Equinor is making good profits from higher oil and gas prices, but expects to generate up to NOK 13 billion in gas trading in the fourth quarter.
It’s not just about gas prices going up. Equinor also received significantly more oil in the last quarter than the previous quarter and the same period a year earlier, according to message.
But even if the company makes good profits, significant price changes in the market may have some negative effects on accounting in the fourth quarter.
Equinor has entered into a number of oil and gas financial contracts, and the carrying value of these contracts is affected by changes in market prices.
In the third quarter, Equinor’s MMP marketing segment recorded a significantly increased value related to gas contracts, but in the fourth quarter, the segment is anticipating a strong hype of up to NOK 13 billion.
This relates to the physical delivery of gas in long-term contracts, where prices are lower than the current market price. The company says that changes in gas prices for future delivery also entail losses.
“The fourth-quarter MMP result will therefore be impacted by a loss of between $1.4 billion and $1.5 billion (12.4-13.3 billion, editor’s note) related to natural gas delivery in the fourth quarter and gas derivatives for future gas volumes in the long-term-terms,” Equinor writes.
The company already announced in the third quarter that this explosion would occur, but it did not disclose any numbers at the time.
Fluctuations in the gas market have had an unusually large impact on the MMP segment lately. The adjusted result in MMP is usually between $250 million and $500 million, but in the third quarter the unit had an adjusted result of $2.2 billion.
I got more for oil
Equinor expects oil prices to rise in the fourth quarter, and estimates that the company received between $76.6 and $78.6 per barrel for its oil production on the Norwegian shelf.
That’s a significant increase from the $42.1 per barrel the company received in the last quarter of the previous year. In the third quarter of 2021, when the company delivered the strongest result since 2012, the achieved oil price on the Norwegian shelf was $70.9 per barrel.
company provides information Regarding the collection of estimates from analysts. The fourth quarter report comes on February 9, hence the company also gives its annual capital market update.
Internationally, Equinor expects to earn $75.4 to $77.4 per barrel on oil in the fourth quarter of 2021, compared to $41.3 in the same quarter last year and $68.7 per barrel in the previous quarter.
In the US, Equinor expects to get $65.8 to $67.8 per barrel for its oil, compared to $34.5 in the same period last year and $60.5 in the third quarter.
The company also states how much it paid in carbon dioxide tax last year. The amount is $100 million, or about 884 million kroner.
Much higher gas prices
This fall, gas prices in Europe rose dramatically because there was little gas in storage, Russia supplied limited quantities of gas, and price competition with Asia contributed to higher prices for global shipments of liquefied natural gas (LNG).
Equinor’s Norwegian operations sell oil and gas internally to the MMP Marketing Unit, which resells it to the market.
Remember the initial company the Apprentice on gas to $28.52 per million British thermal units (MMBtu) for the fourth quarter, up from the domestic price of $13.91 per million British thermal units (MMBtu) in the third quarter and $3.88 in the previous year’s fourth quarter.
The conversion rate for the fourth quarter corresponds to NOK 9.56 per cubic meter (based on a conversion where 1 million British thermal units equals 26.38 cubic metres).
It is much higher than what are considered normal levels. By comparison, the Norwegian government left this fall as a basis The average gas price was NOK 2.35 per cubic meter in 2021 and 1.90 NOK per cubic meter in 2022.
No gas from Malakiya
Equinor has been exporting gas from the Gina Krog field since early October rather than reinjecting it back into the field, linked to higher gas prices. Oseberg and Troll increased gas production in the quarter compared to the same period last year, according to Equinor.
The company reports that the Melkøya LNG plant in Hammerfest remains closed after the major fire. Therefore, there is no gas production from the Snøhvit field. The plant is expected to be operational by the end of March 2022.
In November, there was an unplanned shutdown at Johan Sverdrup due to power issues and on Troll C due to gas coolers. This reduced production by about 15,000 barrels of oil equivalent per day in the fourth quarter.
There were no maintenance rounds in the fourth quarter of last year, compared to five such rounds in the same quarter last year, according to Equinor.
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