Norwegian oil and gas giant Equinor continues to make big money from the extremely tense situation in the energy markets, especially in Europe.
On Wednesday, the company announced adjusted operating profit of $17.6 billion. That’s somewhat lower than the previous quarter, when Equinor set a new record of $18 billion. But with the depreciation of the krone in recent months, it means a new record in the Norwegian currency of NOK 174 billion compared to NOK 169 billion in the previous quarter.
In advance, analysts who track the company on average expected a result of $16.9 billion, according to estimates obtained by Equinor itself.
At the same time, Equinor is reported to be increasing its extraordinary dividend to 50 cents per share, up from the previous 20 cents per share. This comes on top of a regular dividend of 20 cents. Equinor is also increasing its buyback program, which is another way of distributing money to shareholders, by buying and canceling shares and thus increasing the value of those remaining.
According to DN’s calculations, the actions Equinor filed on Wednesday correspond to nearly an additional NOK 30 billion to shareholders this year, nearly 20 of which are in the form of direct dividends. The company calls it a “significant escalation of capital allocation.”
“We believe this provides a good balance, as we invest in the energy transition while delivering an attractive return to our shareholders,” CEO Anders Opedal said at a press conference at Equinor’s office in Fornebu on Wednesday morning.
Question about money box
Ahead of Wednesday’s report, Equinor set a new profit record for three consecutive quarters. The background is the war in Ukraine, which has come on top of a growing energy crisis in Europe and the world since the fall. Norway and Equinor are producing and exporting as much gas as possible to Europe, which in the long term will make itself independent of Russian supplies, but in the short term remains highly vulnerable to reduced gas imports from Russia.
As Equinor has delivered record results after record results, there is one question that has come back over and over again: What will the company do with all the money?
In February, when CEO Anders Obedal presented fourth-quarter results, he went ahead with a dividend increase, which included an extraordinary payment to shareholders for the next four quarters, as well as a larger private equity buyback, which is another way to increase. Angel values.
But that was before Russia invaded Ukraine at the end of February.
The war, at least for periods, led to new spikes in energy prices. As recently as this week, gas prices in Europe rose again due to the loss of Russian supplies, underlining how volatile the market can be as the European Union plans to wean itself off imports from its big eastern neighbor in the coming years.
But after the record quarter that ended in March, there were no signs from Equinor of more money being spent on shareholders. Also, the company has repeated Opedals . operations A message from earlier this year On continued strict spending discipline – including projects in renewable energy, the company has set ambitious growth targets in the coming years, but there has also been greater competition and higher costs.
This approach has won praise from many quarters, both among investors and analysts. But many also pointed out that the company is not actually a bank, and at some point it must make a choice: either invest in projects or acquisitions, or pass the money to shareholders.
For now, it makes sense to have a strong balance sheet, but there have to be limits, Sparebank 1 Markets analyst Theodor Sven-Nielsen said after the previous quarterly report.
Now it’s clear that Equinor is opening up its portfolio a bit. The company is boosting its extraordinary dividend for the second and third quarters, from 20 cents to 50 cents per share, and a buyback program of five to six billion dollars.
So the dividend increase applies to two quarters. At today’s krone exchange rate, this corresponds to a total of 18.8 billion additional NOK for shareholders this year. The increase in buybacks corresponds to NOK 9.9 billion.
Wednesday Sveen-Nilsen That there is still a lot of cash in the company that will not be used.
Obedal responds to this at the press conference:
Remember, we have $22 billion in taxes owed, plus we have dividends coming in, not least because we’re investing for the future with a good portfolio of projects. With so much uncertainty in the market, it’s good to be solid. And we.
The Norwegian shelf pulls the load
As usual, it is the Norwegian business that takes the lead in the company’s results.
$14.3 billion in adjusted operating profit comes from here. Although the company’s total production has decreased marginally from 2 million barrels of oil equivalent per day in the second quarter of 2021 to 1.98 million barrels, it is increasing over the national control plant, from 1.26 to 1.34 million barrels per day. The increase in gas production and its export to Europe explains a lot of this: here the increase was up to 18 percent in the quarter compared to the corresponding period last year.
And as the company announced prior to the report, it is getting a solid result in the trading division, in part as a result of the effects of derivatives on gas contracts. The renewable business, for its part, is responsible for another loss, $42 million before taxes.
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