A fund of more than 400 billion – E24

LONDON (E24): Equinor will spend much of its more than $400 billion cash on owners, and will not develop projects at any cost. – Should be good enough, says the CFO.

– We have $39 billion in cash, Reitan tells E24.

Equinor's fund of funds is equivalent to approximately NOK 410 billion. This means that the company has great opportunities to buy companies and assets, and distribute a lot of money to their owners.

A significant portion of the funds will go to the latter. Reitan notes that Equinor will pay $14 billion to owners this year, in the form of dividends and share buybacks.

What happens is a large payout to shareholders, which brings the debt ratio back into positive territory, says Reitan.

– We still want to have a very strong balance sheet, but with the uncertainty ahead, we want to manage this very aggressively, says the CFO.

Equinor currently has a debt ratio of 22 percent. This should usually be around 15-30 percent. Reitan would not set a deadline for when the company will return to that level of normality.

-We are comfortable being below this level. For us, it is important to be strong in the face of uncertainty. But over time we will return to this level, says Reitan.

– He swings a lot

E24 also challenges Equinor CEO Anders Opedal on what he will use the money for, after two years of exceptionally high income.

– I have a lot of questions about this topic,” Obedal says.

High revenues and a strong balance sheet give Equinor great strength. But the president remembers that 2020 was the worst year for Equinor in history, while 2022 and 2023 were the best.

– This fluctuates a lot, and then it's about thinking long-term about how you're using capital, whether you're competitive in terms of distributing profits to shareholders, or whether you're investing wisely and you have a strong balance sheet, so you can and say that the ability to withstand the challenges that It may come in future energy markets.

He is open to using the money fund in both oil and gas and renewable energy.

– I will not comment on any future acquisitions. But the way things are moving forward, it is important that we are strong and face the changes that may come in the turbulent energy market, while at the same time expanding our business and investing in good projects, whether in oil and gas or renewables. “Ubedal says.

– And then we also said that since our debt ratio is negative, capital distributions will be one of the recovery tools. We have said that having competitive profits is our priority, he says.

Both oil and renewable

Equinor has bought and sold companies and assets in recent years.

– What we did last year was buying oil and gas in the UK, renewables in Denmark and Brazil, and selling in Azerbaijan and Nigeria. This is an ongoing part of our portfolio development, and we will see that in the future as well,” says Reitan.

– We have a very strong balance, and this gives us the freedom to use this tool, he says.

Retan points out that Equinor wants to grow within renewable and low-carbon solutions, but is also investing in oil and gas, especially in core regions such as the UK, USA and Brazil.

– In oil and gas, we at NCS are interested in building length over time and focusing on where we want to be. At the international level, we have some important core areas that we want to strengthen. We have Suncor and Rosebank in the UK, we have Sparta in the US, and the BM-C-33, or Raia, in Brazil.

– Then there are assets that we want to sell over time. He says this will be a dynamic development, and there will be deals in both oil and gas and renewable energy.

– Not at the expense of oil and gas

– Many people are concerned about the dichotomy between oil and gas and renewable energy sources, which do not have the same returns. Is it difficult to maintain the restructuring plan in the face of investors?

-It's important for us to spread the word. Our investment in renewable and low-carbon solutions does not come at the expense of oil and gas, says Reitan.

– Can you afford both?

– Yes. It is clearly progressing today. We are expanding our ambitions until 2035. In terms of the national electricity grid, we will produce as much in 2035 as we will produce in 2020. So, there are significant investments that we will make there, and in international business. Then renewable and low-carbon energy comes at the top.

Equinor expects to maintain an average return of 15 percent until 2035, even as investments in renewables increase.

– And 15 percent represents a very high return, if you compare it to the history of the industry. “We see a great opportunity to build something new on top of what we have, and at the same time we have been able to maintain a strong return over these years,” says Reitan.

You will refrain from spending

Reitan believes Equinor has made good use of its renewable investments.

– We see a reasonable return compared to the risk we take. We must be very careful. He says: We are more interested in creating value than volume goals.

He insists that the company will not bet on unprofitable projects.

– He says that these production ambitions must be scaled back.

Among other things, the company plans to produce 80 terawatt-hours of electricity from renewable energy by 2035. It also has plans to increase oil and gas production by five percent by 2026, and maintain production in 2030 at more than two million barrels. of oil equivalent per day.

– Analysts point out that Equinor has avoided expensive offshore wind tours and postponed expensive projects such as Westing and Pays du Nord. Have you been careful with your spending in recent years, and will that continue?

– It will continue. The CFO says the projects for which money is allocated must be good enough, otherwise they will have to wait.

– Wisting and Bay du Nord are good examples of this. They are actually very good projects with great potential, but they could be better. So they can come later. The same also applies to our renewable projects. If they're not good enough, they have to wait, Reitan says.