in Oslo. The stock was changing hands at Nkr303.00 at a little before 9.30am local time and later reached a high of Nkr306.30.

The early climb of about 1% was inline with analysts’ initial expectations after the results hit the tape and the share rose further during the morning accompanied by improvements in the Oslo Energy index.

“This was a good result,” Redburn analysts said of the overall report. “Market has loved the net cash number of $20bn and shares trading up 4% catching up some of the lost ground versus the sector we’ve seen this year.”

Dividend continues to flow

Equinor will pay a dividend of $0.30 per share for the first quarter 2023, with an extraordinary payout of $0.60 per share also collected by investors.

The company is also investing in its own stock, with a fresh $1.67 billion tranche planned as part of Equinor’s overall $6 billion buy-back plan.

The cash keeps coming, said analysts at Barclays Capital led by Lydia Rainford.

Total cash returns this year are expected to reach $16.9 billion, representing almost a 20% cash return yield, they said in a note.

“This should be based on profit generated in 2022 and independent of 2023 commodity prices,” they added.

Opedal added: “We continue to deliver competitive capital distribution to shareholders and invest in a profitable portfolio in oil and gas, renewables and low-carbon solutions.”

He also pointed to progress in optimising Equinor’s oil and gas portfolio by snapping up Suncor Energy in the UK and what he termed focused exploration.

At the same time Equinor’s renewables business was strengthened by the acquisition of solar project developer BeGreen.

Energy-security provider

Equinor’s oil and gas production reached 2.13 million barrels of oil equivalent per day in the first quarter, up marginally from this point in 2022.

“Gas production on the Norwegian continental shelf remained high and stable, contributing to European energy security,” Equinor said.

It came in a period which saw Equinor bring the Bauge field on stream in the Norwegian Sea and the partner-operated Vito field came on stream in the US Gulf of Mexico.

At the same time, Equinor continued to make fresh discoveries on its home turf.

Nine exploration wells yielded three commercial discoveries in the first quarter. Two were in the Troll area in the Norwegian North Sea, where Equinor also agreed to acquire a further equity interest in five discoveries.

Equinor’s net profit last year hit a record level of $74.9 billion, more than doubling the previous high of 2008.

It came as the war in Ukraine sent global energy process spiralling and Equinor playing a key role in keeping European energy supplies flowing.

The company’s quarterly profits peaked in the third quarter last year and have since been softening due to the declining oil and gas prices.

Norway became the EU’s biggest gas supplier last year, after European Union member nations started looking to replace Russian gas supplies following Moscow’s invasion of Ukraine.

“It is in times of need that you get to know your true friends, and Norway showed in an exemplary manner that we can rely on each other,” European Commission President Ursula von der Leyen told Norwegian Prime Minister Jonas Gahr Store in early April.

Gas pressure and vulnerability

‘Markets vulnerable’: Equinor chief financial officer Torgrim Reitan. Photo: THOMAS LARSEN

Equinor chief financial officer Torgrim Reitan explained on the earnings call today the gas market was still vulnerable.

“And looking ahead to next winter, storage levels will again depend on whether demand across Europe and China and LNG capacity,” he said.

“So these factors can easily put pressure on prices in a tight market and small changes can lead to significant fluctuations.”

He explained there was no commercial holdback in Equinor’s first-quarter gas production as “that gas has been needed in Europe”.

“Going forward, we have increased production permits from the Norwegian states,” the Reitan said.

“So, we will produce more as long as we have those in place and we do expect that to continue for quite a while.

“Also, we see that the facilities and the transportation system is working very well and we are able to maintain a good and stable production,” Reitan added.