September 26, 2022

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Equinor missed the electricity price party and incurred a huge loss in gas trading

Equinor missed the electricity price party and incurred a huge loss in gas trading

Before each quarterly presentation, Equinor sends an email to analysts to collect their estimates for the quarter. At the same time, Equinor’s investor contact is using the opportunity to reveal events in the quarter. Sometimes the company also reports on things that can surprise and give important price results.

The content of the email, which is also posted for order on the company’s website, is unlisted information.

loss notified

Three months ago, Equinor announced huge gains in its gas trading. At the end of the year, the MMP trading division showed a record strong result of $924 million in the third quarter.

However, as Equinor announced until then, these unrealized accounting gains would be followed by “significant losses in the fourth and first quarters of 2021” when the volumes sold in long-term gas contracts are delivered to customers.

Equinor has now identified this loss. In the message that has now been sent, they announced a loss of about 1.4 billion to 1.5 billion dollars – equivalent to between 12.4 billion kroner and 13.2 billion kronor at today’s dollar exchange rate.

Equinor stresses that trading in gas derivatives has been beneficial to the company, although it creates significant volatility in the outcome.

cheap energy from wind turbines

In the thick of information from Equinor in this email, it also appears that the renewable energy division has not benefited from higher electricity prices.

Energy prices in Europe have risen significantly in recent months. That means money is pouring into the coffers of Statkraft and many other energy producers, but Equinor doesn’t expect their renewable business to benefit from the price jump.

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The company says it has “limited exposure to variable prices”, and thus the company writes that “high energy prices are not expected to significantly affect the reported results.”

As Equinor enters into long-term power agreements for its renewable projects, it misses such price jumps as is evident in the market now, at the same time that the company is also ensuring more predictability.
The same goes for players like Hydro, which also has long-term energy contracts that protect the company’s operations in Norway from short-term price jumps as it does now.

In fact, “one should expect a negative outcome due to the growth phase” in the renewable energy division, according to the company.

Equinor’s renewable division is currently small compared to the rest of the company’s operations. In the third quarter, the power output was 304 GWh, and the net profit showed a loss of $27 million.