6-K 1 eqnr2q21_6k.htm EQUINOR SECOND QUARTER 2021 REPORT
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
28 July 2021
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 contains a report of the second quarter 2021 results of Equinor ASA.
Equinor second quarter 2021
2
Equinor second quarter 2021 results
Equinor reports adjusted earnings of USD 4.64 billion and USD 1.58 billion after tax in the
second quarter of 2021. IFRS net operating income was USD 5.30 billion and the IFRS net
income was USD 1.94 billion.
The second quarter of 2021 was characterised by:
●
Strong results due to higher prices, sustained value focus and strict capital discipline.
●
Solid operational performance and progress in the project portfolio, some projects impacted negatively by Covid-19.
●
Strong cash flow and significant improvement of adjusted net debt ratio
(1)
to 16.4%.
●
Cash dividend of USD 0.18 per share and launch of share buy-back programme.
“We deliver a strong result in the second quarter. Solid operational performance and continued focus on value creation have enabled
us to capture additional value from higher commodity prices. Strict capital discipline and a net cash flow of more than USD 4.5
billion,
reduce our net debt ratio to 16.4 percent and make us robust for volatility in commodity prices going forward,” says Anders
Opedal,
President and CEO of Equinor ASA.
“Systematic and sustained improvements on the NCS enable us to capture additional value in the quarter. We progressed our project
portfolio with the Norwegian government’s approval of the development plan for Breidablikk, start-up of Martin Linge on NCS and the
final investment decision on Bacalhau Phase 1 in Brazil. Projects in execution are progressing despite the impact of
Covid-19,” says
Opedal.
“We continue to accelerate within renewables through strategic positions and partnerships. In Poland we made significant progress
with the award of the support regime for Baltyk II & III with a potential total capacity at 1,440 megawatts. We continue our efforts to
reduce emissions. In this quarter we submitted the plan for development and operation of the Troll West electrification, and we have
made good progress on Hywind Tampen, the world’s first floating windfarm to power offshore oil and gas platforms”, says Opedal.
Adjusted earnings [5] were USD 4.64 billion in the second quarter, up from USD 0.35 billion in the same period in 2020. Adjusted
earnings after tax [5] were USD 1.58 billion, up from USD 0.65 billion in the same period last year.
IFRS net operating income was USD 5.30 billion in the second quarter, up from negative USD 0.47 billion in the same period in 2020.
IFRS net income was USD 1.94 billion in the second quarter, compared to negative USD 0.25 billion in the second quarter of 2020.
Net operating income was impacted by higher prices for gas and liquids, and net reversals of impairments of USD 0.28 billion
including
USD 0.11 billion impairment of exploration licences in the second quarter of 2021.
The results of all E&P segments are positively impacted by the higher commodity prices. Strong operational performance, continued
improvement focus and strict capital discipline supported additional value creation.
E&P Norway benefited from improved prices and solid operational performance.
Combined with taxes paid based on the low 2020
results this contributed strongly to the group cash flow.
Results from the Marketing, midstream and processing segment were impacted by losses on hedges of gas forward sales, shut
down
of the Hammerfest LNG plant and weak refinery margins.
Compared to the same quarter last year the Renewables segment experienced lower winds for the offshore wind assets, partially
offset by improved availability. The segment delivered adjusted earnings of negative USD 31 million, down from negative USD 1
million in the second quarter last year.
Equinor delivered total equity production of 1,997 mboe per day in the second quarter, down from 2,011 mboe per day in the same
period in 2020. High planned maintenance,
divestment of Bakken and shut down of the Hammerfest LNG plant were partially offset by
higher flex gas volumes to capture higher prices and increased production from Johan Sverdrup. Equity production of renewable
energy for the quarter was 282 GWh, down from 304 GWh for the same period last year, impacted by lower winds than the same
quarter last year.
At the end of second quarter 2021, Equinor had completed 11 exploration wells with 5 commercial discoveries and 12 wells were
ongoing. Adjusted exploration expenses in the second quarter were USD 0.21 billion, compared to USD 0.28 billion in the same
quarter of 2020.
Equinor second quarter 2021
3
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 6.54 billion for
the
second quarter, compared to USD 2.36 billion for the same period in 2020. Organic capital expenditure [5] was USD 4.03 billion for
the first six months of 2021. At the end of the quarter adjusted net debt to capital employed
(1)
was 16.4%, down from 24.6% in the first
quarter of 2021. Including the lease liabilities according to IFRS 16, the net debt to capital employed was 23.2%.
The board of directors has declared a cash dividend of USD 0.18 per share for the second quarter of 2021. 28 July Equinor
commences execution of the first tranche of around USD 300 million of the USD 600 million share buy-back program for 2021
announced 15 June.
The twelve-month average Serious Incident Frequency (SIF) for the period ending 30 June was 0.5 for 2021, and down from 0.6 in
2020. The twelve-month average Recordable Injury Frequency (TRIF) for the period ending at 30 June was 2.5, up from
2.2 in 2020.
On the Capital Markets Day on 15 June 2021 Equinor presented its updated strategy for accelerating its transition while growing
cash
flow and returns. Equinor’s ambition is to deliver a competitive capital distribution and presented an updated
programme for cash
dividend and share buy-back. Equinor has an ambition to reach a 40% reduction in net carbon intensity by 2035, on the
way towards
net zero by 2050, and interim ambitions to reduce net carbon intensity with 20% by 2030.
Equinor expects gross investments [5] in renewables of around USD 23 billion from 2021 to 2026, and to increase the share of
gross
investments for renewables and low carbon solutions from around 4% in 2020 to more than 50% by 2030. Based on early low-cost
access at scale, Equinor expects to reach an installed capacity of 12 – 16 GW (Equinor share) by 2030. Early access followed
by
targeted farm down is an integrated part of Equinor’s value creation proposition. So far, Equinor has divested assets for USD 2.3
billion and booked a capital gain of USD 1.7 billion.
By 2035, Equinor’s ambition is to develop the capacity to store 15 -30 million tonnes CO2 per year and
to provide clean hydrogen in
3-5 industrial clusters.
Quarters
Change
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million, unless stated otherwise)
2021
2020
Change
5,298
5,220
(472)
N/A
Net operating income/(loss)
10,518
(414)
N/A
4,641
5,467
354
>100%
Adjusted earnings [5]
10,109
2,401
>100%
1,943
1,854
(251)
N/A
Net income/(loss)
3,797
(956)
N/A
1,578
2,662
646
>100%
Adjusted earnings after tax [5]
4,240
1,207
>100%
1,997
2,168
2,011
(1%)
Total equity liquids
and gas production (mboe per day) [4]
2,082
2,122
(2%)
63.7
56.4
22.9
>100%
Group average liquids price (USD/bbl) [1]
60.0
33.6
79%
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.
Equinor second quarter 2021
4
GROUP REVIEW
Second quarter 2021
Total equity liquids and gas production
[4] was 1,997 mboe per day in the second quarter of 2021, down 1% compared to 2,011
mboe per day in the second quarter of 2020 mainly due to planned turnarounds, expected natural decline, divestment
of an
unconventional US onshore asset in the second quarter of 2021, in addition to the shutdown at the Hammerfest LNG plant.
Higher
flexible gas off-take and ramp-up of fields on the Norwegian continental shelf partially offset the decrease.
Total entitlement liquids and gas production
[3] was 1,845 mboe per day in the second quarter of 2021, down 3% compared to
1,897 mboe per day in the second quarter of 2020. The production was negatively influenced by the factors
mentioned above in
addition to higher effects from production sharing agreements (PSA) [4]. The net effect of PSA and US royalties was 152 mboe per
day in total in the second quarter of 2021 compared to 114 mboe per day in the second quarter of 2020.
Quarters
Change
Condensed income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(unaudited, in USD million)
2021
2020
Change
17,462
17,589
7,603
>100%
Total revenues and
other income
35,052
22,733
54%
(7,399)
(7,166)
(2,750)
>100%
Purchases [net of inventory variation]
(14,565)
(10,146)
44%
(2,329)
(2,160)
(2,411)
(3%)
Operating and administrative expenses
(4,489)
(5,014)
(10%)
(2,111)
(2,797)
(2,522)
(16%)
Depreciation, amortisation and net impairment losses
(4,908)
(6,959)
(29%)
(326)
(247)
(393)
(17%)
Exploration expenses
(572)
(1,028)
(44%)
5,298
5,220
(472)
N/A
Net operating income/(loss)
10,518
(414)
N/A
1,943
1,854
(251)
N/A
Net income/(loss)
3,797
(956)
N/A
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 74,579 million at
30 June 2021, compared to USD 75,858 million at 30 June 2020.
Net operating income
was USD 5,298 million in the second quarter of 2021, compared to negative USD 472 million in the second
quarter of 2020. The increase was mainly due to higher average prices for liquids and gas, and net reversal of impairments
in the
second quarter of 2021 compared to net impairment losses in second quarter of 2020. Lower results from liquids trading
compared to
the second quarter of 2020 partially offset the increase in net operating income.
In the second quarter of 2021, net operating income was positively impacted by net reversal of impairments
2
of USD 276 million,
operational storage effects of USD 87 million, net overlifted volumes of USD 80 million, inventory hedge contracts of USD 67 million
and unrealised loss on gas derivatives of USD 60 million. In the second quarter of 2020, net operating income was negatively
impacted by impairments of USD 374 million.
2
For more information, see note 2 Segments to the Condensed interim financial statements.
Equinor second quarter 2021
5
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
17,173
17,327
8,044
>100%
Adjusted total revenues and other income
34,500
23,014
50%
(7,531)
(7,071)
(2,798)
>100%
Adjusted purchases [6]
(14,602)
(10,653)
37%
(2,287)
(2,173)
(2,351)
(3%)
Adjusted operating and administrative expenses
(4,461)
(4,796)
(7%)
(2,500)
(2,386)
(2,259)
11%
Adjusted depreciation, amortisation and net impairment
losses
(4,886)
(4,580)
7%
(212)
(230)
(282)
(25%)
Adjusted exploration expenses
(443)
(584)
(24%)
4,641
5,467
354
>100%
Adjusted earnings [5]
10,109
2,401
>100%
1,578
2,662
646
>100%
Adjusted earnings after tax [5]
4,240
1,207
>100%
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
Adjusted total revenues and other income
were USD 17,173 million in the second quarter of 2021, compared to USD 8,044 million
in the second quarter of 2020. The increase was mainly due to significantly higher average prices for liquids and gas, and higher gas
production, partially offset by lower liquids production.
Adjusted purchases
[6] were USD 7,531 million in the second quarter of 2021, compared to USD 2,798 million in the second quarter
of 2020. The increase was mainly due to significantly higher average prices for liquids and gas in addition to higher third party
volumes for gas in Europe.
Adjusted operating and administrative expenses
were USD 2,287 million in the second quarter of 2021, compared to USD 2,351
million in the second quarter of 2020. The decrease was mainly due to lower transportation costs, especially in the MMP
segment,
primarily due to lower freight rates on shipping of liquids in addition to lower volumes. The NOK/USD exchange rate development
partially offset the decrease.
Adjusted depreciation, amortisation and net impairment losses
were USD 2,500 million in the second quarter of 2021, compared
to USD 2,259 million in the second quarter of 2020. The increase was mainly due to higher investments and the NOK/USD exchange
rate development. The increase was partially offset by higher reserves estimates especially in the E&P International segment, lower
depreciation basis resulting from net impairments in previous periods, and a classification of a US onshore asset as held for
sale.
Adjusted exploration expenses
were USD 212 million in the second quarter of 2021, compared to USD 282 million in the second
quarter of 2020. The decrease was mainly due to previously expensed wells being recapitalised this quarter due to related
projects
being matured, and lower drilling and other costs. This is partially offset by a lower portion of wells being capitalized this quarter and
higher field development costs. For more information, see the table titled Adjusted exploration expenses in the Supplementary
disclosures.
After total adjustments
3
of USD 656 million to net operating income,
Adjusted earnings
[5] were USD 4,641 million in the second
quarter of 2021, an increase of USD 4,287 million from the second quarter of 2020.
Adjusted earnings after tax
[5] were USD 1,578 million in the second quarter of 2021, which reflects an effective tax rate on adjusted
earnings of 66.0%, compared to negative 82.3% in the second quarter of 2020. The change in the effective tax rate was mainly
caused by the effect of the temporary changes to Norway’s petroleum tax system in the second quarter of 2020, and changes in
provision for best estimates for uncertain tax positions in the second quarter of 2020.
Cash flows provided by operating activities
increased by USD 6,275 million compared to the second quarter of 2020. The increase
was mainly due to higher liquids and gas prices, decreased tax payments and a change in working capital.
Cash flows used in investing activities
increased by USD 918 million compared to the second quarter of 2020. The increase was
mainly due to increased financial investments, partially offset by increased proceeds from sale of assets.
3
For items impacting net operating income, see Use and reconciliation of non-GAAP financial measures in
the Supplementary disclosures.
Equinor second quarter 2021
6
Cash flows used in financing activities
increased by USD 6,985 million compared to the second quarter of 2020. The increase was
mainly due to bonds issued in the second quarter of 2020, partially offset by increased short-term debt and decreased dividend paid.
Total cash flows
decreased by USD 1,628 million compared to the second quarter of 2020.
Free cash flow
[5] in the second quarter of 2021 was USD 4,510 million compared to negative USD 1,853 million in the second
quarter of 2020. The increase was mainly due to higher operating cash flow mainly due to higher liquids and gas prices, decreased
tax payments, increased proceeds from sale of assets and decreased dividend paid.
First half 2021 review
Net operating income
was USD 10,518 million in the first half of 2021, compared to negative USD 414 million in the first half of 2020.
The increase was mainly due to higher liquids and gas prices, lower net impairments in the first half of 2021 compared to the
first half
of 2020, and lower transportation and exploration costs.
In the first half of 2021, net operating income was positively impacted by inventory hedge contracts of USD 354 million, operational
storage effects of USD 191 million and net overlifted volumes of USD 79 million, partially offset by net impairments of USD 152 million.
In the first half of 2020, net operating income was negatively impacted mainly by net impairments of USD 2,825 million.
Adjusted total revenues and other income
were USD 34,500 million in the first half of 2021 compared to USD 23,014 million in the
first half of 2020. The increase was mainly due to significantly higher average prices for liquids and gas, and gain on sale of
assets in
the Renewables (REN) segment.
Adjusted purchases
[6] were USD 14,602 million in the first half of 2021 compared to USD 10,653 million in the first half of
2020.
The increase was mainly due to significantly higher average prices for liquids and gas, partially offset by lower volumes for liquids and
third party sales.
Adjusted operating and administrative expenses
were
USD 4,461 million in the first half of 2021, compared to USD 4,796 million in
the first half of 2020. The decrease was mainly due to lower transportation costs, especially in the MMP segment, primarily due
to
lower freight rates on shipping of liquids in addition to lower volumes. The NOK/USD exchange rate development partially offset the
decrease.
Adjusted depreciation, amortisation and net impairment losses
were
USD 4,886 million in the first half of 2021, compared to USD
4,580 million in the first half of 2020. The increase was mainly due to higher investments and the NOK/USD exchange rate
development. The increase was partially offset by higher reserves estimates especially in the E&P International segment, lower
depreciation basis resulting from net impairments in previous periods, and a classification of a US onshore asset as held for
sale.
Adjusted exploration expenses
were USD 443 million in the first half of 2021, compared to USD 584 million in the first half of 2020.
The decrease was primarily due to lower drilling and other costs, a lower portion of exploration expenditure capitalized in earlier
years
being expensed this year in addition to wells expensed in earlier years being recapitalised due to related projects
on NCS being
matured. This is partially offset by a lower portion of exploration expenditure being capitalized this year, and higher field development
costs. For more information, see table titled Adjusted exploration expenses in the Supplementary disclosures.
After total adjustments
4
of USD 409 million to net operating income,
Adjusted earnings
[5] were USD 10,109 million in the first half of
2021, an increase of USD 7,707 million compared to the first half of 2020.
Adjusted earnings after tax
[5] were USD 4,240 million in first half of 2021, compared to USD 1,207 million in the first half of 2020.
The effective tax rate on adjusted earnings was 58.1% in first half of 2021, compared to an effective tax rate of 49.7% in first half of
2020. The increase in the effective tax rate was mainly caused by effect of the temporary changes to Norway’s petroleum tax system
in the first half of 2020 and changes in provision for best estimates for uncertain tax positions in the first half of 2020. This was
partially offset by positive adjusted earnings in countries with unrecognised deferred tax assets.
Cash flows provided by operating activities
increased by USD 7,216 million compared to the first half of 2020. The increase was
mainly due to higher liquids and gas prices and decreased tax payments, partially offset by a change in working capital and decreased
cash flow from derivatives.
Cash flows used in investing activities
decreased by USD 244 million compared to the first half of 2020. The decrease was mainly
due to increased proceeds from sale of assets, partially offset by increased financial investments.
4
For items impacting net operating income, see Use and reconciliation of non-GAAP financial measures in
the Supplementary disclosures.
Equinor second quarter 2021
7
Cash flows used in financing activities
increased by USD 8,824 million compared to the first half of 2020. The increase was mainly
due to bonds issued in the first half of 2020 and increased repayment of finance debt, partially offset by decreased dividend paid.
Total cash flows
decreased by USD 1,364 million compared to the first half of 2020.
Free cash flow
[5] for the first half of 2021 was USD 9,683 million, compared to negative USD 1,492 million in the first half
of 2020.
The increase was mainly due to higher operating cash flow mainly due to higher liquids and gas prices, decreased tax payments,
increased proceeds from sale of assets and decreased dividend paid, partially offset by decreased cash flow from derivatives.
OUTLOOK
●
Organic capital expenditures
[5] are estimated at an annual average of USD 9-10 billion for 2021-2022 and around USD 12
billion annual average for 2023-2024
5
.
●
Production
for 2021 is estimated to be around 2% above 2020 level
6
[7].
●
Equinor’s ambition is to keep the
unit of production cost
in the top quartile of its peer group.
●
Scheduled maintenance activity
is estimated to reduce equity production by around 50 mboe per day for the full year of 2021.
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, the ongoing 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.
5
USD/NOK exchange rate assumption of 9.
6
Adjusted for portfolio measures.
Equinor second quarter 2021
8
EXPLORATION
& PRODUCTION NORWAY
Second quarter 2021 review
Average daily production of liquids and gas
decreased by 2% to 1,257 mboe per day in the second quarter of 2021, compared to
1,281 mboe per day in the second quarter of 2020. The decrease was mainly due to planned turnarounds, expected natural
decline
and shutdown at the Hammerfest LNG plant, partially offset by higher flexible gas off-take and ramp-up on Johan Sverdrup.
Quarters
Change
Income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
6,210
5,783
1,659
>100%
Total revenues and
other income
11,992
5,196
>100%
(828)
(794)
(706)
17%
Operating and administrative expenses
(1,622)
(1,341)
21%
(908)
(1,570)
(992)
(8%)
Depreciation, amortisation and net impairment losses
(2,478)
(2,833)
(13%)
(55)
(70)
(65)
(15%)
Exploration expenses
(125)
(160)
(22%)
4,418
3,350
(104)
N/A
Net operating income/(loss)
7,767
863
>100%
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 35,533 million at
30 June 2021, compared to USD 30,549 million at 30 June 2020.
Net operating income
was USD 4,418 million in the second quarter of 2021 compared to negative USD 104 million in the second
quarter of 2020. The increase was mainly due to higher liquids price and gas transfer price in addition to net reversal of impairments.
In the second quarter of 2021, net operating income was was positively impacted by net reversal of impairments of assets
of USD 396
million, net underlifted volumes of USD 38 million and unrealised gain on derivatives of USD 19 million. In the second quarter
of 2020,
net operating income was negatively impacted by net underlifted volumes of USD 19 million.
Adjusted operating and administrative expenses increased mainly due to the NOK/USD exchange rate development, partially offset by
lower Gassled removal costs and lower transportation costs. Adjusted depreciation, amortisation and net impairment losses increased
mainly due to the NOK/USD exchange rate development, decreased proved reserves on several fields and higher investments.
Adjusted exploration expenses decreased mainly due to previously expensed wells being recapitalised this quarter
due to related
projects being matured. Higher drilling and field development costs partially offset the decrease.
After total adjustments of USD 453 million to net operating income,
Adjusted
earnings
[5] were USD 3,964
million in the second
quarter of 2021, compared to negative USD 85 million in the second quarter of 2020.
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
6,188
5,640
1,715
>100%
Adjusted total revenues and other income
11,828
5,308
>100%
(864)
(714)
(743)
16%
Adjusted operating and administrative expenses
(1,577)
(1,398)
13%
Equinor second quarter 2021
9
(1,312)
(1,293)
(992)
32%
Adjusted depreciation, amortisation and net impairment
losses
(2,605)
(1,973)
32%
(48)
(70)
(65)
(26%)
Adjusted exploration expenses
(118)
(160)
(26%)
3,964
3,563
(85)
N/A
Adjusted earnings/(loss) [5]
7,527
1,778
>100%
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
Equinor second quarter 2021
10
First half 2021 review
Net operating income
for E&P Norway was USD 7,767 million in the first half of 2021 compared to USD 863 million in the first half of
2020. The increase was mainly due to higher gas transfer price and liquids price in addition to net reversal of impairments.
In the first half of 2021, net operating income was positively impacted by net reversal of impairments of assets of
USD 120 million, net
underlifted volumes of USD 103 million and unrealised gain on derivatives of USD 19 million. In the first half of 2020, net operating
income was negatively impacted by impairment of assets of USD 859 million and net underlifted volumes of USD 50 million.
Adjusted operating and administrative expenses increased mainly due to the NOK/USD exchange rate development, partially offset by
lower Gassled removal costs and lower transportation costs. Adjusted depreciation, amortisation and net impairment losses increased
mainly due to the NOK/USD exchange rate development, decreased proved reserves on several fields, increased
depreciation of the
asset retirement obligation (ARO) assets and higher investments.
Lower depreciation basis resulting from net impairments in previous
periods partially offset the increase. Adjusted exploration expenses decreased mainly due to previously expensed wells being
recapitalised due to related projects being matured. Higher drilling and field development costs partially offset the decrease.
After total adjustments of USD 240
million to net operating income,
Adjusted earnings
[5] were USD 7,527 million in the first half of
2021, an increase from USD 1,778 million in the first half of 2020.
Equinor second quarter 2021
11
EXPLORATION
& PRODUCTION INTERNATIONAL
Second quarter 2021 review
Average daily equity production of liquids and gas
was 349 mboe per day in the second quarter of 2021 compared to 325 mboe
per day in the second quarter of 2020. The increase was primarily due to higher gas nominations, field specific production on the
UK
continental shelf and in Russia, partially offset by natural decline in mature fields.
Average daily entitlement production of liquids and gas
was 252 mboe per day in the second quarter of 2021 compared to 266
mboe per day in the second quarter of 2020. The decrease was due to higher effects from production sharing agreements (PSA)
partially offset by higher equity production. The net effects from PSA were 97 mboe per day in the second quarter of 2021 compared
to 59 mboe per day in the second quarter of 2020.
Quarters
Change
Income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
1,475
1,049
555
>100%
Total revenues and
other income
2,525
1,903
33%
14
(29)
(26)
>(100%)
Purchases [net of inventory variation]
(15)
(68)
(78%)
(439)
(252)
(281)
57%
Operating and administrative expenses
(691)
(779)
(11%)
(228)
(400)
(509)
(55%)
Depreciation, amortisation and net impairment losses
(627)
(1,380)
(55%)
(231)
(107)
(288)
(20%)
Exploration expenses
(338)
(536)
(37%)
591
261
(548)
N/A
Net operating income/(loss)
853
(860)
N/A
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 18,662 million at
30 June 2021, compared to USD 20,278 million at 30 June 2020.
Net operating income
was positive USD 591 million in the second quarter of 2021 compared to negative USD 548 million in the
second quarter of 2020. The increase was mainly due to higher liquids and gas prices, lower depreciation and lower exploration
expenses,
in addition to net impairment reversals in the second quarter of 2021 compared to net impairment losses in the second
quarter of 2020. The increase was partially offset by lower entitlement production in the second quarter of 2021.
In the second quarter of 2021, net operating income was positively impacted by net impairment reversals of USD 94 million, revenues
related to a redetermination process of USD 57 million and net overlifted volumes of USD 41 million. In the second quarter of
2020,
net operating income was negatively impacted by net impairment losses of USD 146 million.
Adjusted operating and administrative expenses increased mainly due to increased royalties and production fees driven by higher
prices. Adjusted depreciation, amortisation and net impairment losses decreased mainly due to increased reserve estimates and
lower
entitlement production from mature fields. Reduced ARO asset estimates and lower depreciation basis resulting from net
impairments
in previous periods added to the decrease, partially offset by higher investments and increased production from specific fields.
Adjusted exploration expenses decreased mainly due to lower drilling and other costs, partially offset by a lower portion of exploration
expenditure being capitalised in the second quarter of 2021.
After total adjustments of negative USD 193 million to net operating income,
Adjusted earnings
[5] were USD 399 million in the
second quarter of 2021, up from negative USD 379 million in the second quarter of 2020.
Equinor second quarter 2021
12
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
1,315
1,198
622
>100%
Adjusted total revenues and other income
2,513
1,770
42%
14
(29)
(26)
>(100%)
Adjusted purchases
(15)
(68)
(78%)
(378)
(335)
(324)
17%
Adjusted operating and administrative expenses
(712)
(689)
3%
(416)
(349)
(475)
(12%)
Adjusted depreciation, amortisation and net impairment
losses
(765)
(1,018)
(25%)
(136)
(103)
(177)
(23%)
Adjusted exploration expenses
(239)
(369)
(35%)
399
382
(379)
N/A
Adjusted earnings/(loss) [5]
781
(375)
N/A
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
First half 2021 review
Net operating income
for E&P International was positive USD 853 million in the first half of 2021, compared to negative USD 860
million in the first half of 2020. The positive development was mainly due to higher liquids and gas prices, lower depreciation,
and
lower exploration expenses, in addition to net impairment reversals in the first half of 2021 compared to net impairment losses
in the
first half of 2020. The increase was partially offset by lower entitlement production in the first half of 2021.
In the first half of 2021, net operating income was positively impacted by net impairment reversals of USD 39 million. In
the first half of
2020, net operating income was negatively impacted by net impairment losses of USD 529 million.
Adjusted operating and administrative expenses increased slightly mainly due to increased royalties and production fees,
primarily
driven by increased prices. Adjusted depreciation, amortisation and net impairment losses decreased mainly due to increased
reserves estimates and lower entitlement production from mature fields, partially offset by higher investments and increased
production from certain fields. Adjusted exploration expenses decreased mainly due to lower drilling and other costs, in addition
to
lower exploration expenditure capitalized in earlier years being expensed in the first half of 2021. This was partially offset by a lower
portion of exploration expenditure being capitalized in the first half of 2021,
After total adjustments of negative USD 72 million to net operating income,
Adjusted
earnings
[5] were USD 781 million in the first
half of 2021, up from negative USD 375 million in the first half of 2020.
Equinor second quarter 2021
13
EXPLORATION
& PRODUCTION USA
Second quarter 2021 review
Average daily equity production of liquids and gas
was 391 mboe per day in the second quarter of 2021 compared to 405 mboe
per day in the second quarter of 2020. The decrease is due to divestment of an unconventional US onshore asset in the second
quarter of 2021 and slightly lower US offshore production due natural decline offset slightly by increase in remaining unconventional
US onshore assets.
Average daily entitlement production of liquids and gas
decreased slightly to 337 mboe per day in the second quarter of 2021
compared to 350 mboe per day in the second quarter of 2020. The decrease is due to divestment of an unconventional US onshore
asset in the second quarter of 2021 and slightly lower US offshore production due natural decline offset slightly by increase in
remaining unconventional US onshore assets.
Quarters
Change
Income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
968
993
475
>100%
Total revenues and
other income
1,961
1,360
44%
(287)
(335)
(293)
(2%)
Operating and administrative expenses
(622)
(664)
(6%)
(438)
(436)
(475)
(8%)
Depreciation, amortisation and net impairment losses
(873)
(1,711)
(49%)
(39)
(70)
(40)
(2%)
Exploration expenses
(109)
(332)
(67%)
204
152
(332)
N/A
Net operating income/(loss)
356
(1,347)
N/A
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 11,811 million at
30 June 2021, compared to USD 15,557 million at 30 June 2020.
Net operating income
was positive USD 204 million in the second quarter of 2021 compared to negative USD 332 million in the
second quarter of 2020. The increase was mainly due to higher commodity prices in the second quarter of 2021.
In the second quarter of 2021, net operating income was negatively impacted by net impairments of USD 11 million, relating to the US
offshore leaseholds. In the second quarter of 2020, there were no impairments.
Adjusted operating and administrative expenses decreased mainly due to the divestment of an unconventional US onshore
asset.
Adjusted depreciation, amortisation and net impairment losses decreased mainly due to lower depreciation basis resulting from
classification of an unconventional US onshore asset as held for sale in the fourth quarter of 2020 and no depreciation expense
being
recognised for the period until the divestment of the asset in the second quarter of 2021. Adjusted exploration expenses decreased
mainly due to lower drilling costs partially offset by a lower portion of exploration expenditure being capitalized.
After total adjustments of USD 26 million to net operating income,
Adjusted earnings
[5] were USD 230 million in the second quarter
of 2021, up from negative USD 341 million in the second quarter of 2020.
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
968
993
475
>100%
Adjusted total revenues and other income
1,961
1,360
44%
Equinor second quarter 2021
14
(272)
(335)
(302)
(10%)
Adjusted operating and administrative expenses
(607)
(661)
(8%)
(438)
(408)
(475)
(8%)
Adjusted depreciation, amortisation and net impairment
losses
(846)
(975)
(13%)
(28)
(58)
(40)
(30%)
Adjusted exploration expenses
(86)
(55)
57%
230
192
(341)
N/A
Adjusted earnings/(loss) [5]
422
(330)
N/A
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
Equinor second quarter 2021
15
First half 2021 review
Net operating income
for E&P USA was positive USD 356 million in the first half of 2021 compared to negative USD 1,347 million in
the first half of 2020. The positive development was mainly due to higher liquids and gas prices in the first half of 2021 compared
to
the first half of 2020 and lower impairments related to unconventional US onshore and US offshore assets in the first half of 2021
compared to the first half of 2020.
In the first half of 2021, net operating income was negatively impacted by net impairment losses of USD 51 million, mainly due
to
reduced fair value related to an asset held for sale in the first quarter of 2021. In the first half of 2020, net operating income was
negatively impacted by net impairments of USD 1,014 million, mainly due to lower commodity price assumptions
for the
unconventional US onshore and US offshore assets.
Adjusted operating and administrative expenses decreased mainly due to lower activity for unconventional US onshore as
well as the
divestment of an unconventional US onshore asset. Adjusted depreciation, amortisation and net impairment losses decreased mainly
due to lower depreciation basis resulting from classification of an unconventional US onshore asset as held for sale in the fourth
quarter of 2020 and no depreciation expense being recognised for the period until the divestment of the asset
in the second quarter of
2021. Adjusted exploration expenses increased mainly due to a lower portion of exploration expenditure being capitalised and a
higher portion of exploration expenditure capitalised in earlier years being expensed.
Lower drilling costs partially offset the increase.
After total adjustments of USD 66 million to net operating income.
Adjusted
earnings
[5] were USD 422 million in the first half of
2021, up from negative USD 330 million in the first half of 2020.
Equinor second quarter 2021
16
MARKETING, MIDSTREAM & PROCESSING
Second quarter 2021 review
Natural gas sales volumes
amounted to 14.2 billion standard cubic meters (bcm) in the second quarter of 2021, up 0.6 bcm
compared to the second quarter of 2020. Of the total gas sales in the second quarter of 2021, entitlement gas was 12.6 bcm,
up 0.6 bcm from the second quarter of 2020. The increase was mainly due to higher E&P International entitlement volumes, partially
offset by the absence of equity LNG volumes as a result of the outage at the Hammerfest LNG plant due to shutdown.
Liquids sales volumes
amounted to 180.6 million barrels (mmbl) in the first quarter of 2021, down by 14.3 mmbl compared to the
second quarter of 2020 mainly due to decreased purchase from third party partially offset by increased volumes from E&P
International.
Average invoiced European natural gas sales price
was 237% higher in the second quarter of 2021 compared to the second
quarter of 2020 following the post-Covid-19 economic recovery, higher demand for heating combined with low storage levels.
Average invoiced North American piped gas sales price
increased by 53% in the same period mainly due to increased Henry Hub
price resulting from higher export and increased demand for gas-fired power as a result of warm weather.
Quarters
Change
Income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
16,981
15,789
7,486
>100%
Total revenues and
other income
32,770
22,289
47%
(15,448)
(14,176)
(5,127)
>100%
Purchases [net of inventory variation] [6]
(29,625)
(18,627)
59%
(1,097)
(1,069)
(1,423)
(23%)
Operating and administrative expenses
(2,166)
(2,767)
(22%)
(284)
(152)
(326)
(13%)
Depreciation, amortisation and net impairment losses
(436)
(607)
(28%)
152
392
610
(75%)
Net operating income/(loss)
544
288
89%
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 3,668 million at 30
June 2021, compared to USD 4,337 million at 30 June 2020.
Net operating income
was USD 152 million in the second quarter of 2021 compared to USD 610 million in the second quarter of
2020. The decrease was mainly driven by lower results from liquids trading in the second quarter of 2021 compared to strong
liquids
trading results in the second quarter of 2020. In addition, absence of LNG sales due to the outage at the Hammerfest LNG plant
and
negative results from a weak refinery margin contributed to a lower gross margin. The decrease in net operating income was partially
offset by lower impairment losses and lower operating expenses compared to the second quarter in 2020. The net operating income
in the second quarter of 2021 includes significant impact from derivatives with both gains and losses.
In the second quarter of 2021, net operating income was negatively impacted by impairment losses
7
and net provisions of USD 211
million, compared to USD 377 million in the second quarter of 2020. Unrealised gain on derivatives of USD 41 million positively
impacted net on operating income in the second quarter of 2021, compared to a loss on derivatives of USD 36
million in the second
quarter of 2020.
Adjusted purchases [6] increased mainly due to higher prices for both liquids and gas, partially offset by lower third party volumes for
liquids. Adjusted operating and administrative expenses decreased mainly due to lower transportation costs caused by lower
freight
7
For more information, see note 2 Segments and note 3 A
cquisitions and disposals
to the Condensed interim financial statements.
Equinor second quarter 2021
17
rates on shipping of liquids in addition to lower volumes. The decrease was partially offset by higher costs at operating plants.
Adjusted depreciation, amortisation and net impairment losses were stable.
After total adjustments of USD 8 million to net operating income,
Adjusted earnings
[5] were USD 144 million in the second quarter
of 2021, compared to USD 1,161 million in the second quarter of 2020.
Equinor second quarter 2021
18
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
16,874
15,518
7,805
>100%
Adjusted total revenues and other income
32,392
22,589
43%
(15,535)
(14,281)
(5,272)
>100%
Adjusted purchases [6]
(29,816)
(18,429)
62%
(1,096)
(1,081)
(1,274)
(14%)
Adjusted operating and administrative expenses
(2,177)
(2,585)
(16%)
(99)
(95)
(98)
1%
Adjusted depreciation, amortisation and net impairment
losses
(194)
(185)
5%
144
61
1,161
(88%)
Adjusted earnings [5]
206
1,390
(85%)
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
First half 2021 review
Net operating income
for MMP was USD 544 million in the first half of 2021 compared to USD 288 million in the first half of 2020.
The increase was mainly driven by a gain on liquids inventory hedging effects and operational storage of USD 545 million in the first
half of 2021, compared to a loss of USD 422 million in the first half of 2020.
The increase was partially offset by absence of LNG sales
due to the outage at the Hammerfest LNG plant, and negative result from weaker refinery results. The net operating income
in the first
half of 2021 includes significant impact from derivatives with both gains and losses.
In the first half of 2021, net operating income was negatively impacted by impairment losses and provisions of USD 256 million
compared to USD 604 million in the first half of 2020. Unrealised gain on derivatives of USD 24 million positively impacted net
operating income in the first half of 2021, compared to a loss on derivatives of USD 83 million in the first half of
2020.
Adjusted total revenues and other income and Adjusted purchases [6] increased mainly due to higher prices for all products, partially
offset by lower volumes for liquids. Adjusted operating and administrative expenses decreased mainly due to lower transportation
costs caused by lower freight rates on shipping of liquids, in addition to lower volumes. The decrease was partially offset by higher
costs at operating plants. Adjusted depreciation, amortisation and net impairment slightly increased.
After total net adjustments of USD 338 million,
Adjusted earnings
[5] were USD 206 million in the first half of 2021, a decrease from
USD 1,390 million in the first half of 2020.
Equinor second quarter 2021
19
RENEWABLES
As from the first quarter of 2021, Equinor changed its reporting as REN became a separate reporting segment. Previously the
activities in REN were reported in the segment “Other”. The change has its basis in the increased strategic importance of
the
renewable business for Equinor and that the information is regarded useful for the readers of the financial statements.
Following the
change, Equinor has determined the adjusted earnings item of gain or loss from sales of assets is not applicable to
REN, as the
management considers presentation of the segment operations result, including the presentation of the gain or loss from divestments,
as being reflective of the performance of the segment at this point of time. See Use and reconciliation of non-GAAP financial
measures in the Supplementary disclosures for more information.
Second quarter 2021 review
Power generation
8
was 282 GWh in the second quarter of 2021, compared to 304 GWh in the second quarter of 2020. The decrease
was due to wind being below seasonal average in the second quarter of 2021. The availability has been high in the second
quarter of
2021.
Quarters
Change
Income statement under IFRS
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
2
1,381
38
(96%)
Total revenues and
other income
1,383
82
>100%
(32)
(40)
(38)
(16%)
Operating and administrative expenses
(72)
(71)
1%
(1)
(0)
(0)
>100%
Depreciation, amortisation and net impairment losses
(1)
(0)
>100%
(31)
1,341
(0)
>(100%)
Net operating income/(loss)
1,310
11
>100%
Balance sheet information:
The sum of equity accounted investments and non-current segment assets was USD 1,208 million at 30
June 2021, compared to USD 1,114 million at 30 June 2020.
Net operating income
was negative USD 31 million in the second quarter of 2021 compared to USD 0 million in the second quarter
of 2020. The reduction was mainly due to increased activity level and higher costs due to the progressing of projects, mainly related
to
the Empire Wind and Beacon Wind assets on the US east coast. Increased business development costs driven by higher activity level
in the US, UK and in Asia also added to the decrease in net operating income. The decrease in Net operating income was partially
offset by higher net income from assets in operation compared to the second quarter of 2020.
Lower power generation this quarter compared to same quarter last year was offset by increased power prices and higher availability.
Net income from assets in operation was positive both in the second quarter of 2021 and the second quarter of 2020.
Adjusted total revenue and other income decreased by USD 35 million compared to the second quarter of 2020 due to lower net
income from equity accounted investments. Reduced net result from equity accounted investments were mainly due to
higher costs
related to the progressing of the Empire Wind and Beacon Wind assets on the US east coast. These assets have changed
consolidation method from proportional to equity accounted investments in 2021, following the farm-down of 50% of
the owner share
in the first quarter of 2021. Adjusted operating and administrative expenses decreased compared to the second quarter
of 2020. The
decrease was mainly driven by changed consolidation method for the Empire Wind and Beacon Wind assets. The decrease was
partially offset by higher business development costs driven by higher activity level in the US, the UK and in Asia. Adjusted
depreciation, amortisation and net impairment losses were slightly up compared to the second quarter of 2020 due to
depreciation of
certain water permits acquired in 2021.
8
Equinor share.
Equinor second quarter 2021
20
Adjusted
earnings
[5] were negative USD 31
million in the second quarter of 2021, compared to negative USD 1 million in the
second quarter of 2020
Equinor second quarter 2021
21
Quarters
Change
Adjusted earnings
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
2
1,384
37
(95%)
Adjusted total revenues and other income
1,386
84
>100%
(32)
(40)
(38)
(16%)
Adjusted operating and administrative expenses
(72)
(71)
1%
(1)
(0)
(0)
>100%
Adjusted depreciation, amortisation and net impairment
losses
(1)
(0)
>100%
(31)
1,344
(1)
>(100%)
Adjusted earnings [5]
1,313
12
>100%
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
First half 2021 review
Net operating income
was USD 1,310 million in the first half of 2021 compared to USD 11 million in the first half of 2020. The
increase was due to gain on divestments completed in the first quarter of 2021 of around USD 1.4 billion. Net operating income in the
first half of 2021 was impacted by lower net income from equity accounted investments compared to the first half of 2020.
This was
mainly driven by lower net income from equity accounted investments under development which contributed negatively to
the result as
expected due to increased activity level and higher costs compared to the first half of 2020 due to the progressing of projects.
Adjusted total revenue and other income increased due to gain on divestments in the first half of 2021. The increase was
partially
offset by lower result from equity accounted investments which is included in this line item, mainly due to Empire and Beacon Wind
assets in development not accounted for as equity accounted investment in 2020.
Adjusted operating and administrative expenses
remain at same level. Increase due to higher project activity and business development costs in the US, the UK and in Asia was
offset
by lower operating expenses due to change in ownership and consolidation method related to Empire Wind and Beacon Wind
in the
US, following the farm-down of 50% of the owner share in the first quarter of 2021.
Adjusted depreciation, amortisation and net
impairment losses were slightly up compared to the first half of 2020 due to depreciation of certain water permits acquired in 2021.
After total net adjustments of USD 3 million,
Adjusted earnings
[5] were USD 1,313 million in the first half of 2021 compared to USD
12 million in the first half of 2020.
Equinor second quarter 2021
22
CONDENSED INTERIM FINANCIAL STATEMENTS
Second quarter 2021
CONSOLIDATED STATEMENT
OF INCOME
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(unaudited, in USD million)
Note
2021
2020
2020*
17,380
16,129
7,563
Revenues
2
33,508
22,627
45,753
16
30
33
Net income/(loss) from equity accounted investments
47
104
53
66
1,431
7
Other income
3
1,497
2
12
17,462
17,589
7,603
Total revenues and
other income
2
35,052
22,733
45,818
(7,399)
(7,166)
(2,750)
Purchases [net of inventory variation]
(14,565)
(10,146)
(20,986)
(2,134)
(1,941)
(2,234)
Operating expenses
(4,076)
(4,639)
(8,831)
(195)
(218)
(177)
Selling, general and administrative expenses
(413)
(374)
(706)
(2,111)
(2,797)
(2,522)
Depreciation, amortisation and net impairment losses
6
(4,908)
(6,959)
(15,235)
(326)
(247)
(393)
Exploration expenses
(572)
(1,028)
(3,483)
(12,164)
(12,369)
(8,075)
Total operating expenses
2
(24,534)
(23,147)
(49,241)
5,298
5,220
(472)
Net operating income/(loss)
2
10,518
(414)
(3,423)
(304)
(312)
(379)
Interest expenses and other financial expenses
(616)
(723)
(1,392)
(90)
(396)
130
Other financial items
(485)
498
556
(393)
(707)
(248)
Net financial items
4
(1,101)
(225)
(836)
4,905
4,513
(720)
Income/(loss) before tax
9,417
(640)
(4,259)
(2,962)
(2,659)
469
Income tax
5
(5,620)
(316)
(1,237)
1,943
1,854
(251)
Net income/(loss)
3,797
(956)
(5,496)
1,938
1,851
(254)
Attributable to equity holders of the company
3,789
(961)
(5,510)
Equinor second quarter 2021
23
5
3
3
Attributable to non-controlling interests
8
6
14
0.60
0.57
(0.08)
Basic earnings per share (in USD)
1.17
(0.29)
(1.69)
0.60
0.57
(0.08)
Diluted earnings per share (in USD)
1.16
(0.29)
(1.69)
3,247
3,248
3,276
Weighted average number of ordinary shares outstanding (in millions)
3,248
3,290
3,269
3,257
3,256
3,284
Weighted average number of ordinary shares outstanding diluted (in
millions)
3,257
3,298
3,277
* Audited
Equinor second quarter 2021
24
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(unaudited, in USD million)
2021
2020
2020*
1,943
1,854
(251)
Net income/(loss)
3,797
(956)
(5,496)
107
117
41
Actuarial gains/(losses) on defined benefit pension plans
224
163
(106)
(24)
(25)
(8)
Income tax effect on income and expenses recognised in OCI
1)
(50)
(50)
19
83
91
33
Items that will not be reclassified to the Consolidated statement of
income
174
113
(87)
119
(46)
1,560
Foreign currency translation effects
73
(2,622)
1,064
119
(46)
1,560
Items that may be subsequently reclassified to the Consolidated
statement of income
73
(2,622)
1,064
202
45
1,593
Other comprehensive income/(loss)
247
(2,509)
977
2,144
1,899
1,342
Total comprehensive
income/(loss)
4,044
(3,464)
(4,519)
2,140
1,896
1,340
Attributable to the equity holders of the company
4,036
(3,470)
(4,533)
5
3
3
Attributable to non-controlling interests
8
6
14
* Audited
1) Other comprehensive income (OCI).
Equinor second quarter 2021
25
CONSOLIDATED BALANCE SHEET
At 30 June
At 31 March
At 31 December
At 30 June
(unaudited, in USD million)
Note
2021
2021
2020*
2020
ASSETS
Property, plant and equipment
6
65,373
63,161
65,672
63,941
Intangible assets
6
6,829
8,150
8,148
10,317
Equity accounted investments
2,377
2,374
2,262
1,599
Deferred tax assets
5,231
4,880
4,974
3,794
Pension assets
1,552
1,437
1,310
963
Derivative financial instruments
1,691
1,573
2,476
1,630
Financial investments
3,895
3,922
4,083
3,157
Prepayments and financial receivables
934
774
861
1,311
Total non-current
assets
87,882
86,272
89,786
86,711
Inventories
2,548
2,917
3,084
2,974
Trade and other receivables
8,564
8,692
8,232
5,489
Derivative financial instruments
2,251
1,096
886
589
Financial investments
15,152
10,922
11,865
9,319
Cash and cash equivalents
9,912
8,992
6,757
9,700
Total current assets
38,426
32,619
30,824
28,072
Assets classified as held for sale
3
950
1,100
1,362
0
Total assets
127,259
119,991
121,972
114,783
EQUITY AND LIABILITIES
Shareholders' equity
37,023
35,764
33,873
35,587
Non-controlling interests
18
18
19
23
Total equity
37,041
35,782
33,892
35,610
Finance debt
1)
4
28,112
27,991
29,118
28,632
Equinor second quarter 2021
26
Lease liabilities
1)
2,796
3,006
3,220
3,016
Deferred tax liabilities
12,306
11,440
11,224
8,907
Pension liabilities
4,411
4,363
4,292
3,572
Provisions and other liabilities
7
18,890
17,817
19,731
18,097
Derivative financial instruments
606
550
676
967
Total non-current
liabilities
67,120
65,167
68,260
63,191
Trade, other payables and provisions
10,022
10,592
10,510
8,620
Current tax payable
5
5,156
3,249
1,148
674
Finance debt
1)
4
3,463
2,784
4,591
4,324
Lease liabilities
1)
1,113
1,131
1,186
1,139
Dividends payable
487
0
357
297
Derivative financial instruments
2,247
1,014
1,710
928
Total current liabilities
22,488
18,770
19,502
15,982
Liabilities directly associated with the assets classified as
held for sale
3
610
271
318
0
Total liabilities
90,218
84,209
88,081
79,173
Total equity and liabilities
127,259
119,991
121,972
114,783
* Audited
1) Lease liabilities are separated from the line item Finance debt and 2020 has been reclassified.
Equinor second quarter 2021
27
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
(unaudited, in USD million)
Share
capital
Additional
paid-in
capital
Retained
earnings
Foreign
currency
translation
reserve
Share-
holders'
equity
Non-
controlling
interests
Total equity
At 31 December 2019*
1,185
7,732
37,481
(5,258)
41,139
20
41,159
Net income/(loss)
(961)
(961)
6
(956)
Other comprehensive income/(loss)
113
(2,622)
(2,509)
(2,509)
Total comprehensive
income/(loss)
(3,464)
Dividends
(1,189)
(1,189)
(1,189)
Share buy-back
(890)
(890)
(890)
Other equity transactions
(4)
(0)
(4)
(2)
(6)
At 30 June 2020
1,185
6,838
35,443
(7,879)
35,587
23
35,610
At 31 December 2020*
1,164
6,852
30,050
(4,194)
33,873
19
33,892
Net income/(loss)
3,789
3,789
8
3,797
Other comprehensive income/(loss)
174
73
247
247
Total comprehensive
income/(loss)
4,044
Dividends
(877)
(877)
(877)
Other equity transactions
(8)
0
(8)
(9)
(18)
At 30 June 2021
1,164
6,844
33,136
(4,121)
37,023
18
37,041
* Audited
Equinor second quarter 2021
28
CONSOLIDATED STATEMENT
OF CASH FLOWS
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(unaudited, in USD million)
Note
2021
2020
2020*
4,905
4,513
(720)
Income/(loss) before tax
9,417
(640)
(4,259)
2,111
2,797
2,522
Depreciation, amortisation and net impairment losses
6
4,908
6,959
15,235
25
64
125
Exploration expenditures written off
89
560
2,506
43
(70)
321
(Gains)/losses on foreign currency transactions and balances
4
(27)
24
646
16
(1,383)
(15)
(Gains)/losses on sale of assets and businesses
3
(1,367)
(1)
18
(565)
222
257
(Increase)/decrease in other items related to operating activities
1)
(343)
492
918
170
577
25
(Increase)/decrease in net derivative financial instruments
746
(264)
(451)
39
39
43
Interest received
78
108
162
(199)
(141)
(198)
Interest paid
(340)
(380)
(730)
6,543
6,617
2,360
Cash flows provided by operating activities before taxes paid and
working capital items
13,161
6,859
14,045
(344)
(84)
(1,744)
Taxes paid
(428)
(2,631)
(3,134)
444
(549)
(248)
(Increase)/decrease in working capital
(106)
1,183
(524)
6,643
5,984
368
Cash flows provided by operating activities
12,627
5,411
10,386
(111)
0
0
Cash used in business combinations
2)
3
(111)
0
0
(1,747)
(2,151)
(1,899)
Capital expenditures and investments
(3,897)
(4,249)
(8,476)
(4,224)
699
(2,730)
(Increase)/decrease in financial investments
3)
(3,525)
(2,131)
(3,703)
(65)
(305)
(45)
(Increase)/decrease in derivatives financial instruments
(370)
(71)
(620)
(134)
(3)
2
(Increase)/decrease in other interest-bearing items
(137)
3
202
692
1,146
0
Proceeds from sale of assets and businesses
3
1,839
2
505
(5,589)
(613)
(4,671)
Cash flows used in investing activities
(6,202)
(6,446)
(12,092)
0
0
8,347
New finance debt
0
8,347
8,347
(1)
(1,424)
0
Repayment of finance debt
4)
(1,425)
0
(2,055)
Equinor second quarter 2021
29
(308)
(302)
(318)
Repayment of lease liabilities
4)
(610)
(623)
(1,277)
(389)
(355)
(904)
Dividends paid
(744)
(1,750)
(2,330)
0
0
0
Share buy-back
0
(58)
(1,059)
687
(1,015)
(150)
Net current finance debt and other financing activities
(327)
(198)
1,365
(10)
(3,096)
6,975
Cash flows provided by/(used in) financing activities
(3,107)
5,717
2,991
1,044
2,274
2,672
Net increase/(decrease) in cash and cash equivalents
3,318
4,682
1,285
3
(174)
162
Effect of exchange rate changes on cash and cash equivalents
(170)
(159)
294
8,857
6,757
6,866
Cash and cash equivalents at the beginning of the period (net of
overdraft)
6,757
5,177
5,177
9,904
8,857
9,700
Cash and cash equivalents at the end of the period (net of
overdraft)
5)
9,904
9,700
6,757
* Audited
1) Second quarter 2021 includes redetermination settlement for the
Agbami field. For more information see note 7 Provisions, commitments,
contingent liabilities and contingent assets for more information.
2) Net after cash and cash equivalents acquired.
3) Includes sale of Lundin shares in the second quarter of 2020.
4) Repayment of lease liabilities are separated from the line
item Repayment of finance debt and 2020 has been reclassified.
5) At 30 June 2021 cash and cash equivalents included a net overdraft
of USD 7 million. At 31 December 2020 and at 30 June 2020 cash
and cash equivalents net overdraft were zero.
Equinor second quarter 2021
30
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 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
changed as of the first quarter 2021. Segment information for prior periods has been reclassified to align with the new segment
presentation. Certain further changes to Equinor’s operating segments took effect on 1 June 2021, but this did not impact
the
reporting segments, and no reclassifications were required. For more information, see note 2 Segments to these condensed interim
financial statements.
Equinor's condensed interim financial statements for the second quarter of 2021 were authorised for issue by the board of directors
on
27 July 2021.
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 2020. IFRS as adopted by the EU differs in certain respects from
IFRS as issued by the IASB, but the differences 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 2020.
There have been no changes to the significant accounting policies during 2021 compared to the Consolidated annual
financial
statements for 2020.
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 rounding.
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 creates additional estimation uncertainties and
impacts key assumptions applied by Equinor in the valuation of our assets and the measurement of our liabilities. Reference
is made
to note 2 Significant accounting policies in Equinor’s Consolidated annual financial statements for 2020
and to note 8 Impact of the
Covid-19 pandemic to these condensed interim financial statements for further information.
Equinor second quarter 2021
31
2 Segments
As from 1 June 2021 Equinor’s operations are managed through the following operating segments
(business areas): Exploration &
Production Norway (EPN), Exploration & Production International (EPI), Exploration & Production USA (EPIUSA), Marketing,
Midstream & Processing (MMP), Renewables (REN), Projects, Drilling and Procurement (PDP) and Technology, Digital & Innovation
(TDI) and Corporate staff and functions.
The main change in the organisational corporate structure compared to previous periods is that the operating segment Development
& Production Brazil is merged into the operating segment Exploration & Production International. In addition, the operating segment
Exploration is divided and merged into Exploration & Production Norway, Exploration & Production International and Exploration &
Production USA. Global Strategy & Business development is divided and merged into the functions for Chief Financial Officer and
Safety, Security and Sustainability. The operating segment Technology,
Projects & Drilling is split into Technology,
Digital &
Innovation and Projects, Drilling & Procurement. The new organisational corporate structure has not implied any changes in
the
reportable segments.
The reporting segments Exploration & Production Norway (E&P Norway), Exploration & Production International (E&P International),
Exploration & Production USA (E&P USA), Marketing, Midstream & Processing (MMP) and Renewables (REN) consist
of the
business areas EPN, EPI, EPIUSA, MMP and REN respectively. The operating segments, PDP, TDI and corporate staffs and
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 PDP and TDI are allocated to the E&P Norway, E&P International, E&P USA, MMP and REN
reporting segments.
The changes have no material effect on comparable figures.
As from the first quarter of 2021, Equinor changed its reporting as REN became a separate reporting segment. Previously the
activities in REN were reported in the segment “Other”. The new reporting structure has been applied retrospectively with comparable
figures reclassified. The change has its basis in the increased strategic importance of the renewable business for Equinor and that
the
information is regarded useful for the readers of the financial statements.
Inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products, are eliminated in the Eliminations
column below. Inter-segment revenues are based upon estimated market prices.
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.
Equinor second quarter 2021
32
Second quarter 2021
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
REN
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
42
287
101
16,892
7
117
0
17,446
Revenues inter-segment
6,167
1,170
867
82
0
1
(8,287)
0
Net income/(loss) from equity accounted
investments
0
19
0
7
(6)
(4)
0
16
Total revenues and
other income
6,210
1,475
968
16,981
2
114
(8,287)
17,462
Purchases [net of inventory variation]
0
14
(0)
(15,448)
0
(0)
8,035
(7,399)
Operating, selling, general and
administrative expenses
(828)
(439)
(287)
(1,097)
(32)
57
298
(2,329)
Depreciation, amortisation and net
impairment losses
(908)
(228)
(438)
(284)
(1)
(252)
0
(2,111)
Exploration expenses
(55)
(231)
(39)
0
0
0
0
(326)
Total operating expenses
(1,792)
(884)
(764)
(16,829)
(33)
(195)
8,333
(12,164)
Net operating income/(loss)
4,418
591
204
152
(31)
(82)
46
5,298
Additions to PP&E, intangibles and equity
accounted investments
1,368
429
180
59
156
52
0
2,243
Equinor second quarter 2021
33
First quarter 2021
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
REN
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
28
221
121
15,697
1,382
111
0
17,559
Revenues inter-segment
5,755
805
872
84
0
1
(7,517)
0
Net income/(loss) from equity accounted
investments
0
23
0
8
(1)
0
0
30
Total revenues and
other income
5,783
1,049
993
15,789
1,381
111
(7,517)
17,589
Purchases [net of inventory variation]
0
(29)
(0)
(14,176)
0
(0)
7,040
(7,166)
Operating, selling, general and
administrative expenses
(794)
(252)
(335)
(1,069)
(40)
54
277
(2,160)
Depreciation, amortisation and net
impairment losses
(1,570)
(400)
(436)
(152)
(0)
(240)
0
(2,797)
Exploration expenses
(70)
(107)
(70)
0
0
0
0
(247)
Total operating expenses
(2,433)
(788)
(841)
(15,397)
(40)
(187)
7,317
(12,369)
Net operating income/(loss)
3,350
261
152
392
1,341
(76)
(200)
5,220
Additions to PP&E, intangibles and equity
accounted investments
1,308
396
157
38
128
(13)
(0)
2,014
Second quarter 2020
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
REN
1)
Other
1)
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
10
52
67
7,392
(0)
50
0
7,570
Revenues inter-segment
1,649
515
408
88
0
1
(2,661)
0
Net income/(loss) from equity accounted
investments
0
(11)
0
7
38
0
0
33
Total revenues and
other income
1,659
555
475
7,486
38
50
(2,661)
7,603
Purchases [net of inventory variation]
0
(26)
0
(5,127)
0
(0)
2,403
(2,750)
Operating, selling, general and
administrative expenses
(706)
(281)
(293)
(1,423)
(38)
163
166
(2,411)
Depreciation, amortisation and net
(992)
(509)
(475)
(326)
(0)
(220)
0
(2,522)
Equinor second quarter 2021
34
impairment losses
Exploration expenses
(65)
(288)
(40)
0
0
0
0
(393)
Total operating expenses
(1,762)
(1,103)
(808)
(6,877)
(38)
(56)
2,569
(8,075)
Net operating income/(loss)
(104)
(548)
(332)
610
(0)
(6)
(92)
(472)
Additions to PP&E, intangibles and equity
accounted investments
1,118
484
268
51
4
382
(0)
2,307
1) Reclassified
Equinor second quarter 2021
35
First half 2021
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
REN
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
70
508
222
32,589
1,389
227
0
35,005
Revenues inter-segment
11,923
1,975
1,739
166
0
2
(15,804)
0
Net income/(loss) from equity accounted
investments
0
42
0
15
(6)
(4)
0
47
Total revenues and
other income
11,992
2,525
1,961
32,770
1,383
225
(15,804)
35,052
Purchases [net of inventory variation]
0
(15)
(0)
(29,625)
0
(1)
15,076
(14,565)
Operating, selling, general and
administrative expenses
(1,622)
(691)
(622)
(2,166)
(72)
110
574
(4,489)
Depreciation, amortisation and net
impairment losses
(2,478)
(627)
(873)
(436)
(1)
(492)
0
(4,908)
Exploration expenses
(125)
(338)
(109)
0
0
0
0
(572)
Total operating expenses
(4,225)
(1,672)
(1,605)
(32,226)
(73)
(383)
15,650
(24,534)
Net operating income/(loss)
7,767
853
356
544
1,310
(157)
(154)
10,518
Additions to PP&E, intangibles and equity
accounted investments
2,676
825
337
97
284
38
0
4,257
Balance sheet information
Equity accounted investments
3
1,181
0
96
1,067
32
(0)
2,377
Non-current segment assets
35,530
17,481
11,811
3,572
141
3,668
0
72,202
Non-current assets not allocated to
segments
13,303
Total non-current
assets
87,882
Equinor second quarter 2021
36
First half 2020
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
REN
1)
Other
1)
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
17
218
208
22,087
0
99
0
22,629
Revenues inter-segment
5,179
1,680
1,152
184
0
1
(8,197)
0
Net income/(loss) from equity accounted
investments
0
5
0
18
82
0
0
104
Total revenues and
other income
5,196
1,903
1,360
22,289
82
100
(8,197)
22,733
Purchases [net of inventory variation]
0
(68)
0
(18,627)
0
(0)
8,549
(10,146)
Operating, selling, general and
administrative expenses
(1,341)
(779)
(664)
(2,767)
(71)
255
353
(5,014)
Depreciation, amortisation and net
impairment losses
(2,833)
(1,380)
(1,711)
(607)
(0)
(429)
0
(6,959)
Exploration expenses
(160)
(536)
(332)
0
0
0
0
(1,028)
Total operating expenses
(4,333)
(2,763)
(2,707)
(22,001)
(72)
(174)
8,902
(23,147)
Net operating income/(loss)
863
(860)
(1,347)
288
11
(74)
705
(414)
Additions to PP&E, intangibles and equity
accounted investments
2,407
1,225
694
107
5
484
(0)
4,922
Balance sheet information
Equity accounted investments
2
563
0
87
925
20
0
1,599
Non-current segment assets
30,547
19,715
15,557
4,350
189
3,901
0
74,259
Non-current assets not allocated to
segments
10,853
Total non-current
assets
86,711
1) Reclassified
In the second quarter of 2021 Equinor recognised net impairment reversals of USD 276 million of which USD 113 million was
impairments of acquisition cost and signature bonuses classified as exploration expenses. The line item Exploration expenses
in the
Consolidated statement of income also includes impairment of capitalised exploration well cost. For information regarding impairment
of capitalised exploration cost, see note 6 Property, plant and equipment and intangible assets.
In the E&P International segment the net impairment reversal was USD 93 million. Impairments of USD 95 million related to
exploration licenses in South America and were classified as exploration expenses. Net impairment reversal of other
assets of USD
Equinor second quarter 2021
37
188 million were mainly related to an asset in the Europe and Asia area caused by positive change in the short-term
price
assumptions and a North America offshore asset valued at fair value less cost to sell following the reclassification to held for sale.
In the E&P Norway segment the net impairment reversal was USD 396 million mainly related to an offshore asset caused by a positive
change in the short-term price assumptions.
In the MMP segment the impairments were USD 185 million mainly related to a refinery valued at fair value less cost to
sell following
the reclassification to held for sale.
In addition, in the segments Other and E&P USA total impairments of USD 29 million have been recognized.
For information on group impairment losses and reversals, see note 6 Property, plant and equipment and intangible assets.
For information regarding acquisition and disposal of interests, see note 3 Acquisitions and disposals.
See also note 8 Impact of the Covid-19 pandemic.
Equinor second quarter 2021
38
Revenues from contracts 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 second quarter of 2021, Norway constitutes 76% and USA constitutes 16% of such revenues. For the second quarter
of
2020, Norway and USA constituted 79% and 16% of such revenues, respectively.
For the first half of 2021, Norway constitutes 78% and the US constitutes 16% of such revenues. For the first half of
2020, Norway and
the US constituted 80% and 15% of such revenues respectively.
Non-current assets by country
At 30 June
At 31 March
At 31 December
At 30 June
(in USD million)
2021
2021
2020
2020
Norway
41,342
40,261
42,192
36,383
USA
12,667
12,867
13,172
16,524
Brazil
8,339
8,226
8,203
8,796
UK
4,222
4,256
4,398
4,913
Azerbaijan
1,674
1,670
1,683
1,696
Canada
1,478
1,445
1,527
1,435
Russia
1,012
974
973
427
Angola
914
897
725
1,331
Algeria
772
794
808
866
Denmark
568
918
953
887
Other countries
1,592
1,378
1,447
2,601
Total non-current
assets
1)
74,579
73,686
76,082
75,858
1) Excluding deferred tax assets, pension assets and non-current financial assets.
Revenues from contracts with customers and other revenues
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(in USD million)
2021
2020
2020
9,060
8,714
4,018
Crude oil
17,774
11,858
24,509
3,443
3,298
1,188
Natural gas
6,741
3,358
7,213
2,908
2,661
923
- European gas
5,569
2,691
5,839
319
422
196
- North American gas
741
486
1,010
215
216
68
- Other incl. Liquefied natural gas
431
181
363
2,682
2,373
1,258
Refined products
5,055
3,287
6,534
1,672
1,910
839
Natural gas liquids
3,582
2,288
5,069
205
256
286
Transportation
461
615
1,083
341
112
88
Other sales
454
225
681
17,402
16,664
7,677
Revenues from contracts with customers
34,067
21,631
45,088
80
78
(9)
Taxes paid in-kind
158
38
93
294
(159)
152
Physically settled commodity derivatives
135
251
209
(471)
(523)
(318)
Gain/(loss) on commodity derivatives
(994)
594
108
74
69
61
Other revenues
143
113
256
(23)
(536)
(114)
Total other revenues
(558)
996
665
17,380
16,129
7,563
Revenues
33,508
22,627
45,753
Equinor second quarter 2021
39
Equinor second quarter 2021
40
3 Acquisitions and disposals
Divestments
Bakken onshore unconventional field
On 26 April 2021, Equinor closed the transaction to divest its interests in the Bakken field in the US states of North Dakota and
Montana to Grayson Mill Energy, backed by EnCap Investments for an estimated total consideration of USD 819 million, including
interim period settlement, for which payment has been received in the first half 2021. Post-closing settlement adjustments are
ongoing, and the consideration will be final in early 2022. The asset was impaired in the first quarter 2021. In the second quarter
2021,
an insignificant loss was recorded and is presented in the line item Operating expenses in the Consolidated statement of
income in
the E&P USA segment.
Divestment of 10% of Dogger Bank Farm A and B
On 26 February 2021, Equinor closed the transaction with Eni to sell a 10% equity interest in the Dogger Bank Wind Farm A and
B
assets in the UK for a total consideration of GBP 206.4 million (USD 285 million), resulting in a gain of GBP 202.8 million (USD
280
million). After closing, the new overall shareholdings in Dogger Bank A and Dogger Bank B are SSE Renewables (40%),
Equinor
(40%), and Eni (20%). Equinor will continue to equity account for the remaining investment as a joint venture. The gain is presented
in
the line item Other income in the Consolidated statement of income in the REN segment.
Divestment of non-operated interest in the Empire Wind and Beacon Wind assets on the US east coast
On 29 January 2021, Equinor closed the transaction with BP to sell 50% of the non-operated interests in the Empire Wind and
Beacon
Wind assets for a preliminary total consideration after interim period adjustments of USD 1.2 billion, resulting in a gain of USD 1.1
billion for the divested part, of which USD 500 million had been prepaid at the end of December 2020. Through this transaction,
the
two companies have established a strategic partnership for further growth within offshore wind in the USA. Following the transaction,
Equinor remains the operator with a 50% interest. Equinor consolidated the assets until transaction closing, and thereafter
the
investments are classified as joint ventures and accounted for using the equity method. The gain is presented in the line item Other
income in the Consolidated statement of income in the REN segment.
Acquisitions
Acquisition of Wento
On 5 May 2021, Equinor completed a transaction to acquire 100% of the shares in Polish onshore renewables developer Wento from
the private equity firm Enterprise Investors for a cash consideration of EUR 98 million (USD 117 million) after net cash adjustments. In
addition, Equinor acquired a receivable of USD 3 million from Enterprise Investors towards investees. The assets and
liabilities related
to the acquired business have been recognised under the acquisition method. The acquisition resulted in an increase of Equinor’s
intangible assets of USD 46 million, goodwill of USD 59 million, deferred tax liability of USD 9 million and other net assets
of USD 21
million. The goodwill reflects the expected synergies, competence and access to the Polish renewables market obtained in the
acquisition. The transaction has been accounted for in the REN reporting segment.
Held for sale
On 10 June 2021, Equinor entered into an agreement with the Klesch Group to sell 100% of the shares in Equinor Refining Denmark
A/S. Equinor Refining Denmark A/S consists of the Kalundborg refinery and terminal in the northwest of Zealand, the Hedehusene
terminal near Copenhagen as well as associated infrastructure and industrial property. The assets and liabilities related to this entity
are classified as held for sale and presented in the reporting segment MMP at 30 June 2021. Closing of the transaction is subject
to
customary approvals and contractual condition precedents. Closing is expected in the second half of 2021. Equinor has recognised
an
impairment loss based on the estimated fair value less costs to sell, see note 2 Segments.
In the second quarter 2021 Equinor has reached an agreement on commercial terms to sell its share of an asset in offshore North
America. The assets and liabilities related to this entity are classified as held for sale and presented in the E&P International
segment
at 30 June 2021. The net carrying amount of the interests to be disposed of is immaterial. Equinor has recognised an
impairment
reversal based on the estimated fair value less costs to sell, see note 2 Segments.
Equinor second quarter 2021
41
4 Financial items
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(in USD million)
2021
2020
2020
(43)
70
(321)
Net foreign currency exchange gains/(losses)
27
(24)
(646)
28
45
14
Interest income and other financial items
72
238
248
27
(150)
248
Gains/(losses) on financial investments
(123)
(98)
506
(101)
(360)
189
Gains/(losses) other derivative financial instruments
(462)
382
448
(304)
(312)
(379)
Interest and other finance expenses
(616)
(723)
(1,392)
(393)
(707)
(248)
Net financial items
(1,101)
(225)
(836)
Gains/(losses) on derivative financial instruments is a loss of USD 101 million in the second quarter of 2021,
compared to a gain of
USD 189 million in the second quarter of 2020, mainly due to increased interest rates.
Equinor has a US Commercial paper programme available with a limit of USD 5 billion of which USD 950 million has been utilized
as
of
30 June 2021.
In the first half of 2021, Equinor recorded total lease payments of USD 663 million, of which USD 54 million were payment of
interest
and USD 610 million were down-payment of lease liabilities.
5 Income taxes
Quarters
First half
Full year
Q2 2021
Q1 2021
Q2 2020
(in USD million)
2021
2020
2020
4,905
4,513
(720)
Income/(loss) before tax
9,417
(640)
(4,259)
(2,962)
(2,659)
469
Income tax
(5,620)
(316)
(1,237)
60.4%
58.9%
65.2%
Effective tax rate
59.7%
(49.5%)
(29.0%)
The tax rate for the second quarter of 2021 and for the first half of 2021 was primarily influenced by positive operating income
in
countries with unrecognised deferred tax assets.
The tax rate for the second quarter of 2021 was also influenced by currency effects in entities that are taxable in other currencies than
the functional currency.
The tax rate for the second quarter of 2020 and for the first half of 2020 was primarily influenced by the temporary changes
to
Norway’s petroleum tax system and changes in best estimates for uncertain tax positions.
The tax rate for the first half of 2020 was also influenced by losses including impairments recognised in countries with unrecognised
deferred tax assets or in countries with lower than average tax rates and currency effects in entities that are taxable in other
currencies than the functional currency.
The tax rate for the full year 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 and changes in best estimates for uncertain tax positions.
Equinor second quarter 2021
42
6 Property, plant
and equipment and intangible assets
(in USD million)
Property, plant and
equipment
Intangible
assets
Carrying amount at 31 December 2020
65,672
8,148
Additions through business combinations
4
106
Additions
3,429
166
Transfers
1,467
(1,467)
Disposals and reclassifications
45
(12)
Transferred to assets classified as held for sale
(281)
(0)
Expensed exploration expenditures and net impairment losses
-
(89)
Depreciation, amortisation and net impairment losses
(4,890)
(18)
Foreign currency translation effects
(73)
(5)
Carrying amount at 30 June 2021
65,373
6,829
Right-of-use (RoU) assets are included within property, plant and equipment with a net book value of USD 3,618 million per
30 June 2021. Additions to RoU assets amount to USD 167 million. Gross depreciation and impairment of RoU assets amount
to USD
636 million in the first half of 2021, of which depreciation costs of USD 158 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.
Net impairments/(reversal) of impairments
For information on impairment losses and reversals per reporting segment, see note 2 Segments.
Second quarter
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2021
2020
2021
2020
2021
2020
Producing and development assets
(390)
263
0
0
(390)
263
Goodwill
-
-
0
0
0
0
Other intangible assets
-
-
1
0
1
0
Acquisition costs related to oil and gas prospects
-
-
113
111
113
111
Total net impairment
loss/(reversal) recognised
(390)
263
114
111
(276)
374
First half
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2021
2020
2021
2020
2021
2020
Producing and development assets
21
2,379
12
277
33
2,656
Goodwill
-
-
1
1
1
1
Other intangible assets
-
-
1
0
1
0
Acquisition costs related to oil and gas prospects
-
-
117
170
117
170
Total net impairment
loss/(reversal) recognised
21
2,379
131
448
152
2,827
Equinor second quarter 2021
43
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 second quarter and first half of 2021 were mainly 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.
7 Provisions, commitments, contingent liabilities and contingent assets
Asset retirement obligation
Equinor’s estimated asset retirement obligations (ARO) have decreased by USD 548 million to USD 16,743 million
compared to year-
end 2020, mainly due to the increase in discount rates and divestments, partially offset by increase in cost estimates and additions.
Changes in ARO are reflected within Property, plant and equipment and Provisions and other liabilities in the Consolidated balance
sheet.
Supreme Court decision related to ICMS indirect tax (Imposto sobre Circulaçao de Mercadorias - Tax on the Circulation of
Goods and Certain Services)
In Brazil, the State of Rio de Janeiro in 2015 published a law whereby crude oil extraction would be subject to a 18% ICMS indirect
tax
(Imposto sobre Circulaçao de Mercadorias - Tax on the Circulation of Goods and Certain Services). The Brazilian Industry Association
filed a suit with the Federal Supreme Court of Brazil challenging the law’s constitutionality, and in March 2021 the plenary of Brazil’s
Supreme Court declared the State of Rio de Janeiro’s law to be unconstitutional. The decision became final in May 2021. As a result,
Equinor requested that the Supreme Court’s decision is reflected in the ICMS related legal proceedings which previously were
initiated by Equinor and which currently are ongoing for the Roncador and Peregrino fields in in the legal system of
the State of Rio de
Janeiro. During the second quarter, developments in these state-level legal proceedings regarding the Peregrino field resulted in a
reduction in Equinor’s overall maximum exposure, which at the end of the second quarter 2021 is estimated
at USD 428 million.
Following the Supreme Court’s decision, Equinor evaluates the probability of any cash outflow in these cases to be remote. As no
provisions have previously been made in the matter, the Brazilian Supreme Court’s decision does not impact Equinor’s condensed
interim financial statements for the second quarter or first half of 2021.
Redetermination process for Agbami field
Through its ownership in OML 128 in Nigeria, Equinor is a party to an ownership interest redetermination process for the Agbami field,
which will reduce Equinor’s ownership interest. A non-binding agreement for settlement of
the redetermination was reached during the
fourth quarter of 2018. The parties to the non-binding agreement have thereafter continued to work towards a final settlement
and
agreed-upon ownership percentage adjustment. In June 2021, Equinor paid a total of USD 822 million to two of the partners
in the
Agbami Unit. The payment covered outstanding amounts between the three parties as of 31 March 2021. Following the payment,
an
adjustment to the previous provision by USD 57 million has been reflected in the E&P International segment under Other
Revenue.
The remaining Agbami redetermination related provision reflected in Trade and other payables in the Consolidated balance sheet at
second quarter end is immaterial.
Mineral rights dispute along the Missouri riverbank
Equinor produces minerals from wells in spacing units along the Missouri River in which ownership of the mineral rights associated
with the near shore region up to the ordinary high-water mark have been disputed. As operator of wells in those units,
Equinor has a
right to part of the proceeds, and a responsibility to distribute the remainder of the proceeds from the production to
the owners of the
mineral rights. As the riverbank has moved continuously over time, updated river-surveys have resulted in interest
claims from several
parties, including the State of North Dakota, the United States, and private parties. During the second quarter of 2021,
Equinor has
received updated title opinions reflecting the latest State survey that resulted in clarification among the main parties. Certain limited
procedural matters remain, but Equinor’s maximum exposure in the case has been significantly reduced and at
this stage is minor.
Amounts reflected in the matter in the Consolidated balance sheet at 30 June 2021 and in the Consolidated statement
of income
during the second quarter and for the first half of 2021 are immaterial.
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 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.
Equinor second quarter 2021
44
8 Impact of the Covid-19 pandemic
In 2021, the Covid-19 pandemic continues to impact worldwide economic growth and energy demand, and the uncertainties with
regard to recovery from the effects of the pandemic remain. During the first half of 2021, oil prices rebounded after an unprecedented
collapse and increased volatility in 2020. Developments related to the ongoing pandemic, such as new or continued lockdowns
or
other measures implemented by various countries, new outbreaks, and the success of ongoing vaccination efforts, will continue to
impact energy demand, energy prices, and related volatilities in 2021 and beyond. At the same time, markets are currently
showing
signs of increased demand relative to supply, reflected in higher price levels for oil and gas in the near term.
Equinor second quarter 2021
45
On 19 March 2021, Equinor published its 2020 Annual Report and Form 20-F. The impact of the Covid-19 pandemic for the Equinor
group, including the impact for future energy price levels and demand, is discussed and reflected in a number of
notes to those 2020
annual consolidated financial statements. The Covid-19 pandemic related information with a reach beyond 2020 continue, in all
material aspects, to apply for the first half of 2021.
During the first half of 2021, Equinor has only experienced immaterial effects of the pandemic from assets in operation, due to
measures taken to maintain and secure safe production. The Covid-19 pandemic continues to impact Equinor’s
maintenance and
development project portfolio world-wide with personnel limitation issues causing schedule delays and cost increases.
The situation
continues to be unpredictable and may have additional consequences for the progress and costs of our projects.
Within the group, some projects in the portfolio continue to be impacted by the Covid-19 pandemic, and especially related
to Equinor’s
Brazilian organization and the Peregrino field projects and some of the Norwegian development projects.
9 Subsequent events
On 27 July 2021, the board of directors resolved to declare a dividend for the second quarter of 2021 of USD 0.18 per share.
The
Equinor shares will trade ex-dividend 11 November 2021 on the Oslo Børs and 10 November 2021 for ADR holders on the New York
Stock Exchange. Record date will be 12 November 2021 and payment date will be 24 November 2021.
On 27 July 2021, the board of directors resolved the commencement of the first tranche of the share buy-back programme
for a total
of USD 300 million, including shares to be redeemed from the Norwegian State. The purpose of the share buy-back programme
is to
reduce the issued share capital of the company. All shares repurchased as part of the programme will be cancelled. The first tranche
will end no later than 28 September 2021.
Equinor second quarter 2021
46
Responsibility statement
Board and management confirmation
Today,
the board of directors, the chief executive officer and the chief financial officer have reviewed and approved the Equinor ASA
Condensed interim financial statements as of 30 June 2021.
To the best of our knowledge, we confirm that:
●
the Equinor ASA Condensed interim financial statements for the first half of 2021 have been prepared in accordance with IFRSs
as adopted by the European Union (EU), IFRSs as issued by the International Accounting Standards Board (IASB) and additional
Norwegian disclosure requirements in the Norwegian Accounting Act, and that
●
the information presented in the Condensed interim financial statements gives a true and fair view of the company's and the
group's assets, liabilities, financial position and results for the period viewed in their entirety, and that
●
the information presented in the Condensed interim financial statements gives a true and fair view of the development,
performance, financial position, principle risks and uncertainties of the group, and that
●
the information presented in the Condensed interim financial statements gives a true and fair view of major related-party
transactions
Oslo, 27
July 2021
THE BOARD
OF DIRECTORS
OF EQUINOR
ASA
/s/ JON ERIK REINHARDSEN
CHAIR
/s/ JEROEN VAN
DER VEER
DEPUTY CHAIR
/s/ BJØRN
TORE GODAL
/s/ REBEKKA GLASSER
HERLOFSEN
/s/ ANNE
DRINKWATER
/s/ JONATHAN
LEWIS
/s/ FINN BJØ
RN RUYTER
/s/ TOVE
ANDERSEN
/s/ STIG LÆGREID
/s/ PER MARTIN LABRÅTEN
/s/ HILDE
MØLLERSTAD
/s/ ULRICA
FEARN
CHIEF FINANCIAL
OFFICER
/s/ ANDERS
OPEDAL
PRESIDENT AND
CEO
Equinor second quarter 2021
47
Equinor second quarter 2021
48
Supplementary disclosures
Operational data
Quarters
Change
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
Operational data
2021
2020
Change
Prices
68.8
60.9
29.2
>100%
Average Brent oil price (USD/bbl)
64.9
39.7
63%
64.9
57.3
23.5
>100%
E&P Norway average liquids price (USD/bbl)
60.8
34.0
79%
65.3
58.6
24.4
>100%
E&P International average liquids price (USD/bbl)
62.3
36.4
71%
56.7
50.5
19.0
>100%
E&P USA average liquids price (USD/bbl)
53.5
29.5
81%
63.7
56.4
22.9
>100%
Group average liquids price (USD/bbl) [1]
60.0
33.6
79%
533
480
229
>100%
Group average liquids price (NOK/bbl) [1]
507
327.5
55%
7.08
5.46
0.91
>100%
E&P Norway average internal gas price (USD/mmbtu) [9]
6.23
1.82
>100%
1.82
2.28
1.26
44%
E&P USA average internal gas price (USD/mmbtu) [9]
1.99
1.41
41%
7.54
6.65
2.24
>100%
Average invoiced gas prices - Europe (USD/mmbtu) [8]
7.07
3.23
>100%
2.25
2.71
1.47
53%
Average invoiced gas prices - North America (USD/mmbtu) [8]
2.50
1.68
49%
3.4
1.5
3.9
(13%)
Refining reference margin (USD/bbl) [2]
2.4
2.8
(13%)
Entitlement production (mboe per day)
604
662
637
(5%)
E&P Norway entitlement liquids production
633
643
(2%)
212
212
235
(10%)
E&P International entitlement liquids production
212
250
(15%)
138
150
172
(20%)
E&P USA entitlement liquids production
144
179
(19%)
954
1,024
1,044
(9%)
Group entitlement liquids production
989
1,072
(8%)
652
723
644
1%
E&P Norway entitlement gas production
687
694
(1%)
39
55
31
26%
E&P International entitlement gas production
47
44
7%
199
212
179
12%
E&P USA entitlement gas production
206
177
17%
891
990
854
4%
Group entitlement gas production
940
915
3%
1,845
2,014
1,897
(3%)
Total entitlement liquids
and gas production [3]
1,929
1,987
(3%)
Equity production (mboe per day)
604
662
637
(5%)
E&P Norway equity liquids production
633
643
(2%)
295
299
291
1%
E&P International equity liquids production
297
322
(8%)
153
169
195
(22%)
E&P USA equity liquids production
161
204
(21%)
1,052
1,130
1,123
(6%)
Group equity liquids production
1,091
1,169
(7%)
652
723
644
1%
E&P Norway equity gas production
687
694
(1%)
Equinor second quarter 2021
49
54
61
34
57%
E&P International equity gas production
57
51
13%
239
254
210
13%
E&P USA equity gas production
246
208
18%
945
1,037
888
6%
Group equity gas production
991
953
4%
1,997
2,168
2,011
(1%)
Total equity liquids
and gas production [4]
2,082
2,122
(2%)
REN power generation
282
450
304
(7%)
Power generation (GWh)
732
862
(15%)
Exchange rates
Quarters
Change
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
Exchange rates
2021
2020
Change
0.1195
0.1174
0.1000
20%
NOK/USD average daily exchange rate
0.1184
0.1027
15%
0.1168
0.1173
0.1026
14%
NOK/USD period-end exchange rate
0.1168
0.1026
14%
8.3697
8.5146
10.0023
(16%)
USD/NOK average daily exchange rate
8.4445
9.7382
(13%)
8.5592
8.5249
9.7446
(12%)
USD/NOK period-end exchange rate
8.5592
9.7446
(12%)
1.2058
1.2048
1.1008
10%
EUR/USD average daily exchange rate
1.2053
1.1015
9%
1.1884
1.1725
1.1198
6%
EUR/USD period-end exchange rate
1.1884
1.1198
6%
Equinor second quarter 2021
50
Health, safety and the environment
Twelve months average per
First half
First half
Q2 2021
Q2 2020
Health, safety and the environment
2021
2020
Injury/incident frequency
2.5
2.2
Total recordable
injury frequency (TRIF)
2.5
2.0
0.5
0.6
Serious Incident Frequency (SIF)
0.3
0.5
Oil spills
125
165
Accidental oil spills (number of)
58
68
50
8,968
Accidental oil spills (cubic metres)
27
129
First half
Full year
Climate
2021
2020
Upstream CO2 intensity (kg CO2/boe)
1)
7.4
8.0
1) Total
scope 1 emissions of CO2 (kg CO2) from exploration and production, divided by total production (boe).
Equinor second quarter 2021
51
Reconciliation of net operating income/(loss) to adjusted earnings
The table specifies the adjustments made to each of the profit and loss line item included in the net operating income/(loss) subtotal.
Items impacting net operating income/(loss)
in the second quarter of 2021
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Renewables
Other
(in USD million)
Net operating income/(loss)
5,298
4,418
591
204
152
(31)
(36)
Total revenues and
other income
(289)
(22)
(161)
-
(107)
0
-
Changes in fair value of derivatives
(60)
(19)
-
-
(41)
-
-
Periodisation of inventory hedging effect
(67)
-
-
-
(67)
-
-
Over-/underlift
(106)
(2)
(103)
-
-
-
-
Provisions
(57)
-
(57)
-
-
-
-
Purchases [net of inventory variation]
(133)
-
-
-
(87)
-
(46)
Operational storage effects
(87)
-
-
-
(87)
-
-
Eliminations
(46)
-
-
-
-
-
(46)
Operating and administrative expenses
42
(35)
62
15
1
-
-
Over-/underlift
26
(35)
62
-
-
-
-
Other adjustments
(25)
-
-
-
(25)
-
-
Gain/loss on sale of assets
15
-
-
15
-
-
-
Provisions
26
-
-
-
26
-
-
Depreciation, amortisation and net
impairment losses
(389)
(403)
(188)
-
185
-
17
Impairment
211
-
9
-
185
-
17
Reversal of Impairment
(600)
(403)
(197)
-
-
-
-
Exploration expenses
113
7
95
11
-
-
-
Impairment
113
7
95
11
-
-
-
Sum of adjustments to net operating
income/(loss)
(656)
(453)
(193)
26
(8)
0
(29)
Adjusted earnings/(loss) [5]
4,641
3,964
399
230
144
(31)
(64)
Tax on adjusted earnings
(3,064)
(2,856)
(106)
0
(127)
4
20
Adjusted earnings/(loss) after tax [5]
1,578
1,108
293
230
18
(27)
(44)
Equinor second quarter 2021
52
Items impacting net operating income/(loss)
in the second quarter of 2020
Equinor
group
Exploration &
Production
Norway
Exploration &
Production
International*
Exploration &
Production
USA
Marketing,
Midstream &
Processing
Renewables*
Other*
(in USD million)
Net operating income/(loss)
(472)
(104)
(548)
(332)
610
(0)
(98)
Total revenues and
other income
441
57
66
-
319
(1)
-
Changes in fair value of derivatives
36
-
-
-
36
-
-
Periodisation of inventory hedging effect
288
-
-
-
288
-
-
Impairment
(1)
-
-
-
-
(1)
-
Over-/underlift
123
57
66
-
-
-
-
Gain/loss on sale of assets
(6)
-
-
-
(6)
-
-
Purchases [net of inventory variation]
(48)
-
-
-
(145)
-
97
Operational storage effects
(145)
-
-
-
(145)
-
-
Eliminations
97
-
-
-
-
-
97
Operating and administrative expenses
60
(38)
(43)
(9)
149
-
-
Over-/underlift
(81)
(38)
(43)
-
-
-
-
Gain/loss on sale of assets
(9)
-
-
(9)
-
-
-
Provisions
149
-
-
-
149
-
-
Depreciation, amortisation and net
impairment losses
263
-
35
-
228
-
-
Impairment
263
-
35
-
228
-
-
Exploration expenses
111
-
111
-
-
-
-
Impairment
111
-
111
-
-
-
-
Sum of adjustments to net operating
income/(loss)
827
19
169
(9)
551
(1)
97
Adjusted earnings/(loss) [5]
354
(85)
(379)
(341)
1,161
(1)
(1)
Tax on adjusted earnings
291
408
144
0
(465)
(1)
205
Adjusted earnings/(loss) after tax [5]
646
323
(235)
(341)
696
(1)
204
* Reclassified to reflect change to
segment.
Equinor second quarter 2021
53
Items impacting net operating income/(loss)
in the first half of 2021
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Renewables
Other
(in USD million)
Net operating income/(loss)
10,518
7,767
853
356
544
1,310
(311)
Total revenues and
other income
(552)
(165)
(12)
-
(378)
3
-
Changes in fair value of derivatives
(44)
(19)
-
-
(24)
-
-
Periodisation of inventory hedging effect
(354)
-
-
-
(354)
-
-
Impairment from associated companies
3
-
-
-
-
3
-
Over-/underlift
(100)
(145)
45
-
-
-
-
Provisions
(57)
-
(57)
-
-
-
-
Purchases [net of inventory variation]
(37)
-
-
-
(191)
-
154
Operational storage effects
(191)
-
-
-
(191)
-
-
Eliminations
154
-
-
-
-
-
154
Operating and administrative expenses
28
45
(21)
15
(10)
-
-
Over-/underlift
21
42
(21)
-
-
-
-
Other adjustments
(23)
2
-
-
(25)
-
-
Gain/loss on sale of assets
15
-
-
15
-
-
-
Provisions
15
-
-
-
15
-
-
Depreciation, amortisation and net
impairment losses
22
(127)
(138)
28
242
-
17
Impairment
622
276
59
28
242
-
17
Reversal of impairment
(600)
(403)
(197)
-
-
-
-
Exploration expenses
130
7
99
24
-
-
-
Impairment
130
7
99
24
-
-
-
Sum of adjustments to net operating
income/(loss)
(409)
(240)
(72)
66
(338)
3
171
Adjusted earnings/(loss) [5]
10,109
7,527
781
422
206
1,313
(140)
Tax on adjusted earnings
(5,869)
(5,442)
(312)
0
(158)
(1)
43
Adjusted earnings/(loss) after tax [5]
4,240
2,085
469
422
48
1,312
(97)
Equinor second quarter 2021
54
Items impacting net operating income/(loss)
in the first half of 2020
Equinor
group
Exploration
&
Production
Norway
Exploration
& Production
International
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Renewables
*
Other*
(in USD million)
Net operating income/(loss)
(414)
863
(860)
(1,347)
288
11
632
Total revenues and
other income
281
112
(133)
-
300
1
-
Changes in fair value of derivatives
89
6
-
-
83
-
-
Periodisation of inventory hedging effect
224
-
-
-
224
-
-
Impairment
1
-
-
-
-
1
-
Over-/underlift
(27)
106
(133)
-
-
-
-
Gain/loss on sale of assets
(6)
-
-
-
(6)
-
-
Purchases [net of inventory variation]
(507)
-
-
-
198
-
(705)
Operational storage effects
198
-
-
-
198
-
-
Eliminations
(705)
-
-
-
-
-
(705)
Operating and administrative expenses
217
(57)
89
3
182
-
-
Over-/underlift
33
(57)
89
-
-
-
-
Gain/loss on sale of assets
3
-
-
3
-
-
-
Provisions
182
-
-
-
182
-
-
Depreciation, amortisation and net
impairment losses
2,380
859
362
736
422
-
-
Impairment
2,427
859
409
736
422
-
-
Reversal of impairment
(47)
-
(47)
-
-
-
-
Exploration expenses
445
-
167
278
-
-
-
Impairment
445
-
167
278
-
-
-
Sum of adjustments to net operating
income/(loss)
2,816
915
485
1,017
1,102
1
(705)
Adjusted earnings/(loss) [5]
2,401
1,778
(375)
(330)
1,390
12
(74)
Tax on adjusted earnings
(1,194)
(906)
222
(0)
(733)
(1)
222
Adjusted earnings/(loss) after tax [5]
1,207
872
(152)
(330)
658
12
148
* Reclassified to reflect change to
segment.
Equinor second quarter 2021
55
Items impacting net operating income/(loss)
in the first quarter of 2021
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Renewables
Other
(in USD million)
Net operating income/(loss)
5,220
3,350
261
152
392
1,341
(276)
Total revenues and
other income
(262)
(143)
149
-
(271)
3
-
Changes in fair value of derivatives
16
-
-
-
16
-
-
Periodisation of inventory hedging effect
(287)
-
-
-
(287)
-
-
Impairment from associated companies
3
-
-
-
-
3
-
Over-/underlift
6
(143)
149
-
-
-
-
Purchases [net of inventory variation]
95
-
-
-
(105)
-
200
Operational storage effects
(105)
-
-
-
(105)
-
-
Eliminations
200
-
-
-
-
-
200
Operating and administrative expenses
(14)
80
(82)
-
(11)
-
-
Over-/underlift
(5)
78
(82)
-
-
-
-
Other adjustments
2
2
-
-
-
-
-
Provisions
(11)
-
-
-
(11)
-
-
Depreciation, amortisation and net
impairment losses
411
276
50
28
57
-
-
Impairment
411
276
50
28
57
-
-
Exploration expenses
17
-
4
12
-
-
-
Impairment
17
-
4
12
-
-
-
Sum of adjustments to net operating
income/(loss)
247
213
121
40
(330)
3
200
Adjusted earnings/(loss) [5]
5,467
3,563
382
192
61
1,344
(76)
Tax on adjusted earnings
(2,805)
(2,586)
(206)
(0)
(31)
(5)
23
Adjusted earnings/(loss) after tax [5]
2,662
977
176
192
30
1,338
(53)
Equinor second quarter 2021
56
Adjusted earnings after tax by reporting segment
Quarters
Q2 2021
Q1 2021
Q2 2020*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
3,964
(2,856)
1,108
3,563
(2,586)
977
(85)
408
323
E&P International
399
(106)
293
382
(206)
176
(379)
144
(235)
E&P USA
230
0
230
192
(0)
192
(341)
0
(341)
MMP
144
(127)
18
61
(31)
30
1,161
(465)
696
REN
(31)
4
(27)
1,344
(5)
1,338
(1)
(1)
(1)
Other
(64)
20
(44)
(76)
23
(53)
(1)
205
204
Total Equinor consolidation
4,641
(3,064)
1,578
5,467
(2,805)
2,662
354
291
646
Effective tax rates on adjusted
earnings
66.0%
51.3%
(82.3%)
* REN and Other segment have been reclassified to reflect change to segments.
First half
2021
2020*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
7,527
(5,442)
2,085
1,778
(906)
872
E&P International
781
(312)
469
(375)
222
(152)
E&P USA
422
0
422
(330)
(0)
(330)
MMP
206
(158)
48
1,390
(733)
658
REN
1,313
(1)
1,312
12
(1)
12
Other
(140)
43
(97)
(74)
222
148
Total Equinor consolidation
10,109
(5,869)
4,240
2,401
(1,194)
1,207
Effective tax rates on adjusted earnings
58.1%
49.7%
* REN and Other segment have been reclassified to reflect change to segments.
Equinor second quarter 2021
57
Reconciliation of adjusted earnings after tax to net income
Quarters
Reconciliation of adjusted earnings after tax to net income
First half
Q2 2021
Q1 2021
Q2 2020
(in USD million)
2021
2020
5,298
5,220
(472)
Net operating income/(loss)
A
10,518
(414)
3,025
2,863
(566)
Income tax less tax on net financial items
B
5,888
780
2,272
2,358
93
Net operating income after tax
C = A-B
4,630
(1,194)
(656)
247
827
Items impacting net operating income
1)
D
(409)
2,816
38
(57)
274
Tax on items impacting
net operating income
E
(19)
415
1,578
2,662
646
Adjusted earnings after tax [5]
F = C+D-E
4,240
1,207
(393)
(707)
(248)
Net financial items
G
(1,101)
(225)
64
204
(96)
Tax on net financial
items
H
268
463
1,943
1,854
(251)
Net income/(loss)
I = C+G+H
3,797
(956)
1) Represents the total adjustments to net operating income made to arrive at adjusted earnings (i.e. adjusted
purchases, adjusted operating
and administrative expenses, adjusted depreciation, amortisation and impairment expenses and adjusted exploration expenses,
each of which
are presented and reconciled to the relevant related IFRS figure for the periods presented in this report).
Equinor second quarter 2021
58
Adjusted earnings MMP break down
Quarters
Change
Adjusted earnings break down
First half
Q2 2021
Q1 2021
Q2 2020
Q2 on Q2
(in USD million)
2021
2020
Change
80
(30)
366
(78%)
Natural Gas Europe
51
675
(92%)
37
2
(7)
N/A
Natural Gas US
39
(18)
N/A
58
156
784
(93%)
Liquids
214
745
(71%)
(31)
(66)
19
N/A
Other
(98)
(12)
>(100%)
144
61
1,161
(88%)
Adjusted earnings MMP
206
1,390
(85%)
Adjusted exploration expenses
Quarters
Change
Adjusted exploration expenses
First half
Q2 2021
Q1 2021
Q2 2020*
Q2 on Q2
(in USD million)
2021
2020
Change
186
114
97
92%
E&P Norway exploration expenditures
300
227
32%
127
133
234
(46%)
E&P International exploration expenditures
260
455
(43%)
29
17
76
(61%)
E&P USA exploration expenditures
46
121
(62%)
342
264
407
(16%)
1)
Group exploration expenditures
606
802
(24%)
2)
(88)
47
14
N/A
Expensed, previously capitalised exploration expenditures
(41)
113
N/A
(42)
(81)
(140)
(70%)
Capitalised share of current period's exploration activity
(123)
(334)
(63%)
113
17
111
2%
Impairment (reversal of impairment)
130
447
(71%)
326
247
393
(17%)
Exploration expenses according to IFRS
572
1,028
(44%)
(113)
(17)
(111)
2%
Items impacting net operating income/(loss)
3)
(130)
(445)
(71%)
212
230
282
(25%)
Adjusted exploration expenses
443
584
(24%)
1) 18 wells with activity with 6 completed in the second quarter of 2021 compared to 27 wells with 10 completed
in the second quarter of
2020.
2) 23 wells with activity with 11 completed in
the first half of 2021 compared to 32 wells with activity with 15 completed in the first half of
2020.
3) For items impacting net operating income/(loss), see Reconciliation of net operating income/(loss) to adjusted earnings in the Supplementary
disclosures.
Equinor second quarter 2021
59
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 June
At 31 March
At 31
December
At 30 June
(in USD million)
2021
2021
2020
2020
Shareholders' equity
37,023
35,764
33,873
35,587
Non-controlling interests
18
18
19
23
Total equity
A
37,041
35,782
33,892
35,610
Current finance debt and lease liabilities
4,576
3,915
5,777
5,463
Non-current finance debt and lease liabilities
30,908
30,997
32,338
31,647
Gross interest-bearing debt
B
35,484
34,913
38,115
37,110
Cash and cash equivalents
9,912
8,992
6,757
9,700
Current financial investments
15,152
10,922
11,865
9,319
Cash and cash equivalents and financial investment
C
25,063
19,914
18,621
19,020
Net interest-bearing debt [10]
B1 = B-C
10,421
14,998
19,493
18,091
Other interest-bearing elements
1)
777
773
627
832
Normalisation for cash-build up before tax payment (50% of Tax
Payment)
2)
-
39
-
-
Net interest-bearing debt adjusted normalised for tax payment, including
lease liabilities [5]
B2
11,198
15,811
20,121
18,923
Lease liabilities
3,909
4,137
4,405
4,154
Net interest-bearing debt adjusted [5]
B3
7,289
11,674
15,716
14,768
Calculation of capital employed [5]
Capital employed
A+B1
47,461
50,781
53,385
53,700
Equinor second quarter 2021
60
Capital employed adjusted, including lease liabilities
A+B2
48,238
51,593
54,012
54,532
Capital employed adjusted
A+B3
44,330
47,456
49,608
50,378
Calculated net debt to capital employed [5]
Net debt to capital employed
(B1)/(A+B1)
22.0%
29.5%
36.5%
33.7%
Net debt to capital employed adjusted, including lease liabilities
(B2)/(A+B2)
23.2%
30.6%
37.3%
34.7%
Net debt to capital employed adjusted
(B3)/(A+B3)
16.4%
24.6%
31.7%
29.3%
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.
Equinor second quarter 2021
61
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:
●
Adjusted earnings
are based on net operating income/(loss) and adjusts for certain items affecting the income for the period in
order to separate out effects that management considers may not be well correlated to Equinor’s underlying operational
performance in the individual reporting period. Management considers adjusted earnings to be a supplemental measure
to
Equinor’s IFRS measures, which provides an indication of Equinor’s underlying operational
performance in the period and
facilitates an alternative understanding of operational trends between the periods. Adjusted earnings include adjusted revenues
and other income, adjusted purchases, adjusted operating expenses and selling, general and administrative expenses, adjusted
depreciation expenses and adjusted exploration expenses.
●
Adjusted earnings after tax
– equals the sum of net operating income/(loss) less income tax in business areas and adjustments
to operating income taking the applicable marginal tax into consideration. Adjusted earnings after tax excludes net financial
items
and the associated tax effects on net financial items. It is based on adjusted earnings less the tax effects on all elements included
in adjusted earnings (or calculated tax on operating income and on each of the adjusting items using an estimated marginal tax
rate). In addition, tax effect related to tax exposure items not related to the individual reporting period is excluded from adjusted
earnings after tax. Management considers adjusted earnings after tax, which reflects a normalised tax charge associated with its
operational performance excluding the impact of financing, to be a supplemental measure to Equinor’s net
income. Certain net
USD denominated financial positions are held by group companies that have a USD functional currency that is different from the
currency in which the taxable income is measured. As currency exchange rates change between periods, the basis for measuring
net financial items for IFRS will change disproportionally with taxable income which includes exchange gains and losses from
translating the net USD denominated financial positions into the currency of the applicable tax return. Therefore,
the effective tax
rate may be significantly higher or lower than the statutory tax rate for any given period. Adjusted taxes included in adjusted
earnings after tax should not be considered indicative of the amount of current or total tax expense (or taxes payable) for
the
period.
Adjusted earnings and adjusted earnings after tax should be considered additional measures rather than substitutes
for net operating
income/(loss) and net income/(loss), which are the most directly comparable IFRS measures. There are material limitations
associated with the use of adjusted earnings and adjusted earnings after tax compared with the IFRS measures as such non-GAAP
measures do not include all the items of revenues/gains or expenses/losses of Equinor that are needed to evaluate its profitability on
an overall basis. Adjusted earnings and adjusted earnings after tax are only intended to be indicative of the underlying
developments
in trends of our on-going operations for the production, manufacturing and marketing of our products and exclude pre-and
post-tax
impacts of net financial items. Equinor reflects such underlying development in our operations by eliminating the effects of certain
items that may not be directly associated with the period's operations or financing. However, for that reason, adjusted earnings and
adjusted earnings after tax are not complete measures of profitability. These measures should therefore not be used in isolation.
●
Return on average capital employed after tax (ROACE)
– this measure provides useful information for both the group and
investors about performance during the period under evaluation. Equinor uses ROACE to measure the return on capital employed,
regardless of whether the financing is through equity or debt. The use of ROACE should not be viewed as an alternative to income
before financial items, income taxes and minority interest, or to net income, which are measures calculated in accordance with
GAAP or ratios based on these figures. For a reconciliation for adjusted earnings after tax, see Reconciliation of net operating
income/(loss) to adjusted earnings as presented earlier in this report.
●
Capital employed adjusted –
this measure is defined as Equinor's total equity (including non-controlling interests) and net
interest-bearing debt adjusted.
●
Net interest-bearing debt adjusted
– this measure is defined as Equinor's interest bearing financial liabilities less cash and cash
equivalents and current financial investments, adjusted for collateral deposits and balances held by Equinor's captive
insurance
company and balances related to the SDFI.
●
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.
Equinor second quarter 2021
62
●
Organic capital expenditures
– Capital expenditures, defined as Additions to PP&E, intangibles and equity accounted
investments in note 2 Segments to the Condensed interim financial statements, amounted to USD 2.2 billion in the second quarter
of 2021. Organic capital expenditures are capital expenditures excluding acquisitions, recognised lease assets (RoU assets) and
other investments with significant different cash flow pattern. In the second quarter of 2021, a total of USD 0.2 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.
●
Gross capital expenditures
– Capital expenditures, defined as Additions to PP&E, intangibles and equity accounted investments
in the financial statements, including Equinor’s proportionate share of capital expenditures in equity accounted
investments not
included in additions to equity accounted investments. Forward-looking gross 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 gross capital expenditures cannot be predicted with reasonable certainty.
●
Free cash flow for the second quarter 2021
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 6.5 billion), taxes paid (negative USD 0.3
billion), cash used in business combinations (negative USD 0.1 billion), capital expenditures and investments (negative USD 1.7
billion), (increase)/decrease in other items interest-bearing (negative USD 0.1 billion), proceeds from sale of assets and
businesses (USD 0.7 billion), dividend paid (negative USD 0.4 billion) and share buy-back (USD 0.0 billion), resulting in a
free
cash flow of USD 4.5 billion in the second quarter of 2021.
●
Free cash flow for the first half of 2021
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 13.2 billion), taxes paid (negative USD 0.4
billion), cash used in business combinations (negative USD 0.1 billion), capital expenditures and investments (negative USD 3.9
billion), (increase)/decrease in other items interest-bearing (negative USD 0.1 billion), proceeds from sale of assets and
businesses (USD 1.8 billion), dividend paid (negative USD 0.7 billion) and share buy-back (USD 0.0 billion), resulting in a
free
cash flow of USD 9.7 billion in the first half of 2021.
Amended principles for adjusted earnings with effect from the first quarter of 2021:
With effect from the first quarter of 2021 Equinor has changed its policy for how gain or loss from sales of assets are to be recognised
in Adjusted earnings for the Renewables segment. Previously gain or loss from sales of assets within the renewables segment
has
been excluded from the adjusted earnings performance measure, while as of the first quarter of 2021 such gain or loss will be
included as part of the adjusted earnings performance measure for the segment. The change in policy for the adjusted earnings
performance measure does not impact the other reporting segments, where such gain or loss will continue to be excluded from
the
adjusted earnings performance measure. The policy has been retrospectively applied, but with no impact on the comparable
numbers
for 2020.
The change in policy for gain or loss from sales of assets in the Renewables segment is based on the increased activity and
significance of the segment (REN as a separate reporting segment with effect of the first quarter of 2021), where management
consider such gain or loss on divestments to be an integral part of the performance of the segment. Early access at
scale with a
subsequent partial divestment is an integral part of the strategy for the Renewables segment that distinguishes it from
the other
segments in Equinor.
Adjusted earnings
adjust for the following items:
●
Changes in fair value of derivatives:
Certain gas contracts are, due to pricing or delivery conditions, deemed to contain
embedded derivatives, required to be carried at fair value. Also, certain transactions related to historical divestments include
contingent consideration, are carried at fair value. The accounting impacts of changes in fair value of the aforementioned are
excluded from adjusted earnings. In addition, adjustments are also made for changes in the unrealised fair value of derivatives
related to some natural gas trading contracts. Due to the nature of these gas sales contracts, these are classified as financial
derivatives to be measured at fair value at the balance sheet date. Unrealised gains and losses on these contracts reflect
the
value of the difference between current market gas prices and the actual prices to be realised under the gas sales contracts. Only
realised gains and losses on these contracts are reflected in adjusted earnings. This presentation best reflects the underlying
performance of the business as it replaces the effect of temporary timing differences associated with the re-measurements of the
derivatives to fair value at the balance sheet date with actual realised gains and losses for the period.
●
Periodisation of inventory hedging effect:
Commercial storage is hedged in the derivatives market and is accounted for using
the lower of cost or market price. If market prices increase above cost price, the inventory will not reflect this increase in value.
There will be a loss on the derivative hedging the inventory since the derivatives always reflect changes in the market price.
An
adjustment is made to reflect the unrealised market increase of the commercial storage. As a result, loss on derivatives is
matched by a similar adjustment for the exposure being managed. If market prices decrease below cost price, the write-down
of
the inventory and the derivative effect in the IFRS income statement will offset each other and no adjustment is made.
●
Over/underlift
: Over/underlift is accounted for using the sales method and therefore revenues were reflected in the period the
product was sold rather than in the period it was produced. The over/underlift position depended on a number of
factors related to
our lifting programme and the way it corresponded to our entitlement share of production. The effect on income for the period is
Equinor second quarter 2021
63
therefore adjusted, to show estimated revenues and associated costs based upon the production for the period to
reflect
operational performance and comparability with peers.
●
The
operational storage
is not hedged and is not part of the trading portfolio. Cost of goods sold is measured based on the
FIFO (first-in, first-out) method, and includes realised gains or losses that arise due to changes in market prices.
These gains or
losses will fluctuate from one period to another and are not considered part of the underlying operations for the period.
●
Impairment and reversal of impairment
are excluded from adjusted earnings since they affect the economics of an asset for
the lifetime of that asset, not only the period in which it is impaired or the impairment is reversed. Impairment and reversal
of
impairment can impact both the exploration expenses and the depreciation, amortisation and impairment line items.
●
Gain or loss from sales of assets
is eliminated from the measure since the gain or loss does not give an indication of future
performance or periodic performance; such a gain or loss is related to the cumulative value creation from the time the asset is
acquired until it is sold. Following the first quarter of 2021, Equinor has determined the adjusted earnings item of gain or loss from
sales of assets is not applicable to the reporting segment, REN, as the management considers presentation of the segment
operations result, including the presentation of the gain from divestments, as being reflective of the performance of the
segment
at this point of time.
●
Eliminations (Internal unrealised profit on inventories)
:
Volumes derived from equity oil inventory will vary depending on
several factors and inventory strategies, i.e. level of crude oil in inventory, equity oil used in the refining process and level of in-
transit cargoes. Internal profit related to volumes sold between entities within the group, and still in inventory at period end, is
eliminated according to IFRS (write down to production cost). The proportion of realised versus unrealised gain
will fluctuate from
one period to another due to inventory strategies and consequently impact net operating income/(loss). Write-down to production
cost is not assessed to be a part of the underlying operational performance, and elimination of internal profit related to equity
volumes is excluded in adjusted earnings.
●
Other items of income and expense
are adjusted when the impacts on income in the period are not reflective of Equinor’s
underlying operational performance in the reporting period. Such items may be unusual or infrequent transactions but they may
also include transactions that are significant which would not necessarily qualify as either unusual or infrequent. Other
items are
carefully assessed and can include transactions such as provisions related to reorganisation, early retirement, etc.
●
Change in accounting policy
are adjusted when the impacts on income in the period are unusual or infrequent, and not
reflective of Equinor’s underlying operational performance in the reporting period.
For more information on our use of non-GAAP financial measures, see section 5.2 Use and reconciliation of non-GAAP financial
measures in Equinor's 2020 Annual Report and Form 20-F.
Equinor second quarter 2021
64
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", 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, including with respect to the Covid-19 pandemic and its impacts, consequences and risks; Equinor's
response to the
Covid-19 pandemic, including measures to protect people, operations and value creation, operating costs and assumptions;
the
ambition to reduce net carbon intensity and be a net-zero energy company by 2050; the commitment to develop as a broad
energy
company; the ambition to be a leader in the energy transition; future financial performance, including cash flow and liquidity;
accounting policies; plans to develop fields; plans for renewables production capacity, development of related projects and
investments in renewables; expectations regarding development of CCUS and hydrogen businesses; ambitions regarding capex
for
renewables and low carbon solutions; market outlook and future economic projections and assumptions, including commodity
price
assumptions; organic capital expenditures through 2024; estimates regarding production; ambition to keep unit of
production cost in
the top quartile of our 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 the implementation of our share buy-back
programme; 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 the uncertainty regarding demand
created by the Covid-19 pandemic and oil price volatility triggered, among other things, by the changing dynamic among OPEC+
members; levels and calculations of reserves and material differences from reserves estimates; natural disasters, adverse weather
conditions, climate change, and other changes to business conditions; regulatory stability and access to attractive renewable
opportunities; unsuccessful drilling; operational problems, in particular in light of quarantine rules and social distancing requirements
triggered by the Covid-19 pandemic; health, safety and environmental risks; impact of the Covid-19 pandemic; the effects of climate
change; regulations on hydraulic fracturing; security breaches, including breaches of our digital infrastructure (cybersecurity);
ineffectiveness of crisis management systems; the actions of 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; reputational damage; exercise of ownership by the Norwegian
state; an inability to attract and retain personnel; risks related to implementing a new corporate structure; 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
oil-
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, 2020, filed with the
U.S. Securities
and Exchange Commission (including section 2.12 Risk review - Risk factors thereof). Equinor's 2020 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
assumes responsibility for the accuracy and completeness of the 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, either to make them conform to actual results or changes in our expectations.
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.
Equinor second quarter 2021
65
END NOTES
1.
The group's
average liquids price
is a volume-weighted average of the segment prices of crude oil, condensate and natural gas
liquids (NGL).
2.
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.
3.
Liquids volumes
include oil, condensate and NGL, exclusive of royalty oil.
4.
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 cumulative 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.
5.
These are
non-GAAP figures.
See Use and reconciliation of non-GAAP financial measures in the report for more details.
6.
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 sells 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.
7.
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 reserves estimates.
8.
The group's
average invoiced gas prices
include volumes sold by the MMP segment.
9.
The internal
transfer price
paid from the MMP segment to the E&P Norway and E&P USA segments.
10.
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 offset 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 authorised.
EQUINOR ASA
(Registrant)
Dated: 28 July, 2021
By: ___/s/ Ulrica Fearn
Name: Ulrica Fearn
Title: Chief financial Officer