Equinor ASA 6-K, filed Oct 29, 2020
Equinor ASA (EQNR)
About this 6-K
Equinor ASA filed this 6-K on October 29, 2020.
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON,
DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE
ISSUER
PURSUANT TO RULE 13a
-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT
OF 1934
29 October 2020
Commission File Number 1-
15200
Equinor ASA
(Translation of registrant’s
name into English)
FORUSBEEN 50, N-4035, STAVANGER,
NORWAY
(Address of principal executive offices)
Indicate by check mark whether the
registrant files or will file annual
reports under cover of Form 20
-F
or Form 40-F:
Form 20-F
X
Form 40-F
Indicate by check mark if the registrant
is submitting the Form 6-K in
paper as permitted by Regulation S
-T Rule 101(b)(1):_____
Indicate by check mark if the registrant
is submitting the Form 6-K in
paper as permitted by Regulation S
-T Rule 101(b)(7):_____
This report on Form 6-K is being filed
for the purposes of incorporation
by reference in the Registration
Statements on Form F-3
(File No. 333-
239808) and Form S-8 (File No.
333-168426).
This report shall be deemed filed
and incorporated by reference in such
Registration
Statements and shall be deemed
to be a part thereof from the date
on which this report is furnished,
to the extent not superseded by
documents or reports subsequently
filed or furnished.
This document includes portions from
the previously published results
announcement of Equinor ASA as of,
and for the nine months ended
30
September 2020, as revised to comply
with the requirements of Item
10(e) of Regulation S-K regarding
non-GAAP financial information
promulgated by the U.S. Securities
and Exchange Commission regarding
non-GAAP financial information. This document does not update or
otherwise supplement the information contained in the previously
published results announcement.
Equinor
third
quarter
2020
results
Equinor reports IFRS net
operating income of negative
USD 2.02 billion and IFRS
net income of negative USD
2.12 billion in
the third quarter of 2020
,
following
net impairments of USD
2.93 billion mainly due to reduced
future price assumptions.
●
Solid results from operations
in a low-price environment
●
On track to deliver on
USD 3 billion action plan
to strengthen financial
resilience
●
Strong value creation
from renewables
●
Net debt ratio
(1)
increased to 31.6%, due
to net impairments
and payment for government
share of share buy-back
“Our financial results
are impacted by weak
prices as regions across
the world are still severely
affected by the pandemic.
We see the
results of our forceful
response to the market turmoil,
with significant cost improvements
and strict financial discipline.
Net impairments
in the quarter are
mainly due to reduced price assumptions.
Significant uncertainty
remains around the future
commodity price
development underlining
the importance of increased
competitiveness and
financial resilience,” says
Eldar Sætre, President and
CEO
of Equinor ASA.
“We deliver solid
operational results in the
quarter with an underlying
production growth of nine
percent. We progress
our competitive
project portfolio, supported
by the tax policy measures
in Norway,
with the delivery of
Plan for Development and
Operation of the
Breidablikk field.
Our specialised organisation
for late-life
production at the
Norwegian continental shelf
had a successful start
-up
showing improved production
efficiency and reduced
cost,“
says Sætre.
“We continue to
capture value from our renewable
energy portfolio and position
ourselves for profitable growth
in value chains for
carbon capture and
storage. This quarter we
announced our partnership
with BP,
including the divestment
of half of our share
of
offshore wind projects
Empire Wind and Beacon
Wind in the US.
We are progressing
H2H Saltend, a project
for large-scale
production of hydrogen
in the UK, and in Norway
we are progressing the Northern
Lights project as part
of creating full value chains
for carbon capture,
transportation and storage
,” says Sætre.
Equinor is on track
to deliver on the action plan
launched in March 2020
of USD 3 billion to strengthen
financial resilience,
including a
reduction of operating
costs of USD 0.70 billion.
Unit production costs are
significantly reduced from
third quarter last year.
In the E&P Norway segment
,
Equinor saw weak
prices impacting the
results but took advantage
of the flexibility in gas
production as
gas prices in Europe
recovered through the
quarter.
Results in the E&P International
segment were impacted
by low prices, partially
offset by a substantial
reduction in costs. The E&P
USA segment was also
impacted by weak prices,
while continuing efforts
to reduce activity and costs.
The Marketing, midstream
and processing segment
captured value from
gas sales to Europe, offset
by slightly negative refinery
margins in the quarter.
New energy solutions
delivered a positive result
in the quarter, including
costs related to maturation
of new projects. A capital
gain of
around USD 1 billion
from the divestment of
a 50% non-operated interest
of the offshore wind
projects Empire Wind
and Beacon Wind
in the US is expected
to be booked in the
first quarter of 2021.
IFRS net operating
income was negative
USD 2.02 billion in the third
quarter, down from
negative USD 0.47 billion
in the same period
of 2019. IFRS net income
was negative USD 2.12
billion in the third quarter,
down from negative USD 1.11
billion in the third quarter
of 2019. Net operating
income was impacted
by net impairment of USD 2.93
billion mainly due
to reduced future price
assumptions as
well as some reduction
s
in reserves estimates. Net
impairment include USD 1.38 billion
in the E&P USA segment,
of which USD 1.21
billion is related to US onshore.
Impairments in the E&P International
segment were USD 1.18
billion, while impairments
within the
E&P Norway segment was
USD 0.37 billion.
In total, USD 0.58
billion of the net impairment
was recognised as exploration
expenses.
Equinor delivered total
equity production of 1,994
mboe per day in the third quarter,
up from 1,909 mboe per
day in the same period in
2019, with an increased
share of gas.
Adjusting for portfolio
transactions and government
-imposed curtailments, this
represents an
1
This is a non-GAAP figure. Comparison
numbers and reconciliation to IFRS
are presented in the table Calculation
of capital employed and
net debt to capital employed ratio as
shown under the Supplementary
section in the report.
underlying production
growth of around 9% compared
to the third quarter of
2019.
At the end of the
third quarter Equinor has completed
26 exploration wells
with 13 commercial discoveries
and two wells under
evaluation. At the quarter
end,
16 wells were ongoing. Exploration
expenses in the quarter
were USD 0.89 billion,
compared to USD
0.87 billion in the
same quarter of 2019.
Cash flows provided
by operating activities
before taxes paid and changes
in working capital amounted
to USD 10.2 billion in
the first
nine months of 2020,
compared to USD 16.6 billion
in the first nine months of
- IFRS capital expenditure
(2)
was USD 6.95
billion
for the first nine months
of 2020. Organic capital
expenditure [5] was USD 5.99
billion for the first nine months
of 2020. At the closing
of the quarter net
debt to capital employed
(3)
was 31.6%, up from 29.3
%
at the end of the second
quarter of 2020,
mainly impacted by
the net impairment
in the quarter,
as well as share buy-back
from the Norwegian state
.
Following the implementation
of IFRS 16, net
debt to capital employed
(3)
was 37.0%.
The board of director
s
has decided a cash dividend
of USD 0.11 per
share for the third quarter 2020.
The twelve-month average
Serious Incident Frequency
(SIF) for the period
ending 30 September
was 0.6 for 2020, similar
to the
same period for 2019.
The twelve-month average
Recordable Injury Frequency
(TRIF) for the period
ending 30 September
was 2.3 for
2020, compared to
2.5 in 2019.
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million, unless stated otherwise)
2020
2019
Change
(2,019)
(472)
(469)
>(100%)
Net operating income/(loss)
(2,434)
7,783
N/A
(2,124)
(251)
(1,107)
(92%)
Net income/(loss)
(3,080)
2,081
N/A
1,994
2,011
1,909
4%
Total equity
liquids and gas production (mboe
per day) [4]
2,079
2,032
2%
38.3
22.9
52.5
(27%)
Group average liquids price (USD/bbl)
[1]
35.2
55.8
(37%)
2
Defined as Additions to PP&E, intangibles
and equity accounted investments
in note 2 Segments to the Con
densed financial interim
statements.
3
This is a non-GAAP figure. Comparison
numbers and reconciliation to IFRS
are presented in the table Calculation
of capital employed and
net debt to capital employed ratio as
shown under the Supplementary
section in the report.
GROUP REVIEW
Third quarter 2020
Total equity liquids
and gas production
[4] was 1,994 mboe per day in the third
quarter of 2020, up 4% compared
to 1,909 mboe per day in
the third quarter of 2019 mainly
due to new fields on the NCS and
UKCS. Increased flexible
gas production added to the increase,
partially
offset by expected natural decline
mainly on the NCS, production halt
in Brazil and divestment of the Eagle
Ford asset in the E&P USA
segment in the fourth quarter of 2019.
Total entitlement
liquids and gas production
[3] was 1,865 mboe per day
in the third quarter of 2020, up 7%
compared to 1,745 mboe per
day in the third quarter of 2019. In
addition to the factors mentioned
above, production was positively
influenced by lower effects
from
production sharing agreements (PSA)
[4], and lower US royalty volumes.
The net effect of PSA and US
royalties was 129 mboe per
day in
total in the third quarter of 2020 compared
to 164 mboe per day in the
third quarter of 2019.
Quarters
Change
Condensed income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(unaudited, in USD million)
2020
2019
Change
11,339
7,603
15,610
(27%)
Total revenues
and other income
34,073
49,189
(31%)
(5,307)
(2,750)
(7,667)
(31%)
Purchases [net of inventory variation]
(15,453)
(22,928)
(33%)
(2,368)
(2,411)
(2,922)
(19%)
Operating and administrative expenses
(7,382)
(8,063)
(8%)
(4,798)
(2,522)
(4,619)
4%
Depreciation, amortisation and net
impairment losses
(11,757)
(9,039)
30%
(886)
(393)
(871)
2%
Exploration expenses
(1,914)
(1,374)
39%
(2,019)
(472)
(469)
>(100%)
Net operating income/(loss)
(2,434)
7,783
N/A
(201)
(248)
340
N/A
Net financial items
(426)
489
N/A
(2,220)
(720)
(129)
>(100%)
Income before tax
(2,859)
8,272
N/A
95
469
(978)
>(100%)
Income tax
(221)
(6,191)
(96%)
(2,124)
(251)
(1,107)
(92%)
Net income/(loss)
(3,080)
2,081
N/A
Net operating income
was negative USD 2,019
million in the third quarter
of 2020, compared to
negative USD 469 million in
the third
quarter of 2019. The
decrease was mainly
due to lower liquids and
gas prices in addition
to net impairments
4
primarily related to
reduced price assumptions
5
and negative reserve
updates. Strong results
from liquids trading in the
MMP segment in addition
to lower
operational and administrative
expenses, especially in
the MMP segment, partially
offset the decrease.
In the third quarter of
2020, net operating income
was negatively impacted
by net impairments
of USD 2,928 million
and provisions of
USD 108 million.
Changes in fair value of derivatives
and inventory hedge contracts
of USD 352 million partially
offset the decrease.
In the third quarter of
2019, net operating income
was negatively impacted
mainly by net impairment
s
of USD 2,794 million,
provisions
of USD 560 million
and changes in fair value
of derivatives and inventory
hedge contracts of USD 444
million and positively affected
by gain from sale of
assets of USD 849 million.
Total revenues
and other income
were USD 11
,339 million in the
third quarter of 2020 compared
to USD 15,610 million
in the third
quarter of 2019. The
decrease was mainly
due to lower average
prices for liquids
and gas.
Purchases [net of inventory variation]
[6] were USD 5,307
million in the third quarter
of 2020, compared to
USD 7,667 million in the
third quarter of 2019.
The decrease was mainly
due to lower average prices
for liquids and gas.
4
For more information, see note 2
Segments to the Condensed
interim financial statements.
5
For more information, see note 6
Property, plant
and equiptment and intangible assets
to the Condensed interim financial
statements.
Operating and administrative
expenses
were USD 2,368 million in
the third quarter of 2020,
compared to USD 2,922
million in the
third quarter of 2019.
The decrease was mainly
due to lower activity level
as a result of the Covid
-19 pandemic and the divest
ment of
the Eagle Ford asset
in the fourth quarter of
- Lower royalties and
production fees added
to the decrease. Higher
transportation
costs for liquids,
especially in the MMP segment,
partially offset the
decrease.
Depreciation, amortisation
and net impairment losses
were USD 4,798
million in the third quarter
of 2020, compared
to USD
4,619 million in the
third quarter of 2019. The
increase was mainly due
to ramp-up of new fields
on the NCS and
higher investments
especially in the E&P segments
in addition to higher
net impairments in the
third quarter of 2020. Higher
proved reserves estimates
especially in the E&P International
and E&P USA segments in
addition to lower depreciation
basis resulting from net
impairments in
previous periods
partially offset the
increase.
Exploration expenses
were USD 886 million
in the third quarter of 2020,
compared to USD 871 million
in the third quarter of 2019.
The increase was mainly
due to a lower portion
of exploration expenditures
being capitalised and
a higher portion of exploration
expenditure capitali
sed in earlier years being expensed
this quarter.
The increase was partially
offset by lower drilling
costs and lower
net impairments of
assets amounting to USD 575
million in the third quarter
of 2020, compared to
USD 608 million in the same
period
last year.
For more information, see
the table titled Exploration
expenses in the Supplementary
disclosures.
Net financial items
amounted to negative
USD 201 million in the third
quarter of 2020, compared
to positive USD 340 million
in the
third quarter of 2019.
The decrease of USD 541 million
was mainly due to a loss
of USD 131 million on net
foreign exchange in the
third quarter of 2020,
compared to a gain
of USD 295 million
in the third quarter of
- In addition, lower
gain on derivatives
related
to the long-term debt
portfolio with a gain
of USD 39 million in the
third quarter of 2020, compared
to a gain of USD 209 million
in the
third quarter of 2019
,
added to the decrease.
Positive change in interest
income and other financial
items due to positive effects
of
USD 235 million
in the third quarter of 2020,
compared to positive
effects of USD 180 million
in the third quarter of 2019
partially offset
the decrease.
Income tax
was USD 95 million in
the third quarter of 2020.
The effective tax rate
was 4.3%.
In the third quarter of 2019,
income tax
was negative USD 978
million and the effective
tax rate was more than 100
%. For more information,
see note
5
Income taxes
to the
Condensed interim
financial statements.
Net income
in the third quarter
of 2020 was negative USD 2,124
million, down from negative
USD 1,107 million in the third
quarter of
2019.
The decrease was mainly
due to negative changes
in net operating income
as discussed above
in addition to negative changes
for net financial items,
partially offset by lower
and positive income tax.
Cash flows provided by operating
activities
decreased by USD 1,549 million
compared to the third quarter
of 2019. The decrease was
mainly due to lower liquids and gas
prices and a change in working
capital, partially offset by
decreased tax payments.
Cash flows used in investing
activities
increased by USD 2,877 million
compared to the third quarter
of 2019. The increase was mainly
due
to increased financial investments
and reduced proceeds from sale
of assets, partially offset by
lower cash flow used for business
combinations and capital expenditures.
Cash flows provided by financing
activities
increased by USD 820 million
compared to the third quarter
of 2019. The increase was mainly
due to increased short-term debt, increased
collateral received and decreased
dividend paid, partially offset
by increased payments related
to
the share buy-back programme and
repayment of finance debt.
Total cash flows
decreased by USD 3,606 million
compared to the third quarter
of 2019.
Free cash flow
[5] in the third quarter of 2020 was
USD 216 million compared
to negative USD 672 million in
the third quarter of 2019. The
increase was mainly due to lower cash
flow used for business combinations,
decreased tax payments and lower
capital expenditures, partially
offset by reduced proceeds from
sale of assets, lower liquids
and gas prices and increased payments
related to the share buy-
back
programme.
First nine months 2020
Net operating income
was negative USD 2,434 million
in the first nine months of 2020 compared
to positive USD 7,783 million
in the first
nine months of 2019. The decrease
was mainly due to lower liquids
and gas prices in addition to net impairments
6
primarily related to reduced
price assumptions
7
and negative reserve updates.
6
For more information, see note 2
Segments to the Condensed
interim financial statements
In the first nine months of 2020, net
operating income was negatively
impacted mainly by net impairments
of USD 5,752 million and provisions
of USD 290 million.
In the first nine months of 2019, net
operating income was negatively
affected mainly by net impairments
of USD 2,678 million, provisions
of
USD 557 million and positively impacted
by net gain of sale of assets
of USD 999 million and changes
in the fair value of derivatives
and
inventory hedge contracts of USD
267 million.
Total revenues and
other income
were USD 34,073 million in the first
nine months of 2020 compared
to USD 49,189 million in the first
nine
months of 2019. The decrease was
mainly due to lower average prices
for liquids and gas.
Purchases
[6]
were USD 15,453 millio
n
in the first nine months of 2020 compared
to USD 22,928 million in
the first nine months of 2019.
The
decrease was mainly due to lower average
prices for liquids and gas.
Operating and administrative expenses
were
USD 7,382 million in
the first nine months of 2020, a decrease
of USD 681 million compared
to in the first nine months of 2019. The
decrease was mainly due to the NOK/USD
exchange rate development in addition
to lower royalties
and production fees driven by lower
volumes and prices. The
divestment of the Eagle
Ford asset in the E&P USA segment
in the fourth
quarter of 2019 and reduced Gassled
removal costs added to the decrease.
Higher transportation costs for
liquids in the MMP segment
partially offset the decrease.
Depreciation, amortisation and net
impairment losses
were USD 11,757
million in the first nine months
of 2020, an increase of USD 2,
718
million compared to the first nine months
of 2019.
The increase was mainly due to higher
net impairments mainly related to
reduced price
assumptions and negative reserve
updates
2
. Ramp-up of new fields especially
on the NCS and UKCS and
higher investments mainly in the
US added to the increase. The increase
was partially offset by higher
proved reserves estimates for
several fields, lower depreciation
basis
resulting from net impairments
in previous periods and the NOK/USD
exchange rate development.
Exploration expenses
increased by USD 540 million
to USD 1,914 million
in the first nine months of 2020,
primarily due to net impairment
of
assets, higher portion of exploration
expenditure capitalised in earlier
years being expensed this period
and higher drilling costs. A higher
portion of exploration expenses
being capitalised and lower seismic
costs and other costs
compared to the first nine months
of 2019 partially
offset the increase. For more information,
see the table titled Exploration
expenses in the Supplementary
disclosures.
Net financial items
amounted to negative
USD 426
million in the first nine
months of 2020, compared
to positive USD 489
million in
the first nine months
of 2019.
The decrease of USD 914 million
was mainly due to a gain
of USD 421 million on derivatives
related to
a long-term debt
portfolio in the first nine
months of 2020 compared
to a gain of USD 781 million
in the first nine months of
2019.
A
loss of USD 156 million
on net foreign exchange in
the first nine months of 2020
compared to a gain of USD 201
million in the first
nine months of 2019
in addition to lower gain
of USD 375 million
on Interest income and
other financial items in the
first nine months
of 2020 compared to
a gain of USD 535 million
in the first nine months of
2019, added to the decrease.
Income tax
was USD negative 221
million in the first nine months
of 2020 and the effective
tax rate was negative
7.7%. Income tax in
the first nine months
of 2019 was USD 6,191
million and the effective
tax rate was 74,8%. For
more information, see
note 5 Income
tax to the Condensed
interim financial statements.
Net income
in the first nine
months of 2020 was negative
USD 3,080 million compared
to positive USD 2,081
million in the first nine
months of 2019. The
decrease was mainly
due to the negative changes
in net operating income
as discussed above in addition
to
negative changes in
net financial items, partially
offset lower income
tax.
Cash flows provided by operating
activities
decreased by USD 3,932 million
compared to the first nine months
of 2019. The decrease was
mainly due to lower liquids and gas
prices and a change in working
capital, partially offset by
decreased tax payments
and increased cash
flow from derivatives.
Cash flows used in investing
activities
increased by USD 920 million
compared to the first nine
months of 2019. The increase
was mainly
due to increased financial investments
and reduced proceeds from sale
of assets, partially offset
by lower cash flow used for
business
combinations and capital expenditures.
Cash flows provided by financing
activities
increased by USD 8,107 million
compared to the first nine months
of 2019. The increase was
mainly due to bond issues in the seco
nd quarter of 2020, increased short
-term debt and decreased dividend
paid, partially offset by
increased
payments related to the share buy-
back program and increased repayment
of finance debt.
Total cash flows
increased by USD 3,255 million
compared to the first
nine months of 2019.
Free cash flow
[5] for the first nine months
of 2020 was negative USD
1,277 million including USD 332
million received from the Lundin
divestment included in the line item
(increase)/decrease in financial
investment in the cash flow statement,
compared to USD 338 million
in the
7
For more information, see note 6
Property, plant
and equiptment and intangible assets
to the Condensed interim financial
statements.
first nine months of 2019. The decrease
was mainly due to lower liquids
and gas prices, reduced proceeds
from sale of assets and increased
payments related to the share buy-
back program, partially offset by
decreased tax payments, lower
cash flow used for busin
ess combinations,
lower capital expenditures and increased
cash flow from derivatives.
OUTLOOK
●
Organic capital expenditures
[5] are estimated
at around USD 8.5
billion for 2020
8
, around USD 10 billion
for 2021
8
, and
around USD
12 billion annual average
for 2022-2023
●
Equinor intends to continue
to mature its attractive portfolio
of exploration assets and
estimates a total
exploration activity
level
of around USD 1.1 billion
for 2020, excluding signature
bonuses,
accruals and field development
costs
●
Equinor’s ambition
is to keep the
unit of production cost
in the top quartile of
its peer group
●
For
the period 2019–2026,
production growth
[7] is expected
to come from new projects
resulting in around
3% CAGR
(Compound Annual
Growth Rate) based on
current forecast
●
Scheduled maintenance
activity
is estimated to reduce
equity production by around
30 mboe per day for the
full year of 2020
These forward-looking
statements reflect current
views about future events
and are, by their nature,
subject to significant risks
and
uncertainties because
they relate to events and
depend on circumstances
that will occur in the future.
We continue to monitor
the
impact of Covid-19
on our operations. Deferral
of production to create
future value, production
cuts, gas off-take,
timing of new
capacity coming on
stream, operational regularity,
impact of Covid-19
and activity level in
the US onshore represent
the most
significant risks related
to the foregoing production
guidance. There has been
considerable uncertainty
created by the Covid-19
pandemic and we are
still unable to predict the
ultimate impact of this
event, including impact
on general economic conditions
worldwide. Our future
financial performance,
including cash flow and
liquidity, will
be impacted by the
extent and duration
of the
current market conditions,
the development in realised
prices, including price
differentials and the
effectiveness of actions
taken in
response to the pandemic.
For further information,
see section Forward-looking
statements.
8
USD/NOK exchange rate assumption
of 9.5.
EXPLORATION & PRODUCTION NORWAY
Third quarter 2020 review
Average daily production
of liquids and gas
increased by 19% to
1,273 mboe per day
in the third quarter of 2020,
compared to
1,067 mboe per day
in the third quarter of 2019.
The increase was mainly
due to ramp-up of new fields.
Net operating income
was USD 431 million
in the third quarter of
2020 compared to USD 2,
558 million in the thir
d
quarter of 2019.
The decrease was mainly
due to lower liquids price
and gas transfer price in
addition to impairments.
Higher volumes partially offset
the decrease.
In the third quarter of
2020, net operating income
was negatively impacted
by impairments of USD 360
million, partially offset
by
overlifted volumes of
USD 23 million. In the third
quarter of 2019, net operating
income was positively
impacted by gain on sale of
assets of USD 840
million, partially offset by
a negative impact of USD
25 million related
to underlifted volumes.
Total
revenues and other
income
decreased mainly due
to lower liquids price and
gas transfer price. Higher
volumes partially offset by
the decrease.
Operating and administrative
expenses
decreased mainly due to
the NOK/USD exchange
rate development, lower
transportation cost
in addtion to lower activity
and reduced cost level as
a result of the Covid
-19 restrictions. Lower well
maintenance cost added
to the
decrease.
Depreciation, amortisation
and net impairment losses
increased mainly due
to net impairments primarily
related to negative reserve
updates and reduced
price assumptions.
Ramp-up of new fields
added to the increase
.
Exploration expenses
increased mainly due
to lower portion of exploration
expenditure being capitalised,
a higher portion of
exploration expenditure
capitalised earlier years
being expensed this
quarter and higher field development
costs.
Lower drilling costs
partially offset the
increase.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
2,822
1,659
4,498
(37%)
Total revenues
and other income
8,018
13,876
(42%)
(735)
(706)
(817)
(10%)
Operating and administrative expenses
(2,076)
(2,441)
(15%)
(1,486)
(992)
(981)
51%
Depreciation, amortisation and net
impairment losses
(4,318)
(2,945)
47%
(170)
(65)
(142)
20%
Exploration expenses
(330)
(335)
(2%)
431
(104)
2,558
(83%)
Net operating income/(loss)
1,294
8,155
(84%)
First nine months 2020
Net operating income
for E&P Norway was USD
1,294 million
in the first nine months of
2020 compared to USD 8
,155 million in the
first nine months
of 2019. The decrease
was mainly due to lower
liquids price and gas
transfer price in addition to
impairments in the
first nine months
of 2020. Higher liquids
volumes partially offset
the decrease.
In the first nine months
of 2020,
net operating income was
negatively impacted by
impairments of USD 1,219
million and underlifted
volumes of USD 26 million
.
In the first nine months of
2019,
net operating income
was positively impacted
by a gain on sale of
assets
of USD 977 million,
partially offset by a negative
impact of USD 94 million
from underlifted volumes in
the period and an
implementation effect
of USD 42 million from a
change in accounting policy
for lifting imbalances.
Total
revenues and other
income
decreased by 42% in
the first nine months of
2020 compared to the
first nine months of 2019
,
mainly
due to lower liquids
prices and gas transfer price
.
Higher liquids volumes
partially offset the decrease
.
Operating and administrative
expenses
decreased mainly due to
the NOK/USD exchange
rate development and
reduced Gassled
removal costs.
Depreciation, amortis
ation and net impairment
losses
increased in the first nine
months of 2020 compared
to the first nine months
of
2019,
mainly due to impairments
primarily related to
negative reserve
updates and reduced
price assumptions in addition
to ramp-up
of new fields.
The NOK/USD exchange rate
development and higher
proved reserves estimates
for several fields partially
offset the
increase.
Exploration expenses
decreased mainly due
to lower drilling costs. Lower
portion of exploration
expenditure being capitali
sed and a
higher portion of exploration
expenditure capitalised
earlier years being expensed
this period partially offset
the decrease.
EXPLORATION & PRODUCTION INTERNATIONAL
In the second quarter
of 2020, Equinor changed
its internal reporting to management,
impacting the composition
of Equinor's
operating and reporting
segments. Equinor’s
upstream activities
in the USA are now reported
separately to management,
and such
information is also considered
to be useful to the users
of the financial statements,
resulting in the exploration
and production activities
in the USA being considered
a separate operating-
and reporting segment as
of the second quarter
of 2020. Previously these
activities were included
in the DPI operating segment
and presented as part
of the E&P International
reporting segment.
Third quarter 2020 review
Average daily equity production
of liquids and gas
was 323 mboe per day
in the third quarter of
2020 compared to 410 mboe
per
day in the third quarter
of 2019. The decrease was
primarily due to repairs on
Peregrino (Brazil) resulting in
a production halt, lower
gas nominations,
natural decline in mature
fields, partially offset
by production ramp
-up of new fields in the UK.
Average daily entitlement
production of liquids
and gas
was 255 mboe per day
in the third quarter of 2020
compared to
312 mboe per day in
the third quarter of 2019. The
decrease was due to lower
equity production partially
offset by lower effects
from
production sharing agreements
(PSA). The net effects
from PSA were 68 mboe
per day in the third quarter
of 2020 compared to
97 mboe per day
in the third quarter of 2019.
Net operating income
was negative USD 1,328
million in the third quarter
of 2020 compared to positive
USD 325 million in the third
quarter of 2019. The
decrease was mainly
due to higher impairments
in the third quarter of 2020,
lower liquids and gas prices
in
addition to lower
entitlement production.
In the third quarter of
2020, net operating income
was negatively impacted
by impairments of USD 1,176
million. In the third quarter of
2019, net operating income
was negatively impacted
by net impairments
of USD 56 million.
Total
revenues and other
income
decreased mainly due
to lower liquids and gas
prices in addition to lower
entitlement production
.
Operating and administrative
expenses
increased mainly due to
overlifted volumes in
the quarter in addition
to higher transportation
costs. The increase
was partially offset by lower
operation and maintenance
expenses in addition to
lower royalties and production
fees, driven by lower
volumes and prices.
Depreciation, amortisation
and net impairment losses
increased
mainly due to higher
net impairments, higher
proved reserves
estimates and lower
production from mature
fields. Ramp-up of new fields
on stream partially offset
the decrease.
Exploration expenses
increased mainly due
to impairments,
a lower portion of exploration
expenditure being capitalised
and a higher
portion of exploration
expenditure capitalised
earlier years being expensed
this quarter.
Lower drilling and field develo
pment costs
partially offset the
increase.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
840
555
1,351
(38%)
Total revenues
and other income
2,742
4,608
(40%)
12
(26)
16
(25%)
Purchases [net of inventory variation]
(56)
(9)
>100%
(373)
(281)
(321)
16%
Operating and administrative expenses
(1,152)
(1,324)
(13%)
(1,504)
(509)
(620)
>100%
Depreciation, amortisation and net
impairment losses
(2,883)
(1,491)
93%
(304)
(288)
(100)
>100%
Exploration expenses
(840)
(367)
>100%
(1,328)
(548)
325
N/A
Net operating income/(loss)
(2,189)
1,418
N/A
First nine months 2020
Net operating income
for E&P International
was negative USD 2,189
million in the first nine
months of 2020, compared
to positive
USD 1,418 million in
the first nine months of
- The decrease was
mainly due to higher net
impairments in the
first nine months of
2020 and lower liquids
and gas prices.
In the first nine months
of 2020, net operating income
was negatively impacted
by net impairments
of USD 1,705 million.
In the first nine months
of 2019, net operating income
was positively impacted
by net impairment reversals
of USD 60 million and
negatively impacted
by an implementation effect
of USD 63 million from
a change in accounting policy
for lifting imbalances.
Total
revenues and other
income
decreased mainly due
to lower liquids and gas
prices.
Operating and administrative
expenses
decreased mainly due to
lower royalties and
production fees driven by
lower volumes and
prices.
Lower operation and maintenance
expenses added to
the decrease.
Depreciation, amortisation
and net impairment losses
increased due to higher
net impairments
and new fields on stream,
partially
offset by higher
proved reserves estimates
and lower production
from mature fields.
Exploration expenses
increased mainly due
to higher impairments,
a higher portion of exploration
expenditure capitalised in
earlier
years being expensed
this period and higher
drilling costs.
Lower field development
costs partially offset
the increase.
EXPLORATION & PRODUCTION USA
In the second quarter
of 2020, Equinor changed
its internal reporting to management,
impacting the composition
of Equinor's
operating and reporting
segments. Equinor’s
upstream activities
in the USA are now reported
separately to management,
and such
information is also considered
to be useful to the users
of the financial statements,
resulting in the exploration
and production activities
in the USA being considered
a separate operating-
and reporting segment as
of the second quarter
of 2020. Previously these
activities were included
in the DPI operating segment
and presented as part
of the E&P International
reporting segment.
Third quarter 2020 review
Average daily equity production
of liquids and gas
was 398 mboe per day
in the third quarter of
2020 compared to 432 mboe
per
day in the third quarter
of 2019. The divestment
of the Eagle Ford asset
in 2019 resulted in a decrease,
as well as planned
maintenance and
weather shutdowns in the
US offshore.
New wells in the US onshore
and additional ownership
in the Caesar Tonga
field acquired in the
third quarter of 2019 partially
offset the decrease.
Average daily entitlement
production of liquids
and gas
decreased slightly to
337 mboe per day in the
third quarter of 2020
compared to 366
mboe per day in the third quarter
of 2019. The decrease
was due to lower equity production
slightly offset by lower
effects from US onshore
royalty volumes after
the divestment of the
Eagle Ford asset.
The net effects from US royalties
were 61
mboe per day in the
third quarter of 2020 compared
to 67 mboe per day in the third
quarter of 2019.
Net operating income
was negative USD 1,606
million in the third quarter of
2020 compared to negative
USD 2,587 million in the
third quarter of 2019.
The increase was mainly due
to lower depreciation,
net impairments and lower
operating costs due to the
divestment of the
Eagle Ford asset. Lower commo
dity prices partially
offset the increase.
In the third quarter of
2020, net operating income
was negatively impacted
by net impairments
of USD 1,377 million,
with the largest
effect on unconventional
US onshore assets.
In the third quarter of
2019, net operating income
was negatively impacted
by net impairments
of USD 2,532 million.
Total
revenues and other
income
decreased mainly due
to lower commodity prices.
Operating and administrative
expenses
decreased mainly due to
the divestment of
the Eagle Ford asset,
lower transportation cost
due
to reduced production
volumes in addition to
lower production fees driven
by lower prices.
Depreciation, amortisation
and net impairment losses
decreased mainly due
to lower net impairments,
lower
depreciation basis
resulting from impairments
in previous periods and
higher proved reserves estimates
in US offshore.
Increased investments in the
third quarter of 2020
and acquired interest
in the Caesar Tonga
field during 2019 partially
offset the decrease.
Exploration expenses
decreased mainly due
to lower impairments in
the third quarter of 2020
and a higher portion
of exploration
expenditure being capitalised,
partially offset by higher
drilling costs.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
611
475
996
(39%)
Total revenues
and other income
1,971
3,179
(38%)
(344)
(293)
(425)
(19%)
Operating and administrative expenses
(1,008)
(1,226)
(18%)
(1,460)
(475)
(2,529)
(42%)
Depreciation, amortisation and net
impairment losses
(3,171)
(3,558)
(11%)
(413)
(40)
(629)
(34%)
Exploration expenses
(745)
(672)
11%
(1,606)
(332)
(2,587)
38%
Net operating income/(loss)
(2,953)
(2,278)
(30%)
First nine months 2020
Net operating income
for E&P USA was negative
USD 2,953 million in the first
nine months of 2020 compared
to negative USD
2,278 million in the
first nine months of 2019.
The decrease was mainly
due to higher net impairments
in the first nine months
of 2020
in addition to lower
liquids and gas prices. Lower
operating and administrative
expenses in addition to
lower depreciation expenses
partially offset the
decrease.
In the first nine months
of 2020, net operating income
was negatively impacted
by net impairment losses
of USD 2,296 million, mainly
due to reduced price
assumptions with the
largest effect being on
an unconventional US onshore
asset.
In the first nine months
of 2019, net operating income
was negatively impacted
by net impairments
of USD 2,532 million,
with the
largest effect
on unconventional US onshore
assets.
Total
revenues and other
income
decreased mainly due
to lower liquids and gas
prices.
Operating and administrative
expenses
decreased mainly due to
divestment of the
Eagle Ford asset in the fourth
quarter of 2019 in
addition to lower
severance taxes due to
lower prices.
Depreciation, amortisation
and net impairment losses
decreased mainly due
to lower net impairments,
lower depreciation basis
resulting from impai
rments in previous periods
and higher proved reserves
estimates in US offshore.
Increased investments and
acquired interest
in the Caesar Tonga
field during 2019 partially
offset the decrease.
Exploration expenses
increased mainly due
to higher drilling and field
development costs.
A higher portion of exploration
expenditure
being capitalised
partially offset the
increase.
.
MARKETING, MIDSTREAM &
PROCESSING
Third quarter 2020 review
Natural gas sales
volumes
amounted to 14.1
billion standard cubic
meters (bcm) in the third quarter
of 2020, an increase of
1.6 bcm
compared to the
third quarter of 2019. Of the
total gas sales in the third
quarter of 2020, entitlement
gas was 12.6 bcm, up 1.4
bcm
from the third quarter
of 2019. The increase
was mainly due to higher NCS entitlement
volumes.
Liquids sales volumes
amounted to 218.7
million barrels (mmbl) in the
third quarter of 2020,
up 14.2 mmbl compared
to the third
quarter of 2019
mainly due to increased
NCS volumes.
Average invoiced European
natural gas sales price
was 48%
lower in the third
quarter of 2020 compared
to the third quarter of
2019 mainly due
to drop in European gas
prices.
Average invoiced North American
piped gas sales
price
decreased by 23% in
the same period mainly
due to the decreased Henry
Hub price.
Net operating income
was positive
USD 551 million in the third quarter
of 2020 compared to negative
USD 757 million in
the third
quarter of 2019. The
increase was mainly due to
inventory hedging effects
and unrealised gain on
derivatives amounting
of USD 325
million in the third quarter
of 2020, compared
to a loss on derivatives
of USD 453 million in the third
quarter of 2019. In addition,
provisions and impairment
s
related to damage to the
South Riding Point oil terminal
in Bahamas negatively impacted
net operating
income in the third quarter
of 2019.
Total
revenues and other
income and Purchases
[net of inventory variation]
decreased mainly due to
negative refinery margins
and
lower prices for all products.
Strong piped gas result
partially offset the
decrease.
Operating and administrative
expenses
decreased mainly due to
decreased provisions
in the third quarter of 2020
compared to the
third quarter of 2019
.
Depreciation, amortisation
and net impairment losses
decreased mainly due
to impairments in previous
periods.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
11,055
7,486
14,188
(22%)
Total revenues
and other income
33,344
46,481
(28%)
(9,171)
(5,127)
(13,048)
(30%)
Purchases [net of inventory variation]
[6]
(27,799)
(41,581)
(33%)
(1,231)
(1,423)
(1,585)
(22%)
Operating and administrative expenses
(3,998)
(3,753)
7%
(102)
(326)
(311)
(67%)
Depreciation, amortisation and net
impairment losses
(709)
(504)
41%
551
610
(757)
N/A
Net operating income/(loss)
839
644
30%
First nine months 2020
Net operating income
for MMP was USD 839
million in the first nine
months of 2020 compared
to USD 644 million in
the first nine
months of 2019. The
increase was mainly due to
strong results from liquids
trading and price review
settlement in addition
to lower
provisions of USD 246
million in the first nine months
of 2020 compared to USD 510
million in the first nine
months of 2019. Weaker
refinery results and
higher impairments related
to refinery and infrastructure
assets in the third quarter
of 2020 partially offset
the
increase.
Total
revenues and other
income
and Purchases [net
of inventory variation]
decreased mainly due to
lower refining margins and
lower
prices for all products
,
partially offset by increased
results from gas and liquids
trading in addition to settlement
of price revisions.
Operating and administrative
expenses
increased mainly due to
higher transportation
cost for liquid volumes.
Depreciation, amortisation
and net impairment losses
increased mainly due
to higher impairments the
first nine months of 2020
compared to the
first nine months of 2019.
CONDENSED INTERIM FINANCIAL
STATEMENTS
Third quarter 2020
CONSOLIDATED
STATEMENT
OF INCOME
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
Note
2020
2019
2019*
11,250
7,563
14,704
Revenues
33,878
48,011
62,911
86
33
46
Net income/(loss) from equity accounted
investments
190
149
164
3
7
860
Other income
5
1,028
1,283
11,339
7,603
15,610
Total revenues
and other income
2
34,073
49,189
64,357
(5,307)
(2,750)
(7,667)
Purchases [net of inventory variation]
(15,453)
(22,928)
(29,532)
(2,187)
(2,234)
(2,732)
Operating expenses
(6,826)
(7,422)
(9,660)
(181)
(177)
(190)
Selling, general and administrative
expenses
(555)
(642)
(809)
(4,798)
(2,522)
(4,619)
Depreciation, amortisation and net
impairment losses
6
(11,757)
(9,039)
(13,204)
(886)
(393)
(871)
Exploration expenses
(1,914)
(1,374)
(1,854)
(13,359)
(8,075)
(16,079)
Total operating
expenses
2
(36,506)
(41,405)
(55,058)
(2,019)
(472)
(469)
Net operating income/(loss)
2
(2,434)
7,783
9,299
(343)
(379)
(343)
Interest expenses and other financial
expenses
(1,066)
(1,029)
(1,450)
142
130
683
Other financial items
640
1,517
1,443
(201)
(248)
340
Net financial items
4
(426)
489
(7)
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
95
469
(978)
Income tax
5
(221)
(6,191)
(7,441)
(2,124)
(251)
(1,107)
Net income/(loss)
(3,080)
2,081
1,851
(2,127)
(254)
(1,107)
Attributable to equity holders of the company
(3,088)
2,079
1,843
3
3
1
Attributable to non-controlling interests
8
2
8
(0.65)
(0.08)
(0.33)
Basic earnings per share (in USD)
(0.94)
0.62
0.55
(0.65)
(0.08)
(0.33)
Diluted earnings per share (in USD)
(0.94)
0.62
0.55
3,248
3,276
3,329
Weighted average number of ordinary
shares outstanding (in millions)
3,276
3,330
3,326
3,257
3,284
3,337
Weighted average number of ordinary
shares outstanding diluted (in
millions)
3,284
3,338
3,334
* Audited
CONSOLIDATED
STATEMENT
OF COMPREHENSIVE INCOME
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
2020
2019
2019*
(2,124)
(251)
(1,107)
Net income/(loss)
(3,080)
2,081
1,851
34
41
192
Actuarial gains/(losses) on defined
benefit pension plans
197
365
427
(6)
(8)
(49)
Income tax effect on income and
expenses recognised in OCI
1)
(56)
(86)
(98)
27
33
142
Items that will not be reclassified to
the Consolidated statement
of
income
141
279
330
888
1,560
(1,726)
Currency translation adjustments
(1,734)
(1,254)
(51)
0
0
57
Share of OCI from equity accounted
investments
0
44
44
888
1,560
(1,668)
Items that may be subsequently reclassified
to the Consolidated
statement of income
(1,734)
(1,210)
(7)
915
1,593
(1,526)
Other comprehensive income/(loss)
(1,593)
(930)
323
(1,209)
1,342
(2,633)
Total comprehensive
income/(loss)
(4,673)
1,151
2,174
(1,212)
1,340
(2,633)
Attributable to the equity holders of the
company
(4,682)
1,149
2,166
3
3
1
Attributable to non-controlling interests
8
2
8
* Audited
1) Other comprehensive income (OCI).
CONSOLIDATED
BALANCE SHEET
At 30 September
At 30 June
At 31 December
At 30 September
(unaudited, in USD million)
Note
2020
2020
2019*
2019
ASSETS
Property, plant and
equipment
6
62,988
63,941
69,953
69,954
Intangible assets
6
9,667
10,317
10,738
10,877
Equity accounted investments
1,650
1,599
1,442
1,421
Deferred tax assets
4,251
3,794
3,881
3,435
Pension assets
1,103
963
1,093
871
Derivative financial instruments
1,964
1,630
1,365
1,486
Financial investments
3,437
3,157
3,600
3,185
Prepayments and financial receivables
1,240
1,311
1,214
1,174
Total non-current
assets
86,300
86,711
93,285
92,403
Inventories
2,860
2,974
3,363
2,501
Trade and other receivables
6,108
5,489
8,233
6,917
Derivative financial instruments
570
589
578
949
Financial investments
10,563
9,319
7,426
7,203
Cash and cash equivalents
7,844
9,700
5,177
6,838
Total current
assets
27,944
28,072
24,778
24,408
Assets classified as held for sale
3
188
0
0
297
Total assets
114,432
114,783
118,063
117,108
EQUITY AND LIABILITIES
Shareholders' equity
34,084
35,587
41,139
40,983
Non-controlling interests
24
23
20
16
Total equity
34,108
35,610
41,159
40,999
Finance debt
4
32,193
31,647
24,945
24,401
Deferred tax liabilities
9,451
8,907
9,410
9,731
Pension liabilities
3,705
3,572
3,867
3,765
Provisions and other liabilities
7
19,191
18,097
17,951
18,269
Derivative financial instruments
787
967
1,173
1,409
Total non-current
liabilities
65,328
63,191
57,346
57,576
Trade, other payables
and provisions
8,118
8,620
10,450
8,663
Current tax payable
5
543
674
3,699
4,115
Finance debt
4
5,277
5,463
4,087
4,375
Dividends payable
292
297
859
864
Derivative financial instruments
765
928
462
516
Total current
liabilities
14,996
15,982
19,557
18,533
Total liabilities
80,324
79,173
76,904
76,109
Total equity
and liabilities
114,432
114,783
118,063
117,108
* Audited
CONSOLIDATED
STATEMENT
OF CHANGES IN EQUITY
(unaudited, in USD million)
Share
capital
Additional
paid-in
capital
Retained
earnings
Currency
translation
adjustments
OCI from
equity
accounted
investments
Share-
holders'
equity
Non-
controlling
interests
Total equity
At 31 December 2018*
1,185
8,247
38,790
(5,206)
(44)
42,970
19
42,990
Net income/(loss)
2,079
2,079
2
2,081
Other comprehensive income/(loss)
279
(1,254)
44
(930)
(930)
Total comprehensive
income/(loss)
1,151
Dividends
(2,596)
(2,596)
(2,596)
Share buy-back
1)
(500)
(500)
(500)
Other equity transactions
(12)
(29)
(40)
(5)
(45)
At 30 September 2019
1,185
7,735
38,523
(6,460)
0
40,983
16
40,999
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
Net income/(loss)
(3,088)
(3,088)
8
(3,080)
Other comprehensive income/(loss)
141
(1,734)
0
(1,593)
(1,593)
Total comprehensive
income/(loss)
(4,673)
Dividends
(1,476)
(1,476)
(1,476)
Share buy-back
1)
(21)
(869)
(890)
(890)
Other equity transactions
(8)
(0)
(8)
(4)
(12)
At 30 September 2020
1,164
6,855
33,056
(6,991)
0
34,084
24
34,108
* Audited
1) In September 2019
Equinor launched a USD 5
billion share buy-back programme,
where the first tranche of the
programme of around
USD 1.5 billion has been finalis
ed. A proportionate share of 67%
from the Norwegian State was
redeemed in accordance with an
agreement with the Ministry of Petroleum
and Energy for the Norwegian State
to maintain their ownership percentage
in Equinor.
The
redemption was approved by the
annual general meeting held
14 May 2020.
The first tranche of USD 500 million
acquired in the market has been
recognised as a reduction in equity
as treasury shares in third
quarter 2019.
The State’s share including
interest and dividends has been
recognised as a short-term obligation
and as a reduction in
equity as treasury shares, subsequent
to the decision at the annual
general meeting held on 14 May
- The liability of USD 0.9
billion
(NOK 9.1 billion) was settled 23 July
- The corresponding shares
of the first tranche of the buyback
programme were cancelled
on 16 July 2020.
Equinor has suspended the remaining
share buy-back programme until
further notice. The announced
second tranche of around
USD 675 million, including the Norwegian
State share, will under the current
market conditions not be executed
as previously
announced
and planned.
CONSOLIDATED
STATEMENT
OF CASH FLOWS
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
Note
2020
2019
2019*
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
4,798
2,522
4,619
Depreciation, amortisation and net
impairment losses
6
11,757
9,039
13,204
662
125
650
Exploration expenditures written
off
1,222
673
777
131
321
(295)
(Gains)/losses on foreign currency
transactions and balances
4
156
(201)
(224)
(1)
(15)
(851)
(Gains)/losses on sale of assets
and businesses
3
(2)
(994)
(1,187)
258
257
678
(Increase)/decrease in other items
related to operating
activities
750
1,159
1,016
(182)
25
141
(Increase)/decrease in net derivative
financial instruments
(446)
(988)
(595)
41
43
50
Interest received
150
166
215
(146)
(198)
(226)
Interest paid
(526)
(526)
(723)
3,342
2,360
4,637
Cash flows provided by operating activities
before taxes paid
and working capital items
10,201
16,600
21,776
(110)
(1,744)
(1,447)
Taxes paid
(2,742)
(5,636)
(8,286)
(600)
(248)
990
(Increase)/decrease in working capital
583
1,010
259
2,632
368
4,180
Cash flows provided by operating activities
8,043
11,975
13,749
0
(0)
(1,794)
Cash used in business combinations
1)
3
0
(2,274)
(2,274)
(1,723)
(1,899)
(2,637)
Capital expenditures and investments
(5,972)
(7,504)
(10,204)
(1,034)
(2,730)
2,584
(Increase)/decrease in financial investments
2)
(3,165)
(801)
(1,012)
(261)
(45)
182
(Increase)/decrease in derivatives financial
instruments
(332)
295
298
(18)
2
0
(Increase)/decrease in other interest-
bearing items
(16)
8
(10)
14
0
1,519
Proceeds from sale of assets and
businesses
3
16
1,726
2,608
(3,023)
(4,671)
(146)
Cash flows used in investing activities
(9,469)
(8,549)
(10,594)
0
8,347
0
New finance debt
8,347
0
984
(1,642)
(318)
(855)
Repayment of finance debt
(2,266)
(1,389)
(2,419)
(287)
(904)
(859)
Dividends paid
(2,037)
(2,492)
(3,342)
(1,001)
0
(91)
Share buy-back
3)
(1,059)
(91)
(442)
1,308
(150)
(639)
Net current finance debt and other
1,110
(41)
(277)
(1,623)
6,975
(2,443)
Cash flows provided by/(used in)
financing activities
4,095
(4,012)
(5,496)
(2,014)
2,672
1,590
Net increase/(decrease) in cash and
cash equivalents
2,669
(587)
(2,341)
158
162
(154)
Effect of exchange rate changes
on cash and cash
equivalents
(1)
(153)
(38)
9,700
6,866
5,379
Cash and cash equivalents at the beginning
of the period (net
of overdraft)
5,177
7,556
7,556
7,844
9,700
6,816
Cash and cash equivalents at the end
of the period (net of
overdraft)
4)
7,844
6,816
5,177
* Audited
1) Net after cash and
cash equivalents acquired.
2) Includes sale of Lundin
shares in the second quarter
of 2020.
For more information,
see note 3 Acquisition
and disposals.
3) For more information,
see Consolidated statement of
changes in equity.
4) At 30 September 2020
cash and cash equivalents
net overdraft was zero. At 30
September 2019 net overdraft was
USD 22
million and
at 31 December 2019 net overdraft
was zero.
Notes to the Condensed interim
financial statements
1 Organisation and basis of preparation
Organisation and principal
activities
Equinor ASA, originally
Den Norske Stats Oljeselskap
AS, was founded in 1972 and
is incorporated and domiciled
in Norway.
The
address of its registered
office is Forusbeen
50, N-4035 Stavanger,
Norway.
The Equinor group’s
(Equinor’s) business consists
principally of the exploration,
production, transportation,
refining and marketing of
petroleum and petroleum
-derived products, and
other forms of energy.
Equinor ASA is listed
on the Oslo Børs (Norway)
and the New
York
Stock Exchange (USA).
All of Equinor's oil and
gas activities and net
assets on the Norwegian continental
shelf
(NCS) are owned by Equinor
Energy AS, a
100% owned operating
subsidiary of Equinor
ASA. Equinor Energy AS is co
-obligor or guarantor
of certain debt obligations
of Equinor
ASA.
Following changes
in Equinor's internal reporting
to management the
composition of Equinor's operating
and reporting segments
has
changed as of the second
quarter of 2020. Segment
information for prior
periods has been restated
to align with the new segment
presentation. For
further information see
note 2 Segments to
these Condensed interim
financial statements.
Equinor's Condensed
interim financial statements
for the third quarter
of 2020 were authorised
for issue by the board
of directors on
28 October 2020.
Basis of preparation
These Condensed interim
financial statements are
prepared in accordance
with International Accounting
Standard 34 Interim
Financial Reporting as
issued by the International
Accounting Standards
Board (IASB) and as adopted
by
the European Union (EU).
The Condensed interim
financial statements do
not include all the information
and disclosures required
by International Financial
Reporting Standards
(IFRS) for a complete
set of financial statements,
and these Condensed interim
financial statements should
be
read in conjunction
with the Consolidated
annual financial statements
for 2019.
IFRS as adopted by the
EU differs
in certain respects
from IFRS as issued
by the IASB, but the d
ifferences do not impact
Equinor's financial statements
for the periods presented.
A
description of the
significant accounting policies
applied in preparing these
Condensed interim financial
statements is included
in
Equinor`s Consolidated
annual financial statements
for 2019.
On 1 January 2020,
Equinor implemented amendments
to IFRS 3 Business Combinations,
which apply to relevant
transactions that
occur on or after
the implementation date. The
amendments introduce
clarification to the definition
of a business, and also
establish
an optional test to identify
a concentration of fair
value that, if applied and
met, will lead to the conclusion
that an acquired set of
activities and assets
is not a business.
There have been
no other changes to the
significant accounting policies
during the first nine months
of 2020 compared to the
Consolidated annual
financial statements for
2019.
The Condensed interim
financial statements reflect
all adjustments which
are, in the opinion of management,
necessary for a fair
presentation of the
financial position,
results of operations and
cash flows for the dates
and interim periods presented.
Interim period
results are not necessarily
indicative of results of
operations or cash flows
for
an annual period. Certain
amounts in the comparable
periods in the note disclosures
have been reclassified to
conform to current period
presentation. The subtotals
and totals in some of
the tables may not equal
the sum of the amounts
shown due to roundin
g.
The Condensed interim
financial statements are
unaudited.
Use of estimates
The preparation of financial
statements in conformity
with IFRS requires management
to make judgments, estimates
and assumptions
that affect the application
of policies and reported
amounts of assets,
liabilities, income and expenses.
The estimates and associated
assumptions are
based on historical
experience and various
other factors that
are believed to be reasonable
under the circumstances,
the results of which
form the basis for making the
judgments about carrying
values of assets and liabilities
that are not readily
apparent from other
sources. Actual results may
differ from these estimates.
The estimates and underlying
assumptions are reviewed
on an on-going basis,
considering current and
expected future market
conditions. A change in
an accounting estimate
is recognised in
the period in which
the estimate is revised if
the revision affects only
that period, or in the period
of the revision and future
periods if
the revision affects
both current and future periods.
The ongoing Covid-19
pandemic and the steep
oil price decline experienced
during 2020 create
additional estimation uncertainties
and impact key assumptions
applied by Equinor
in the valuation of our
assets
and the measurement
of our liabilities, and related
sensitivities. Reference
is made to note 8 Impact of
the Covid-19 pandemic
and oil
price decline for further
information.
2 Segments
Equinor’s operations
are managed through
the following operating segments
(business areas): Development
& Production Norway
(DPN), Development
& Production International
(DPI), Development & Production
Brazil (DPB), Development
& Production USA
(DPUSA), Marketing,
Midstream & Processing (MMP),
New Energy Solutions
(NES), Technology,
Projects & Drilling (TPD),
Exploration (EXP) and
Global Strategy & Business
Development (GSB).
The reporting segments
Exploration & Production Norway
(E&P Norway),
Exploration & Production
USA (E&P USA) and MMP consist
of the business areas
DPN,
DPUSA and MMP respectively.
The operating segments
DPI and DPB are aggregated
into the reporting
segment Exploration
& Production International
(E&P International). The
aggregation has its basis in
similar economic characteristics,
such as similar long-term
average gross margins,
the assets’ long term and
capital-intensive nature and
exposure to volatile oil and
gas commodity prices,
the nature of products, service
and production processes,
the type and class of customers,
the methods of
distribution and regulatory
environment. The operating
segments NES, GSB, TPD,
EXP and corporate
staffs and support
functions
are aggregated into
the reporting segment “Other”
due to the immateriality
of these operating segments.
The majority of the costs
within the operating segments
GSB, TPD and EXP are allocated
to the E&P Norway,
E&P USA, E&P International
and MMP reporting
segments.
In the second quarter
of 2020, Equinor changed
its internal reporting to management,
impacting the composition
of Equinor's
operating and reporting
segments. Equinor’s
upstream activities
in the USA is as from the
second quarter reported
separately to
management. The fact
that such information
is also considered to be
useful to the users of
the financial statements,
resulted in the
exploration and production
activities in the USA as of
the second quarter
of 2020 were considered
a separate operating-
and reporting
segment. Previously
these activities were included
in the DPI operating segment
and presented as part
of the E&P International
reporting segment.
The eliminations
section includes the
elimination of inter-segment
sales and related unrealised
profits, mainly from the
sale of crude oil
and natural gas. Inter-segment
revenues are based upon
estimated market prices.
Segment data for the
third quarter and the first
nine months of 2020 and
2019 is presented below.
The reported measure
of segment
profit is net operating
income/(loss)
.
Deferred tax assets, pension
assets and non-current
financial assets are not allocated
to the
segments.
The measurement basis
for segments is IFRS as applied
by the group with the exception
of IFRS 16 Leases
and the line item
Additions to PP&E, intangibles
and equity accounted
investments. All IFRS 16 leases
are presented within the
Other segment. The
lease costs for the period
are allocated to the
different segments
based on underlying lease
payments, with a corresponding
credit in
the Other segment.
Lease costs allocated to
licence partners are recognised
as other revenues
in the Other segment. Additions
to
PP&E, intangible assets
and equity accounted
investments in the E&P and
MMP segments include
the period’s allocated
lease costs
related to activity
being capitalised with
a corresponding negative addition
in the Other segment. The
line item Additions to PP&E,
intangibles and equity
accounted investments excludes
movements related to
changes in asset retirement
obligations.
Third quarter 2020
E&P
Norway
E&P
Internationa
l
E&P USA
MMP
Other
Eliminations
Total
(in USD million)
Revenues third party,
other revenues and other
income
15
91
76
11,000
71
0
11,253
Revenues inter-segment
2,806
731
535
47
1
(4,121)
0
Net income/(loss) from equity accounted
investments
0
18
0
8
60
0
86
Total revenues
and other income
2,822
840
611
11,055
132
(4,121)
11,339
Purchases [net of inventory variation]
0
12
0
(9,171)
1
3,851
(5,307)
Operating, selling, general and administrative
expenses
(735)
(373)
(344)
(1,231)
152
163
(2,368)
Depreciation, amortisation and net
impairment losses
(1,486)
(1,504)
(1,460)
(102)
(247)
0
(4,798)
Exploration expenses
(170)
(304)
(413)
0
1
0
(886)
Total operating
expenses
(2,391)
(2,168)
(2,217)
(10,504)
(93)
4,014
(13,359)
Net operating income/(loss)
431
(1,328)
(1,606)
551
39
(107)
(2,019)
Additions to PP&E, intangibles
and equity accounted
investments
1,103
357
252
35
278
0
2,025
Third quarter 2019
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
Other
Eliminations
Total
(in USD million)
(restated)
(restated)
Revenues third party,
other revenues and other
income
866
403
106
14,099
90
0
15,564
Revenues inter-segment
3,630
939
888
85
1
(5,543)
0
Net income/(loss) from equity accounted
investments
2
9
2
4
29
0
46
Total revenues
and other income
4,498
1,351
996
14,188
121
(5,543)
15,610
Purchases [net of inventory variation]
0
16
(1)
(13,048)
(0)
5,366
(7,667)
Operating, selling, general and administrative
expenses
(817)
(321)
(425)
(1,585)
41
185
(2,922)
Depreciation, amortisation and net
impairment losses
(981)
(620)
(2,529)
(311)
(177)
0
(4,619)
Exploration expenses
(142)
(100)
(629)
0
0
0
(871)
Total operating
expenses
(1,940)
(1,025)
(3,583)
(14,945)
(137)
5,551
(16,079)
Net operating income/(loss)
2,558
325
(2,587)
(757)
(16)
8
(469)
Additions to PP&E, intangibles
and equity accounted
investments
2,920
511
1,408
127
111
0
5,077
First nine months 2020
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
Other
Eliminations
Total
(in USD million)
Revenues third party,
other revenue and other income
33
308
285
33,087
169
0
33,882
Revenues inter-segment
7,985
2,412
1,686
232
3
(12,318)
0
Net income/(loss) from equity accounted
investments
0
22
0
26
142
0
190
Total revenues
and other income
8,018
2,742
1,971
33,344
315
(12,318)
34,073
Purchases [net of inventory variation]
0
(56)
0
(27,799)
1
12,400
(15,453)
Operating, selling, general and administrative
expenses
(2,076)
(1,152)
(1,008)
(3,998)
336
516
(7,382)
Depreciation, amortisation and net
impairment losses
(4,318)
(2,883)
(3,171)
(709)
(676)
0
(11,757)
Exploration expenses
(330)
(840)
(745)
0
1
0
(1,914)
Total operating
expenses
(6,724)
(4,931)
(4,924)
(32,505)
(338)
12,916
(36,506)
Net operating income/(loss)
1,294
(2,189)
(2,953)
839
(23)
599
(2,434)
Additions to PP&E, intangibles
and equity accounted
investments
3,511
1,582
945
142
768
0
6,948
Balance sheet information
Equity accounted investments
2
581
0
90
977
0
1,650
Non-current segment assets
31,442
18,710
14,113
4,427
3,964
0
72,655
Non-current assets not allocated to
segments
11,995
Total non-current
assets
86,300
First nine months 2019
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
Other
Eliminations
Total
(in USD million)
(restated)
(restated)
Revenues third party,
other revenue and other income
1,026
1,310
320
46,149
235
0
49,040
Revenues inter-segment
12,835
3,271
2,854
312
3
(19,275)
0
Net income/(loss) from equity accounted
investments
15
27
5
20
82
0
149
Total revenues
and other income
13,876
4,608
3,179
46,481
320
(19,275)
49,189
Purchases [net of inventory variation]
1
(9)
(1)
(41,581)
(0)
18,661
(22,928)
Operating, selling, general and administrative
expenses
(2,441)
(1,324)
(1,226)
(3,753)
103
578
(8,063)
Depreciation, amortisation and net
impairment losses
(2,945)
(1,491)
(3,558)
(504)
(541)
0
(9,039)
Exploration expenses
(335)
(367)
(672)
0
0
0
(1,374)
Total operating
expenses
(5,721)
(3,190)
(5,457)
(45,837)
(439)
19,239
(41,405)
Net operating income/(loss)
8,155
1,418
(2,278)
644
(120)
(36)
7,783
Additions to PP&E, intangibles
and equity accounted
investments
5,860
2,291
2,486
674
596
0
11,907
Balance sheet information
Equity accounted investments
2
306
81
88
943
0
1,421
Non-current segment assets
33,737
20,562
17,307
4,956
4,270
0
80,831
Non-current assets not allocated to
segments
10,151
Total non-current
assets
92,403
In the third quarter of
2020 Equinor recognised
net impairment of USD 2,928
million of which USD 575 million
was classified as
exploration expenses.
In the E&P Norway segment
the impairments were
USD 365 million of which USD 5
million related to
exploration assets.
The
impairments were mainly
due to price reductions
and reduced reserve estimates.
In the E&P International
segment the impairments
were USD 1,176 million
of which USD 183 million
related to exploration asset
s.
The
impairments were caused
by reduced price assumptions
and reduction in reserve
estimates in the Europa
and Asia and the North
America - conventional
other areas.
In the E&P USA segment the
net impairment was USD 1,37
7
million of which USD 386
million was classified
as exploration expenses.
Impairment losses of
USD 1,611
million were mainly caused
by reduced price
assumptions. USD 1,447
million related
to North
America non-conventional
assets and USD 164 million
related
to North America -
conventional offshore
Gulf of Mexico assets
.
Impairment reversals
of USD 234 million
related
to North America non
-conventional assets due
to performance trends and
accelerated production.
Most of the renewabl
e
assets in Equinor Group
are accounted for using
equity method and the results
are presented in the Other
reporting segment.
The net income from the
equity accounted investments
within the operating segment
NES was USD 60 million in
the third quarter of 2020
and USD 142 million in
the first nine months of 2020,
which compares to USD 29 million
in the third quarter of
2019 and USD 82 million
in the first nine months
of 2019. Current quarter
result was materially impacted
by the reversal of losses in
the Dogger Bank projects
.
This was partially offset
by lower income from other
equity accounted investments
including the effect
of
reduced ownership
share in Arkona wind
farm compared to 2019.
For information regarding
acquisition and dispo
sal of interests, see note
3 Acquisitions and disposals.
See also note 8 Impact
of the Covid-19 pandemic
and oil price decline.
Revenues from contract
s
with customers
by geographical areas
When attributing the
line item Revenues third party,
other revenues and other
income to the country of the
legal entity executing
the
sale for the third quarter
of 2020, Norway constitutes
82%
and the US constitutes
13%
of such revenues. For
the third quarter of 2019
,
Norway and the US constituted
73%
and 20%
of such revenues,
respectively.
For the first nine
months of 2020, Norway constitutes
81%
and the US constitutes
14%
of such revenues. For
the first nine months of
2019, Norway and the
US constituted 74%
and 19% of such revenues
,
respectively.
Non-current assets
by country
At 30 September
At 30 June
At 31 December
At 30 September
(in USD million)
2020
2020
2019
2019
Norway
37,327
36,383
40,292
39,994
USA
14,858
16,524
17,776
18,455
Brazil
8,752
8,796
8,724
8,669
UK
4,175
4,913
5,657
5,261
Azerbaijan
1,684
1,696
1,598
1,551
Canada
1,468
1,435
1,672
1,651
Angola
1,270
1,331
1,564
1,669
Tanzania
985
964
964
964
Denmark
911
887
984
958
Algeria
845
866
915
930
Other countries
2,030
2,064
1,986
2,149
Total non-current
assets
1)
74,305
75,858
82,133
82,252
1)
Excluding deferred tax assets,
pension assets and non
-current financial assets.
Revenues from contracts
with customers and other revenues
Quarters
Full Year
(in USD million)
Q3 2020
Q2 2020
Q3 2019
2019
Crude oil
6,635
4,018
8,667
33,505
Natural gas
1,351
1,188
2,236
11,281
- European gas
1,048
923
1,847
9,366
- North American gas
229
196
290
1,359
- Other incl. LNG
74
68
99
556
Refined products
1,560
1,258
2,404
10,652
Natural gas liquids
1,282
839
1,224
5,807
Transportation
295
286
205
967
Other sales
91
88
123
445
Revenues from contracts with customers
11,215
7,677
14,859
62,657
Taxes paid
in-kind
27
(9)
83
344
Physically settled commodity derivatives
(16)
152
(610)
(1,086)
Gain/(loss) on commodity derivatives
(44)
(318)
298
732
Other revenues
70
61
74
265
Total other
revenues
36
(114)
(155)
254
Revenues
11,250
7,563
14,704
62,911
3 Acquisitions and disposals
Divestment of non-operated
interest in the Empire
Wind and Beacon Wind assets
on the US east coast
On 10 September 2020
Equinor entered into an
agreement with BP to sell
50% non-operated interests
in the Empire Wind and
Beacon Wind assets
for a total consideration
before adjustments
of USD 1.1 billion. Through
this transaction, the two
companies are
also establishing a strategic
partnership for further growth
within offshore wind
in the US. Following the
transaction, Equinor will
remain the operator
with a 50% interest.
The 100% of interest share
has been reclassified
as held for sale. The transaction
has an
effective date of
1 January 2020 and
is expected to close in early
2021, subject to customary
conditions including purchase
price adjustments and
authority approval.
Upon transaction closing, the
gain will be presented in
the line item Other income
in the Consolidated statement
of
income in the Other
segment.
Divestment of remaining shares
in Lundin
On 8 May 2020 Equinor
closed the divestment of
its remaining (4.9%) financial
shareholding in Lundin
Energy AB (formerly Lundin
Petroleum AB). The consideration
is SEK 3.3 billion (USD 0.3
billion). The impact on the
Consolidated statement
of income in the
second quarter was
a loss of USD 0.1 billion
and was recognised as
Interest income and other
financial items.
Investment in interest
onshore Argentina
On 30 January 2020
Equinor closed a transaction
to acquire a 50% ownership
share in SPM Argentina
S.A (SPM) from Schlumberger
Production Management
Holding Argentina B.V.
Shell acquired the remaining
50% ownership share
of SPM.
SPM holds a 49%
interest in the Bandurria
Sur onshore block in Argentina,
and the block is in the
pilot phase of development.
The consideration
including final adjustments
is USD 187 million. In
the second quarter
,
Equinor increased its shareholding
in the Bandurria Sur
by 5.5%
to 30% for a final
consideration of USD 44 million.
The investment in SPM was
accounted for as
a joint venture using the
equity
method and reported
in the E&P International
segment.
4 Financial items
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(in USD million)
2020
2019
2019
(131)
(321)
295
Gains/(losses) on net foreign exchange
(156)
201
224
235
262
180
Interest income and other financial
items
375
535
746
39
189
208
Gains/(losses) on derivative financial
instruments
421
781
473
(343)
(379)
(343)
Interest and other finance expenses
(1,066)
(1,029)
(1,450)
(201)
(248)
340
Net financial items
(426)
489
(7)
Gains on derivative
financial instruments for
the first nine months of 2020
of USD 421 million and
for the first nine months
of 2019 of
USD 781 million,
are mainly due to decreased
interest rates.
Equinor has a US Commercial
paper programme available
with a limit of USD 5 billion
of which USD 787 million
has been utilised as
of
30
September 2020.
In the first nine months
of 2020, Equinor recorded
total lease payments of
USD 1,054 million, of which
USD 93 million were payment
of interests and USD 961
million were down-payment
of lease liabilities. Lease
liabilities as at 30
September 2020 were USD 4,218
million, presented in
the balance sheet within
the line items Current
and Non-current finance
debt with USD 1,039 million
and USD
3,120 million,
respectively.
In the second quarter
of 2020 Equinor ASA issued
bonds with maturities
from 5 to 30 years for a
total amount of USD 8.3 billion.
The
bonds were issued
in USD and EUR, amounting
to USD 6.5 billion and
EUR 1.75 billion, and
are fully and unconditionally
guaranteed
by Equinor Energy AS.
5 Income taxes
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(in USD million)
2020
2019
2019
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
95
469
(978)
Income tax
(221)
(6,191)
(7,441)
4.3%
65.2%
>(100%)
Effective tax rate
(7.7%)
74.8%
80.1%
The tax rate for the
third quarter 2020 and for the
first nine months of
2020 was primarily influenced
by losses including net
impairments recognised
in countries with unrecognised
deferred taxes or in countries
with lower than average tax
rates.
The tax rate
was also influenced
by currency effects in entities
that are taxable in other
currencies than the functional
currency,
partially offset by
the temporary changes
to Norway’s petroleum
tax system.
The tax rate for the
first nine months of 2020
was also influenced by changes
in best estimates for uncertain
tax positions.
The tax rate for the
third quarter of 2019 and
the first nine months of 2019
was primarily influenced by losses
recognised in countries
with unrecognised deferred
tax assets partially offset
by the tax exempted
divestment of shares in
Lundin.
The tax rate for the
full year 2019 was primarily
influenced by losses recognised
in countries with unrecognised
deferred tax assets or
in countries with lower
than average tax rates, partially
offset by tax exempted
gains on divestments.
6 Property, plant and equipment and intangible assets
(in USD million)
Property, plant and
equipment
Intangible
assets
Balance at 31 December 2019
69,953
10,738
Additions
7,595
551
Transfers
67
(67)
Disposals and reclassifications
(15)
(6)
Transferred to assets classified
as held for sale
(10)
(177)
Expensed exploration expenditures
and net impairment losses
-
(1,222)
Depreciation, amortisation and net
impairment losses
(11,737)
(20)
Effect of foreign currency translation
adjustments
(2,864)
(130)
Balance at 30 September 2020
62,988
9,667
Right-of-use (RoU)
assets are included within
property,
plant and equipment with
a net book value of USD 3,944
million as at
30
September 2020. Additions
to RoU assets amount to
USD 1,001 million.
Gross depreciation and
impairment of RoU assets
amounts to USD 927
million in the first nine
months of 2020,
of
which depreciation
costs of USD 278 million
have been allocated to
exploration and development
activities and are presented
net on the Depreciation,
amortisation and net impairment
losses and
Additions lines in
the table above.
Equinor’s Block 2 Exploration
License in Tanzania
was due to expire in June
2018 but based on indications
from the Tanzanian
authorities that the license
would be extended the asset
has remained capitalised.
The license was formally
extended by 3.5 years in
and from the second
quarter of 2020. The capitalised
expenditures included
in intangible assets related
to the license are USD 962
million.
Impairments and impairment
reversals
For information on impairment
losses and reversals per
reporting segment, see note
2 Segments.
First nine months 2020
Property, plant and
equipment
Intangible
assets
Total
(in USD million)
Producing and development assets
4,732
589
5,321
Goodwill
-
1
1
Acquisition costs related to oil and gas
prospects
-
434
434
Total net
impairment losses/(reversals)
recognised
4,732
1,023
5,755
The net impairments
have been recognised
in the Consolidated statement
of income as Depreciation,
amortisation and net
impairment losses and
Exploration expenses
based on the impaired
assets’ nature of property,
plant and equipment and
intangible
assets, respectively.
The recoverable
amounts in the third
quarter of 2020 were discounted
cash flows based on value
in use.
Value in
use estimates and discounted
cash flows used to determine
the recoverable amount
of assets tested for impairment
are
based on internal
forecasts on costs,
production profiles and
commodity prices.
Changes to accounting assumptions
Management’s
future commodity price assumptions
and currency assumptions
are used for value-in-use
impairment testing. The
same assumptions
are also used for evaluating
investment opportunities,
together with other relevant
criteria, including among others
robustness targets
(value creation in lower
commodity price scenarios).
While there are inherent
uncertainties in the assumptions,
the
commodity price
assumptions as well as
currency assumptions
reflect management’s
best estimate of the price
and currency
development over the
life
of the Group’s assets
based on its view of relevant
current circumstances and
the likely future development
of such circumstances,
including energy demand
development, energy
and climate change policies
as well as the speed of the
energy
transition, population
and economic growth,
geopolitical risks, technology
and cost development, and
other factors. Management’s
best estimate also takes
into consideration a range
of external forecasts.
During the third quarter,
Equinor has performed
a thorough and broad
analysis of the expected
development in drivers
for the different
commodity markets
and exchange rates,
following the recent and
ongoing Covid-19 situation
and management has gained
more
insight into the development
of the different markets
in which we operate. Significant
uncertainty continues to
exist regarding future
commodity price
development due to
the potential long-term impact
on demand resulting from
the ongoing Covid-19
pandemic and
the measures taken
to contain it, energy investments
in the transition to a
lower carbon economy and
future supply actions by
OPEC+
and other factors. Following
management’s analysis
of the expected development
in drivers for the different
commodity markets and
exchange rates, Equinor
has decided to revise
the assumptions. As a result,
both short-
and long-term prices have
been reduced,
some by more than
twenty percent. Management
will continue to monitor
these developments and
the impact they may have
on its
commodity price
assumptions.
For Brent-blend,
compared to current prices,
we expect a strengthening
of the prices through the
2020s.
In 2025,
the assumption is 65
USD/bbl (78 USD/bbl)
,
with a further increase towards
- Beyond 2030
,
we expect a gradual decline
with an estimate of 64
USD/bbl in 2040
(82 USD/bbl),
which approximates the
average price level for the
period 2021-2050. In 2050,
the oil prices are
expected to be below
60 USD/bbl. All commodity
prices are on a real
2020 basis, and comparables
as per fourth quarter 2019
are
given in brackets.
For natural gas in the
UK (NBP), we expect
some volatility,
where the trend is a gradua
l
increase in prices from today’s
current prices
up to 6.5 USD/mmBtu in
2030 (7.7 USD/mmBtu).
From 2030, we expect
prices at levels sufficient
to incentivise the next
LNG
investment cycle
and a flatter price-curve,
with the price gradually
increasing to 7.8
USD/mmBtu close to
2040 (7.7 USD/mmBtu).
Beyond 2040, a declining
price trend is foreseen
as the energy transition
is expected to impact the demand
side. For 2050, the price
has been set at the
pre-2035 level. Henry Hub
follows the same pattern,
gradually increasing from
today’s current prices
to
3.3
USD/mmBtu in 2030
(3.7 USD/mmBtu) and
gradually increasing to 3
.7 USD/mmBtu in 2040 (3.7
USD/mmBtu) before gradually
declining through the
2040s.
Equinor has performed
analyses of the NOK currency
exchange rates, which
suggests that a return
to a previously assumed
long-
term equilibrium is less
likely. This
conclusion is supported
by the historical 5-year average
and spot prices in the
currency market, as
well as an expected
lower oil price and increased
market uncertainty.
Equinor has therefore implemented
new long-term exchange
rates from 2023 onwards.
The NOK/USD rate has
been revised to 8.5
(previously 7.0), while
the NOK/EUR rate has
been revised to
10.0 (from previously
9.0).
In 2020 we have
continued to see a significant
drop in risk-free interest
rates. Long-term risk-free
interest rates (10 years)
have
decreased by approximately
1.3 percentage points
in the period from year
-end 2019 to 30 September
- The stock market
recovery after the initial
Covid-19 impact in March,
and despite lower expectations
of future cash flows, is
indicating a lower market
risk premium. The low
interest rates combined
with lack of good alternative
investment opportunities,
channels more funds
towards
the equity market resulting
in investors accepting lower
returns on investments,
and we see a downward
shift in the estimated equity
risk premium. Taking
this into account, Equinor
has adjusted the Weighted
Average Cost of Capital
(WACC) for accounting
purposes,
real post-tax, down
from 6% to 5% with effe
ct as of the third quarter
of 2020.
Please refer to note
8 Impact of the Covid-19
pandemic and oil price.
Sensitivities
Commodity prices have
historically been volatile. Significant
downward adjust
ments of Equinor’s commodity
price assumptions would
result in impairment
losses on certain producing and
development assets
in Equinor’s portfolio, while
an opposite adjustment
could
lead to impairment
-reversals. If a decline
in commodity price
forecasts over the lifetime
of the assets were 30%,
considered to
represent a reasonably
possible change, the impairment
amount to be recognised
could illustratively be
in the region of USD 12 billion
before tax effects.
This illustrative impairment
sensitivity,
based on a simplified method,
assumes no changes
to input factors other
than prices; however,
a price reduction of 30%
is likely to result in changes
in business plans as well
as other factors used when
estimating an asset’s
recoverable amount. These
associated changes reduce
the stand-alone impact on
commodity price sensitivity.
Changes in such
input factors would
likely include a reduction in
the cost level in the oil and
gas industry as well as offsetting
currency
effects, both of which
have historically occurred
following significant changes
in commodity prices. The
illustrative sensitivity is
therefore not considered
to represent a best estimate
of an expected impairment
impact, nor an estimated impact
on revenues or
operating income in
such a scenario. In comparison,
following the amended assumptions
and the decline in commodity
prices
presently disclosed
for this quarter,
the impairment impact recognised
is considerably lower.
A significant and prolonged
reduction in
oil and gas prices would
also result in mitigating
actions by Equinor and
its licence partners, as a
reduction of oil and gas
prices would
impact drilling plans
and production profiles for
new and existing assets.
Quantifying such impacts
is considered impracticable,
as it
requires detailed
technical, geological and
economical evaluations
based on hypothetical
scenarios and not based
on existing
business or development
plans.
7 Provisions, commitments, contingent liabilities and contingent
assets
Asset retirement obligation
Equinor’s estimated asset
retirement obligations
(ARO) have increased
by USD 928 million compared
to year-end 2019, mainly
due to
the decrease in discount
rate. Changes in ARO are
reflected within property,
plant and equipment and
provisions in the Consolidated
balance sheet.
Onerous contract
Due to significant
ly reduced expected use of
a transportation agreement
,
Equinor provided in the second
quarter USD 154 million
as
an onerous contract.
In third quarter the provision
has increased to USD 162
million. The provision
is recognised in the MMP segment
as an operating expense
in the Consolidated statement
of income and has been
included in the line item
Provisions and other
liabilities in the Consolidated
balance sheet.
Price review arbitration
Some long-term gas sales
agreements contain price
review clauses, which in
certain cases lead to claims
subject to arbitration.
The exposure related
to price reviews has been
reduced by approximately
USD 1.3 billion due to
settlements
in the second quarter.
The remaining exposure
for gas delivered prior to 30
September is immaterial. Price
review related changes
in the second quarter
represent an income
of approximately USD 150
million before tax and
USD 30 million after tax
.
The amounts have
been reflected in
the Consolidated
statement of income as
revenues
and income tax, respectively.
A dispute between the
Federal Government of Nigeria
and the Governments of Rivers,
Bayelsa and Akwa Ibom States
in
Nigera
In October 2018,
the Supreme Court
of Nigeria rendered
a judgement in a dispute
between the Federal Gover
nment of Nigeria and
the Governments of
Rivers, Bayelsa and Akwa
Ibom States in favour
of the latter.
The Supreme Court judgement
provides for
potential retroactive
adjustment of certain production
sharing contracts in
favour of the Federal Government,
including OML 128
(Agbami). This case
has been withdrawn by
the plaintiff in the second
quarter of 2020 with no impact
on Equinor’s Interim financial
statements.
Dispute with Brazilian
tax authorities
Brazilian tax authorities
issued an updated tax assessment
for 2011
for Equinor’s Brazilian subsidiary
which was party to Equinor’s
divestment of 40%
of the Peregrino field to
Sinochem at that time. The
assessment disputed
Equinor’s allocation of the sale
proceeds
between entities and
assets involved, resulting
in a significantly higher assessed
taxable gain and related
taxes payable in Brazil.
Equinor disagreed with
the assessment and had
the case brought forward
to the second instance
of the Administrative Cour
t
in Brazil
which decided the case
in Equinor’s favour.
Equinor has received confirmation
that the decision is considered
final and non-
appealable. The final
ruling did not have any
impact on Equinor’s Interim
Financial statement.
KKD Oil Sands Partnership
Canadian tax authorities
have issued a proposal
of re-assessment for
2014 for Equinor’s Canadian
subsidiary which was
party to
Equinor’s divestment
of 40% of the KKD Oil Sands
partnership at that
time. The proposal disputes
the partners allocation
between
entities and assets
involved. Maximum exposure
is estimated to be approximately
USD 360 million.
The ongoing process
of formal
communication with
the Canadian tax authorities,
as well as any subsequent
litigation that may become
necessary,
may take several
years. No taxes will
become payable until the matter
has been finally settled.
Equinor is of the view that
all applicable tax regulations
have been applied in
the case and that Equinor
has a strong position.
No amounts have consequently
been provided for in
the
accounts.
Deviation notices from Norwegian
tax authorities
With reference
to the previously disclosed
dispute in Norway regarding
the level of Research
& Development cost to be
allocated to
the offshore tax
regime, a Norwegian supreme
court ruling announced
in second quarter and
Equinor’s subsequent correspondence
with the Norwegian
tax authorities in third quarter
has resulted in a reduced
maximum exposure in
this matter to approximately
USD
250 million. Equinor
provides for its best estimate
in the matter.
Suit for an annulment of Petrobras'
sale of the interest
in BM-S-8 to Equinor
In March 2017, the
Union of Workers of
Oil Tankers
of Sergipe (Sindipetro)
filed a class action suit against
Petrobras, Equinor and
ANP - the Brazilian
Regulatory Agency - to see
k
annulment of Petrobras'
sale of the interest and operatorship
in BM-S-8 to Equinor,
a
transaction which was
closed in November 2016.
There was also an injunction
request aiming to suspend
the assignment, which first
was granted in April
2017 by a federal judge,
but subsequently lifted
by the federal court. The
injunction request has now been
finally
dismissed by the
courts.
Claim from Petrofac regarding
multiple variation order
requests performed in Algeria
(In Salah)
Petrofac International
(UAE) LLC (PIUL) was awarded
the EPC Contract to execute
the ISSF Project (the In
Salah Southern
Fields Project which
has finalised the development
of four gas fields in
central Algeria). Following
suspension of activity
after the
terrorist attack at
another field in Algeria
(In Amenas) in 2013, PIUL issued
multiple Variation
Order Requests (VoRs
)
related to the
costs incurred for stand
-by and remobilisation costs
after the evacuation
of expatriates.
Several VoRs have
been paid, but the
settlement of the
remaining has been
unsuccessful. PIUL initiated
arbitration on 7 August
2020 claiming an estimated
amount of USD
533 million, of which
Equinor In Salah AS holds
a 31,85%
share. Equinor's maximum
exposure amounts
to USD 170 million. Equinor
provides for its best
estimate in the matter.
During the normal course
of its business Equinor
is involved in legal and
other proceedings, and several
claims are unresolved and
currently outstanding.
The ultimate liability or
asset, respectively,
in respect of such litigation
and claims cannot be
determined now.
Equinor has provided
in its Condensed interim
financial statements for
probable liabilities related
to litigation and claims based
on the
company's best judgement.
Equinor does not expect
that its financial position,
results of operations or
cash flows will be materially
affected by the resolution
of these legal proceedings.
8 Impact of the Covid-19 pandemic and oil price decline
The COVID-19 pandemic
with global lockdowns
has slowed, and in
many countries, contracted
economic growth and
has had
dramatic consequences
for energy demand. As a result,
commodity prices collapsed
in the first half of 2020 before
a partial re-bounce
in the second half, impacting
the energy industry
and Equinor.
The full extent, duration
and consequences
of the Covid-19 pandemic
and the resulting operational
and economic impact
for Equinor cannot be
ascertained at this time.
However, resulting
changes in
market risk and economic
circumstances impact
Equinor’s assumptions about the
future and related sources
of
estimation uncertainty.
Updates of certain information
previously provided in
Equinor’s Annual financial statement
s
for 2019, as well as other
relevant
information, are consequently
included below.
The mitigation effects
from COVID-19 have
had a massive impact on oil
demand, particularly mobility
fuels. According to the
International Energy
Agency (IEA), Global energy
demand in 2020 is estimated
to drop by 5-6%, with
the largest uncertainty being
around the shake of
a second wave of lockdowns
in the last quarter this
year. Significant
Opec+ supply cuts and shut
-in production
around the world
following the announcement
at 1 May 2020, have so
far prevented another
price collapse and storages
running full.
In Norway,
where Equinor has production
on the NCS, the Norwegian
Government announced
unilateral oil production
cuts portioned
out to relevant fields
via their production
licenses. Equinor complies
with the revised production
permits issued by the
authorities, but
for the third quarter
of 2020 the production cuts
in Norway and internationally
did not have significant impact
on the total production.
An updated overview
of Equinor’s price assumptions
as of 30 September
2020 has been provided
in note 6 Property,
plant and
equipment and intangible
assets. Equinor has evaluated
the reasonable possible
changes in certain assumptions
as of 30 September
- For interest rate
and currency risk, the
reasonable possible change
remains unchanged from 31
December 2019.
As of 30 September
2020, the reasonable possible
change in prices is deemed
to be -50%/+50% for short-term
contracts, and -
30%/+30% for the long
-term derivatives, based
on their duration. The short
-term price contracts are
considered more volatile
compared to year-end
2019.
The table below contains
the price risk sensitivities
of Equinor's commodity-based
derivatives contracts.
Equinor enters into
commodity-based derivative
contracts mainly to
manage short-term commodity
risk. However,
since none of the derivative
financial
instruments included
in the table below are
part of formal hedging relationships,
any changes in their fair
values would be recognised
in the Consolidated
statement of income.
Commodity price sensitivity
30 September 2020
31 December 2019
(in USD million)
- 50%
- 50%
- 30%
- 30%
Crude oil and refined products net gain/(losses)
1,092
(1,092)
569
(563)
Natural gas and electricity net gains/(losses)
333
283
(33)
49
Due to market developments
and related consequences,
certain Equinor suppliers
and customers have indicated
that contractual
clauses such as those
involving force majeure
are being explored. The
potential impact for Equinor,
if any, is
currently uncertain.
As a measure to
maintain activity in the oil and
gas related industry,
the Norwegian Government
on 19 June 2020 enacted
temporary
targeted changes to
Norway’s petroleum tax
system for investments
incurred in 2020 and 2021
and for new projects with
final
investment decisions
submitted by end of 2022.
The changes are effective
from 1 January 2020 and
provide companies with
a direct
tax deduction in the
special petroleum tax (56%
tax rate) instead of tax depreciation
over 6 years. One of the
changes is that the tax
uplift benefit, which
has increased from 20.8%.
to 24% will be recognised
over one year instead of
four years. Tax
depreciation
towards the ordinary
corporate tax (22% tax
rate) will continue with a
six-year depreciation profile.
The totality of the petroleum
tax
changes will increase
the profitability for investments
and strengthen Equinor’s’
liquidity.
9 Subsequent events
On 28 October 2020,
the board of directors
resolved to declare a dividend
for the third quarter
of 2020 of USD 0.11
per share. The
Equinor shares will
trade ex-dividend 11
February 2021 on the Oslo
Børs and for ADR holders
on the New York
Stock Exchange.
Record date will be
12 February 2021 and payment
date will be 26 February
2021.
Supplementary disclosures
Operational data
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
Operational data
2020
2019
Change
Prices
43.0
29.2
61.9
(31%)
Average Brent oil price (USD/bbl)
40.8
64.7
(37%)
39.6
23.5
52.6
(25%)
E&P Norway average liquids price (USD/bbl)
35.9
56.6
(37%)
39.1
24.4
58.1
(33%)
E&P International average liquids price
(USD/bbl)
37.3
60.3
(38%)
32.2
19.0
45.9
(30%)
E&P USA average liquids price (USD/bbl)
30.3
48.6
(38%)
38.3
22.9
52.5
(27%)
Group average liquids price (USD/bbl)
[1]
35.2
55.8
(37%)
349
229
465
(25%)
Group average liquids price (NOK/bbl)
[1]
335
486
(31%)
1.45
0.91
3.96
(63%)
E&P Norway average internal gas
price (USD/mmbtu) [9]
1.70
4.66
(64%)
1.13
1.26
1.74
(35%)
E&P USA average internal gas price (USD/mmbtu)
[9]
1.31
2.29
(43%)
2.72
2.24
5.19
(48%)
Average invoiced gas prices - Europe
(USD/mmbtu) [8]
3.06
5.95
(49%)
1.53
1.47
1.99
(23%)
Average invoiced gas prices - North
America (USD/mmbtu) [8]
1.63
2.51
(35%)
(0.1)
3.9
5.9
>(100%)
Refining reference margin (USD/bbl)
[2]
1.8
4.4
(58%)
Entitlement production (mboe per day)
619
637
497
25%
E&P Norway entitlement liquids production
635
507
25%
220
235
266
(17%)
E&P International entitlement liquids
production
240
272
(12%)
151
172
182
(17%)
E&P USA entitlement liquids production
170
172
(2%)
991
1,044
946
5%
Group entitlement liquids production
1,045
951
10%
654
644
570
15%
E&P Norway entitlement gas production
681
691
(1%)
35
31
47
(25%)
E&P International entitlement gas
production
41
39
4%
185
179
183
1%
E&P USA entitlement gas production
179
181
(1%)
874
854
799
9%
Group entitlement gas production
901
911
(1%)
1,865
1,897
1,745
7%
Total entitlement
liquids and gas production [3]
1,946
1,862
5%
Equity production (mboe per day)
619
637
497
25%
E&P Norway equity liquids production
635
507
25%
283
291
352
(20%)
E&P International equity liquids
production
309
355
(13%)
173
195
212
(18%)
E&P USA equity liquids production
194
209
(7%)
1,076
1,123
1,061
1%
Group equity liquids production
1,138
1,071
6%
654
644
570
15%
E&P Norway equity gas production
681
691
(1%)
40
34
58
(31%)
E&P International equity gas production
47
61
(22%)
224
210
220
2%
E&P USA equity gas production
213
210
2%
918
888
848
8%
Group equity gas production
941
961
(2%)
1,994
2,011
1,909
4%
Total equity
liquids and gas production [4]
2,079
2,032
2%
NES power production
319
305
342
(7%)
Power generation (GWh)
1,181
1,278
(8%)
Exchange rates
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
Exchange rates
2020
2019
Change
0.1095
0.1000
0.1129
(3%)
NOK/USD average daily exchange rate
0.1050
0.1150
(9%)
0.1055
0.1026
0.1100
(4%)
NOK/USD period-end exchange
rate
0.1055
0.1100
(4%)
9.1321
10.0023
8.8573
3%
USD/NOK average daily exchange rate
9.5266
8.6979
10%
9.4814
9.7446
9.0874
4%
USD/NOK period-end exchange
rate
9.4814
9.0874
4%
1.1685
1.1008
1.1118
5%
EUR/USD average daily exchange
rate
1.1239
1.1234
0%
1.1708
1.1198
1.0889
8%
EUR/USD period-end exchange rate
1.1708
1.0889
8%
Health, safety and the
environment
Twelve months average per
First nine months
First nine months
Q3 2020
Q3 2019
Health, safety and the environment
2020
2019
Injury/incident frequency
2.3
2.5
Total recordable
injury frequency (TRIF)
2.3
2.5
0.6
0.6
Serious Incident Frequency (SIF)
0.5
0.6
Oil spills
165
226
Accidental oil spills (number of)
116
170
317
8,850
Accidental oil spills (cubic metres)
158
8,824
First nine months
Full year
Climate
2020
2019
Upstream CO2 intensity (kg CO2/boe)
1)
8.1
9.5
1) Total
scope 1 emissions
of CO2 (kg CO2) from exploration
and production, divided by
total production (boe).
Exploration expenses
Quarters
Change
Exploration expenses
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
142
97
179
(21%)
E&P Norway exploration expenditures
369
437
(16%)
143
234
219
(35%)
E&P International exploration expenditures
598
578
3%
65
76
24
>100%
E&P USA exploration expenditures
186
90
>100%
349
407
422
(17%)
1)
Group exploration expenditures
1,151
1,106
4%
2)
87
14
39
>100%
Expensed, previously capitalised
exploration expenditures
200
59
>100%
(125)
(140)
(201)
(38%)
Capitalised share of current period's
exploration activity
(459)
(405)
14%
575
111
611
(6%)
Impairment (reversal of impairment)
1,022
614
67%
886
393
871
2%
Exploration expenses according
to IFRS
1,914
1,374
39%
1) 27 wells with activity with 11
completed in the third quarter
of 2020 compared to 21 wells
with 11 completed
in the third quarter of 2019.
2) 42 wells with activity with 26 completed
the first nine months of 2020
compared to 42 wells
with 32 completed in the first
nine months of
2019.
Calculation of capital employed
and net debt to capital
employed ratio
The table below reconciles
the net interest-bearing
debt adjusted, the capital
employed, the net debt to
capital employed ratio
adjusted including lease
liabilities and the net debt
to capital employed adjusted
ratio with the most directly
comparable financial
measure or measures
calculated in accordance
with IFRS.
Calculation of capital employed and net debt to capital employed
ratio
At 30
September
At 30 June
At 31
December
At 30
September
(in USD million)
2020
2020
2019
2019
Shareholders' equity
34,084
35,587
41,139
40,983
Non-controlling interests
24
23
20
16
Total equity
A
34,108
35,610
41,159
40,999
Current finance debt
5,277
5,463
4,087
4,375
Non-current finance debt
32,193
31,647
24,945
24,401
Gross interest-bearing debt
B
37,471
37,110
29,032
28,776
Cash and cash equivalents
7,844
9,700
5,177
6,838
Current financial investments
10,563
9,319
7,426
7,203
Cash and cash equivalents and financial
investment
C
18,407
19,020
12,604
14,041
Net interest-bearing debt [10]
B1 = B-C
19,064
18,091
16,429
14,735
Other interest-bearing elements
1)
669
832
791
878
Normalisation for cash-build up
before tax payment (50% of Tax
Payment)
2)
259
-
-
670
Net interest-bearing debt adjusted normalised
for tax payment, including
lease liabilities [5]
B2
19,992
18,923
17,219
16,283
Lease liabilities
4,218
4,154
4,339
4,383
Net interest-bearing debt adjusted [5]
B3
15,774
14,768
12,880
11,899
Calculation of capital employed [5]
Capital employed
A+B1
53,172
53,700
57,588
55,734
Capital employed adjusted, including
lease liabilities
A+B2
54,100
54,532
58,378
57,282
Capital employed adjusted
A+B3
49,883
50,378
54,039
52,898
Calculated net debt to capital employed
[5]
Net debt to capital employed
(B1)/(A+B1)
35.9%
33.7%
28.5%
26.4%
Net debt to capital employed adjusted,
including lease liabilities
(B2)/(A+B2)
37.0%
34.7%
29.5%
28.4%
Net debt to capital employed adjusted
(B3)/(A+B3)
31.6%
29.3%
23.8%
22.5%
1) Cash
and cash equivalents
adjustments regarding collateral
deposits classified as cash
and cash equivalents
in the Consolidated
balance sheet but considered
as non-cash in the non
-GAAP calculations as well
as financial investments
in Equinor Insurance
AS classified as current
financial investments.
2) Adjustment
to net interest-bearing debt
for cash build-up in the first
quarter and the third quarter
before tax payment on 1
April
and 1 October.
This is to exclude 50% of
the cash build-up to have
a more even allocation of
tax payments between the
four
quarters and hence
a more representative net
interest-bearing debt.
USE AND RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Non-GAAP financial
measures are defined as numerical
measures that either exclude
or include amounts or
certain accounting items
that are not excluded
or included in the comparable
measures calculated and
presented in accordance with
GAAP (i.e. IFRS).
Management considers
adjusted earnings and adjusted
earnings after tax together
with other non-GAAP financial
measures as
defined below,
to provide a better indication
of the underlying operational
and financial performance
in the period (excluding
financing), and therefore
better facilitate comparisons
between periods.
The following financial
measures may be considered
non-GAAP financial
measures:
●
Net debt to capital employed,
Net debt to capital
employed adjusted,
including lease
liabilities and
Net debt to capital
employed ratio adjusted
– Following implementation
of IFRS 16 Equinor presents
a “net debt to capital employed
adjusted”
excluding lease liabilities
from the gross interest
-bearing debt. Comparable
numbers are presented
in the table Calculation of
capital employed
and net debt to capital
employed ratio in the report
include Finance lease according
to IAS17, adjusted for
marketing instruction
agreement
●
Organic capital expenditures
– Capital expenditures,
defined as Additions to PP&E,
intangibles and
equity accounted
investments in note
2 Segments to the Condensed
financial interim statements,
amounted to USD 2.0 billion
in the third quarter
of 2020. Organic
capital expenditures are
capital expenditures excluding
acquisitions, recognised
lease assets (RoU assets)
and
other investments with
significant different cash
flow pattern. In the third quarter
of 2020, a total of USD 0.3
billion are excluded in
the organic capital expenditures.
Forward-looking organic capital
expenditures included
in this report are not reconcilable
to its
most directly comparable
IFRS measure without
unreasonable efforts,
because the amounts
excluded from such IFRS measure
to determine organic
capital expenditures cannot
be predicted with reasonable
certainty.
●
Free cash flow for
the third quarter 2020
- includes the following line items
in the Consolidated statement
of cash flows: Cash
flows provided by operating
activities before taxes
paid and working capital
items (USD 3.3 billion),
taxes paid (negative USD 0.1
billion), cash used in
business combinations
(USD 0.0 billion), capital
expenditures and investments
(negative USD 1.7 billion),
(increase) decrease
in other items interest bearing
(USD 0.0 billion), proceeds
from sale of assets and
businesses (USD 0.0
billion), dividend paid
(negative USD 0.3 billion)
and share buy-back (negative
USD 1.0 billion), resulting
in a free cash flow of
USD 0.2 billion in the
third quarter of 2020.
●
Free cash flow for
the first nine months of 2020
- includes the following line items
in the Consolidated statement
of cash flows:
Cash flows provided
by operating activities
before taxes paid and working
capital items (USD 10.2
billion), taxes paid (negative
USD 2.7 billion),
cash used in business
combinations (USD 0.0 billion),
capital expenditures and
investments (negative USD 6.0
billion), (increase) decrease
in other items interest bearing
(USD 0.0 billion), proceeds
from sale of assets
and businesses,
including USD 0.3 billion
received from the Lundin
divestment included in
(increase)/decrease in financial
investments (USD 0.3
billion), dividend paid
(negative USD 2.0 billion)
and share buy-back
(negative USD 1.1 billion),
resulting in a free cash flow
of
negative USD 1.3 billion
in the first nine months of
2020.
FORWARD-LOOKING STATEMENTS
This report contains
certain forward-looking statements
that involve risks and
uncertainties. In some
cases, we use words
such as
"ambition", "continue",
"could", "estimate", “intend”,
"expect", "believe", "likely",
"may", "outlook", "plan", "strategy",
"will", "guidance",
“targets”, “in line
with”, “on track”, “consistent”
and similar expressions
to identify forward-looking
statements. Forward
-looking
statements include
all statements other than
statements of historical
fact, including, among others,
statements regarding Equinor’s
plans, intentions,
aims, ambitions and expectations
with respect to the Covid
-19 pandemic including
its impacts, consequences
and
risks; Equinor’s USD 3 billion
action plan for 2020 to
strengthen financial
resilience; Equinor’s response
to the Covid-19 pandemic,
including anticipated
measures to protect people,
operations and value creation,
operating costs and assumptions;
the commitment to
develop as a broad
energy company; future
financial performance, including
cash flow and liquidity;
the share buy-back programme,
including its suspension;
accounting policies;
production cuts, including
their impact on the level
and timing of Equinor’s production;
plans to develop
fields; changes to Norway’s
petroleum tax system; market
outlook and future economic
projections and assumptions,
including commodity
price assumptions;
organic capital expenditures
through 2023;
intention to mature its
portfolio; estimates
regarding exploration
activity levels; ambition
to keep unit of production
cost in the top quartile
of its peer group; scheduled
maintenance activity
and the effects on
equity production thereof;
completion and results
of acquisitions and disposals;
expected
amount and timing of
dividend payments; and
provisions and contingent
liabilities.
You should
not place undue reliance
on these forward-looking
statements. Our actual
results could differ
materially from those
anticipated in the
forward-looking statements
for many reasons.
These forward-looking
statements reflect current
views about future events
and are, by their nature,
subject to significant risks
and
uncertainties because
they relate to events and
depend on circumstances
that will occur in the future.
There are a number of
factors
that could cause
actual results and developments
to differ materially
from those expressed or
implied by these forward-looking
statements, including
levels of industry product
supply, demand
and pricing, in particular
in light of recent significant
oil price volatility
triggered,
among other things, by
the changing dynamic
among OPEC+ members
and the uncertainty regarding
demand created by
the Covid-19 pandemic;
the impact of Covid-19;
levels and calculations of
reserves and material
differences from reserves
estimates;
unsuccessful drilling;
operational problems;
health, safety and environmental
risks; natural disasters,
adverse weather conditions,
climate change, and
other changes to business
conditions; the effects
of climate change; regulations
on hydraulic fracturing; securit
y
breaches, including breaches
of our digital infrastructure
(cybersecurity); ineffectiveness
of crisis management systems;
the actions of
counterparties and
competitors; the development
and use of new technology,
particularly in the renewable
energy sector; inability
to
meet strategic objectives;
the difficulties involving
transportation infrastructure;
political and social stability
and economic growth
in
relevant areas of
the world; an inability
to attract and retain personnel;
inadequate insurance
coverage; changes or uncertainty
in or
non-compliance with
laws and governmental regulations;
the actions of the Norwegian
state as majority shareholder;
failure to meet
our ethical and social
standards; the political
and economic policies
of Norway and other o
il-producing countries; non
-compliance with
international trade sanctions;
the actions of field partners;
adverse changes in
tax regimes; exchange
rate and interest rate
fluctuations; factors
relating to trading, supply and
financial risk; general
economic conditions; and
other factors discussed
elsewhere
in this report. Additional
information, including information
on factors that may
affect Equinor’s business,
is contained in Equinor’s
Annual Report on Form
20-F for the year
ended December 31,
2019, filed with the U.S. Securities
and Exchange Commission
(including section 2.11
Risk review - Risk factors
thereof). Equinor’s 2019 Annual
Report and Form 20-F is available
at Equinor’s
website www.equinor.com.
Although we believe that
the expectations reflected
in the forward-looking statements
are reasonable, we
cannot assure you that
our future results, level of
activity, performance
or achievements will meet
these expectations. Moreover,
neither we nor any other
person assume responsibility
for the accuracy and completeness
of these forward-looking
statements. Any
forward-looking statement
speaks only as of the
date on which such
statement is made, and,
except as required
by applicable law, we
undertake no obligation
to update any of these statements
after the date of this report,
whether to make them either
conform to actual
results or changes in
our expectations or
otherwise.
We use certain
terms in this document,
such as “resource” and
“resources” that the SEC’s rules
prohibit us from including in
our filings
with the SEC. U.S. investors
are urged to closely consider
the disclosures in our Form 20
-F, SEC File
No. 1-15200. This
form is
available on our website
or by calling 1-800-SEC-0330
or logging on to
www.sec.gov
.
Although we believe
that the expectations reflected
in the forward-looking statements
are reasonable, we cannot
assure you that our
future results, level
of activity, performance
or achievements will meet
these expectations.
Moreover, neither
we nor any other person
assumes responsibility
for the accuracy and completeness
of the forward-looking statements.
Unless we are required
by law to update
these statements, we
will not necessarily update
any of these statements
after the date of this
report, either to make
them conform to
actual results or changes
in our expectations.
END NOTES
- The
group's average liquids
price is a volume-weighted
average of the segment
prices of crude oil, condensate
and natural gas
liquids (NGL).
- The
refining reference margin
is a typical average gross
margin of our two refineries,
Mongstad and Kalundborg.
The reference
margin will differ
from the actual margin,
due to variations in
type of crude and other feedstock,
throughput, product yields,
freight
cost, inventory,
etc.
- Liquids
volumes include oil, condensate
and NGL, exclusive of royalty
oil.
- Equity
volumes represent
produced volumes under
a production sharing agreement
(PSA) that correspond to
Equinor's ownership
share in a field. Entitlement
volumes, on the other hand,
represent Equinor's share
of the volumes distributed
to the partners in the
field, which are subject
to deductions for,
among other things, royalty
and the host government's
share of profit oil. Under
the
terms of a PSA, the amount
of profit oil deducted from
equity volumes will normally
increase with the cumu
lative return on
investment to the
partners and/or production
from the licence. Consequently,
the gap between entitlement
and equity volumes
will
likely increase in
times of high liquids prices.
The distinction between
equity and entitlement is
relevant to most PSA regimes,
whereas it is not
applicable in most concessionary
regimes such as those
in Norway,
the UK, the US, Canada
and Brazil.
- These
are non-GAAP figures. See
Use and reconciliation of
non-GAAP financial measures
in the Supplementary
disclosures for
more details.
- Transactions
with the Norwegian State.
The Norwegian State, represented
by the Ministry of Petroleum
and Energy (MPE), is the
majority shareholder
of Equinor and it also
holds major investments
in other entities. This ownership
structure means that Equinor
participates in transactions
with many parties that are
under a common ownership
structure and therefore
meet the definition of a
related party.
Equinor purchases liquids
and natural gas from the Norwegian
State, represented by
SDFI (the State's Direct
Financial Interest).
In addition, Equinor sell
s
the State's natural gas production
in its own name, but for
the Norwegian State's
account and risk
as well as related expenditures
are refunded by the
State. All transactions are
considered priced on an
arm’s-
length basis.
- The
production guidance
reflects our estimates
of proved reserves calculated
in accordance with US Securities
and Exchange
Commission (SEC) guidelines
and additional production
from other reserves not
included in proved reser
ves estimates. The
growth percentage
is based on historical
production numbers, adjusted
for portfolio measures
.
- The
group's average invoiced
gas prices include volumes
sold by the MMP segment.
- The
internal transfer price
paid from the MMP segment
to the E&P Norway and
E&P USA segments.
- Since different
legal entities in the group
lend to projects and others
borrow from banks, project
financing through external
bank or
similar institutions is
not netted in the balance
sheet and results in over
-reporting of the debt stated
in the balance sheet compared
to the underlying exposure
in the group. Similarly,
certain net interest-bearing
debt incurred from activities
pursuant to the
Marketing Instruction
of the Norwegian government
are off-set against
receivables on the SDFI. Some
interest-bearing elements
are classified together
with non-interest bearing elements,
and are therefore included
when calculating the net
interest-bearing
debt.
Signatures
Pursuant to the requirements of the
Securities Exchange Act of 1934,
the registrant has duly caused this
report to be signed on its behalf
by
the undersigned, thereunto duly authoris
ed.
EQUINOR ASA
(Registrant)
Dated: 29 October, 2020
By: ___/s/ Lars Christian Bacher
Name: Lars Christian Bacher
Title:
Chief Financial Officer