Equinor Increases 2018 Earnings, Eyes Offshore U.S.
“Strong operational performance and high production gave solid results and cash flow in a quarter with significant market volatility. We delivered growing returns for the full year and expect continued earnings growth. Following strong improvements in recent years, the board proposes an increase in quarterly dividend of 13% to $0.26 per share,” says Eldar Sætre, president and CEO of Equinor ASA.
“Our cash flow generation was strong across the business. At an average oil price of $71/bbl, we generated an organic free cash flow well above $6 billion for the full year. We have also done several value-enhancing transactions, strengthened our financial position and reduced our net debt ratio from 29% to 22.2%,” says Sætre.
Adjusted earnings were $4.4 billion in the fourth quarter, up from $4 billion in the same period in 2017. Adjusted earnings after tax were $1.5 billion, up from $1.3 billion in the same period last year. High production at higher prices contributed to the increase. Due to sales pricing mechanisms in the market, the significant fall in oil prices led to a negative one-off effect with a higher than normal differential between realised liquids prices and Brent Blend average. In addition, higher exploration activity and lower refinery and products trading margins impacted adjusted earnings negatively. For the full year, adjusted earnings were $18 billion, up 42% from $12.6 billion in 2017.
IFRS net operating income was $6.7 billion in the fourth quarter compared to $5.2 billion in the same period of 2017. IFRS net income was $3.4 billion, up from $2.6 billion in the fourth quarter of 2017. For the full year, IFRS net income was $7.5 billion, up from $4.6 billion in 2017.
“In 2018 we sanctioned seven new projects, which will deliver more than 1 Bbbl of resources to Equinor at an average break-even price of $14 and very low CO2 emissions. In the quarter, we started production at Aasta Hansteen, Oseberg Vestflanken and Big Foot, and at the Apodi solar plant in Brazil. We also had the winning bid in an offshore wind lease round offshore Massachusetts in the U.S.,” says Sætre.
Equinor delivered total equity production of 2,170 Mboed in the fourth quarter, an increase from 2,134 Mboed in the same period in 2017. The increase was mainly due to portfolio changes and new wells especially in the US onshore. New fields coming on stream added to the increase. Expected natural decline in addition to reduced gas off-take partially offset the increase. Equinor delivered all-time high production in 2018 with an underlying production growth of more than 2%.
As of year-end 2018, Equinor had completed 24 exploration wells with nine commercial discoveries. Adjusted exploration expenses in the quarter were $417 million, up from $274 million in the same quarter of 2017, mainly due to higher seismic and drilling activity.
The reserve replacement ratio (RRR) reached an all-time high of 213% in 2018, mainly driven by sanctioning of new fields, positive revisions and acquisitions. The reserves to production ratio (R/P) increased from 7.6 to 8.7 years.
Cash flows provided by operating activities before tax amounted to $27.6 billion in 2018 compared to $21.0 billion in 2017. Organic capital expenditure was $9.9 billion for the full year of 2018. At year-end, net debt to capital employed was reduced to 22.2%.
The board of directors proposes to the annual general meeting to increase the dividend by 13% to $0.26 per share for the fourth quarter.
The twelve-month average Serious Incident Frequency (SIFp) was 0.5 for 2018, compared to 0.6 in 2017.