Equinor ASA Q3 FY2024 earnings call

Management Statement and Operational Highlights:

• Johan Sverdrup: Produced over 1 billion barrels, set a new record in September 2023 with over 756,000 barrels of oil produced, and extended its plateau into 2024 through water management and new well drilling.
• Troll: Achieved all-time high gas production in the gas year ending September, with improvements in the gas value chain ensuring reliable natural gas supply to Europe.
• Johan Castberg: On track for production startup by the end of 2023 in the Barents Sea.
• Northern Light: Facility completed on time and within budget, ready to receive CO2.
• Ørsted Acquisition: Acquired 9.8% in Ørsted as a counter-cyclical investment, complementing offshore wind projects in the US, UK, and Poland. Requires lower CapEx than organic opportunities and supports renewable ambitions towards 2030.
• Dividends and Buybacks: Board approved an ordinary cash dividend of $0.35 per share and $0.35 in extraordinary dividend, with a $1.6 billion share buyback starting the next day. Total capital distribution for the year is $14 billion.
• Safety: An incident on Sleipner B was taken seriously, with gas production shut down and an investigation launched to understand root causes.

Segment Performance:

• NCS Production: Total NCS production up 2% year-over-year. Gas production increased 8% driven by high output from Troll, Aasta Hansteen, Oseberg, and new fields like Breidablikk and Hans.
• E&P International: Production impacted by turnarounds at Peregrino, partially offset by new wells in Angola.
• E&P U.S.: Liquids production affected by hurricanes and well work over at Caesar Tonga.
• Renewables: Production significantly higher than last year, led by onshore power plants in Brazil and Poland. Dogger Bank A in the UK expects full commercial production in the second half of 2025.
• MMP: Driven by strong LNG and power trading, and LPG shipping fleet arbitrage.
• Financials: Adjusted operating income was $6.9 billion before tax, IFRS net income was $2.3 billion. Year-to-date cash flow from operations after tax was $14 billion. Adjusted earnings per share came in at $0.79.

Guidance:

• CapEx: 2024 CapEx guidance adjusted to $12 billion to $13 billion, down from $13 billion due to phasing of project spends, adjustments in onshore renewables, and currency effects on NCS projects.
• Oil and Gas Production: No change to production guidance, but downside risk exists from curtailments in U.S. onshore operations.
• Renewables Production: Adjusted to grow by around 50% this year, mainly reflecting progress on Dogger Bank A.

Risks:

• Gas Market: Fragile market with small events causing large price fluctuations; impacted by Asian LNG demand, weather, political risk in Ukraine, and timing of new LNG projects.
• U.S. Production: Uncertainty regarding gas production curtailments in the U.S., affecting gas production outlook.
• Rosebank Project: Uncertainty from a court case on Scope 3 emissions and potential changes in UK tax treatment.

Question and Answer: Q: Thoughts on the 12-16GW renewables target and progress on Empire Wind financing?

A: The Ørsted acquisition replaces organic investments. Empire Wind is approaching financial close and expected to close by year-end, with plans to farm down.

Q: Hedging gas sales and risk in U.S. production?

A: Not hedging, wanting investors to be exposed to gas price volatility. U.S. curtailment risk exists but has less impact than NCS gas.

Q: Update on Rosebank project and tax treatment?

A: Judicial review on Scope 3 emissions, UK tax changes uncertain; startup expected in 2027.

Q: CapEx adjustments and Johan Sverdrup plateau?

A: CapEx adjustments due to phasing, currency, and onshore renewables. Johan Sverdrup plateau to continue until early 2025, extended via reservoir optimization.

Q: Ørsted acquisition strategy and future projects?

A: Long-term investment in Ørsted, no current plans for joint projects; capital distribution next year expected to be $8 billion to $10 billion.

Q: CCS strategy and Ørsted board representation?

A: Attractive returns in U.S. and Europe for CCS; no current plans for board representation in Ørsted.

Q: Cancellation of blue hydrogen project and hydrogen plant?

A: Blue hydrogen not viable due to lack of economic framework, customer base, and market.

Q: Ørsted strategy shift and CapEx for projects?

A: Energy transition approach differs; CapEx adjustments due to phasing, currency, and project updates.

Q: Follow-up on CapEx adjustments for projects like Johan Castberg?

A: CapEx adjustments due to phasing, currency, and project updates, with full transparency in national budget filings.