Norway’s Equinor will pay $10 billion to shareholders in this year’s fiscal after reporting record fourth-quarter pretax profits. It joins European competitors in cashing into a boom in oil and gas prices, sending its shares to new heights.
- 4Q + year-end 2021 results:
- USD 15 billion adjusted earnings for 4Q 2021
- USD 10 billion earnings after tax for 2021
- USD 25 billion net cash flow for 2021
- Net debt reduction
- Strong operational performance
- Continued profitable energy transition projects investment
The October-December quarter saw an increase in adjusted earnings before taxes to $15.0 billion, up from $756 million a year ago and surpassing the $13.2 billion forecast by Equinor’s poll of 23 analysts.
Equinor generated $25 Billion of cash flow free of charge last year due to high energy prices, disciplined spending and high energy costs. This is equivalent to Senegal’s GDP in 2020 according to World Bank data.
CEO Anders Opedal stated that “We are capturing the value from high prices gas and liquids with exceptional performance and increased production.”
Last year saw an enormous turnaround in the oil and gas industry. Markets overcame the 2020 pandemic-driven slump, which saw the prices of European natural gas quadruple and the North Sea crude rose more than 50%.
Equinor, a majority state-owned company, announced that it will increase its quarterly dividend from $0.18 to $0.20 and pay an extra extraordinary dividend of $0.20 over a period of four quarters. Total payments are expected to reach $5 billion.
In 2022, the company plans to increase its share purchase back to $5 billion. This is an increase from the previous plan of $1.2billion in 2021. This will bring the total cash flow shareholders will receive to $10 billion.
European oil industry peers also reported record profits in recent days with BP promising to increase share buybacks and Shell (SHEL.L.) claiming it will increase both dividends as well as stock purchases.
Jefferies stated in a note to clients that Equinor delivered a set of results far beyond expectations, particularly in terms of shareholder compensation.
Equinor is at the top of the IOC sector range with a $10 billion shareholder distribution in 2022. This yield places Equinor at 10%.
Equinor shares were 0.9% higher at 258.6 crowns 1307 GMT. This was in line with the Oslo benchmark, but lower than Wednesday’s all-time high at 271.25 crowns.
Equinor’s quarterly petroleum output was 2.16 million barrels of oil equivalent per day (boepd), an increase of 6% over the fourth quarter of 2020.
The company anticipates that it’s oil and natural gas production will grow by 2% by 2022.
Equinor stated that it will increase its climate ambitions over the next decade and reduce net global greenhouse gas emissions from its global operations by 50% by 2030.
The previous target was only for Norway operations and was a reduction of 40%.
Opedal stated that 90% of the cuts will be permanent, which means they cannot be reversed.
“The new ambition aligns with the Paris agreement and provides a path to limit global warming at 1.5 degrees Celsius,” Opedal said. Opedal stated that this is a significant and difficult step.
Equinor shares have increased 68% over the past 12 months, more than twice the increase in the European oil-and-gas index.
According to the company, capital spending will reach $10 billion in this year’s fiscal year, as opposed to $9-10 billion previously.
The 2023 capital expenditure forecast was cut to $10 billion from $12billion, but the 2024 estimate remained the same at $12 billion. It also stated that it would stay at this level in 2025.
