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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
27 July
2022
Commission File Number
1-15200
Equinor ASA
(Translation of registrant’s name into English)
FORUSBEEN 50, N-4035
,
STAVANGER
,
NO
RWAY
(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 2022 results of Equinor ASA.
Equinor second quarter 2022
2
Equinor second quarter 2022
Equinor delivered adjusted earnings* of USD 17.6 billion and USD 5.00 billion after tax in the
second quarter of 2022. Net operating income was USD 17.7 billion and the net income was
reported at USD 6.76 billion.
Strategic and industrial developments:
●
Further optimisation of the oil and gas portfolio
●
Assets in Russia exited
●
Continued progress in building new value chains in low carbon with investments in battery storage
and power
●
Progressing a strong portfolio of projects in execution
Operational performance:
●
Continued high production performance
●
High gas production from E&P Norway to support European energy security
●
Safe startup of Hammerfest LNG
Financial performance:
●
Continuing to generate strong earnings and cash flow from operations, partially offset by increased costs
●
Balance sheet further strengthened with net debt ratio* reduced to negative 38.6%
●
Significant step-up in capital distribution with cash dividend of USD 0.20 per share, increased extraordinary
cash dividend to USD
0.50 per share for the second and third quarter,
and increased share buy-back programme to up to USD 6.00 billion for 2022,
with a third tranche of around USD 1.83 billion
Anders Opedal, president and CEO of Equinor ASA:
“Russia’s invasion of Ukraine impacted already tight energy markets and has created an energy crisis with
high prices affecting people
and all sectors of society. Equinor puts its best effort into securing safe and reliable deliveries of energy to Europe, whilst continuing to
invest in the energy transition.”
“Equinor continues to provide high gas production from the NCS, including volumes from
Hammerfest LNG, now safely back in
production. Solid operational performance and high production combined with high prices resulted in
strong financial results with
adjusted earnings of more than 17 billion dollars before tax”
“We have taken important steps within our low carbon portfolio to help our customers decarbonise. Investments in
the UK power
company Triton Power and the battery storage developer East Point Energy in the US will expand our energy offerings and be
important building blocks in new value chains.”
Quarter
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
17,733
18,392
5,298
>100%
Net operating income/(loss)
36,125
10,518
>100%
17,590
17,991
4,641
>100%
Adjusted earnings*
35,581
8,726
>100%
6,762
4,714
1,943
>100%
Net income/(loss)
11,476
3,797
>100%
5,000
5,179
1,578
>100%
Adjusted earnings after tax*
10,180
2,867
>100%
8,520
15,771
6,643
28%
Cash flows provided by operating activities
24,291
12,627
92%
6,964
12,689
4,511
54%
Free cash flow*
19,653
9,681
>100%
Quarter
Change
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
Operational data
2022
2021
Change
106.9
97.1
63.7
68%
Group average liquids price (USD/bbl) [1]
102.0
60.0
70%
1,984
2,106
1,997
(1%)
Total equity liquids and gas production (mboe per day) [4]
2,045
2,082
(2%)
325
511
283
15%
Power generation (GWh) Equinor share
837
733
14%
Q2 | First half
Full year
Health, safety and the environment
Q2 2022
2021
Serious incident frequency (SIF) Twelve-month average as at Q2 2022
0.5
0.4
Upstream CO
2
intensity (kg
CO
2
/boe)
as at first half 2022
6.8
7.0
Equinor second quarter 2022
3
30 June
31 December
%-point
Net debt to capital employed adjusted*
2022
2021
change
Net debt to capital employed adjusted*
(38.6%)
(0.8%)
(37.8)
Dividend
(USD per share)
Q2 2022
Q1 2022
Q2 2021
Announced dividend per share
0.20
0.20
0.18
Extraordinary dividend per share
0.50
0.20
In the first half of 2022 Equinor has acquired and settled shares in the market under the share
buy-back programmes, of USD 742
million.
*
For items marked with an asterisk throughout this report,
see Use and reconciliation of non-GAAP financial
measures in the Supplementary disclosures.
Progressing on strategy for the energy transition
Equinor enhanced the value creation with continued optimisation of its oil and gas portfolio with
the announced sale of assets in the
Ekofisk area, and a share in the Martin Linge field on the NCS. In the US, Equinor’s
transactions in the North Platte project resulted in
an increased interest in the project as well as a proceed. The group entered into
a long-term LNG purchase agreement which will add
new volumes to the portfolio from 2026.
Further, progress was made in developing value chains within low carbon. In the UK, Equinor is investing in the power company Triton
Power and will prepare for future use of hydrogen in the Saltend power station. In the
US, Equinor acquired the battery storage
developer East Point Energy to further broaden the group’s energy offerings.
Equinor is executing a full portfolio of 23 projects with overall good progress, despite impact from
global supply chain disruptions and
the pandemic. On the NCS, Johan Sverdrup phase 2 and Njord future are expected
on stream the fourth quarter, while the floating
wind farm Hywind Tampen is expected to be completed next spring. In Brazil, Peregrino phase 2 is on track for start-up in third
quarter. The wind farm Dogger Bank in UK is on track for the first phase to come into operation in 2023.
Equinor previously announced that it will exit all joint ventures in Russia and halt all investments
in the country. This was completed in
the quarter and the company was released from all future commitments and obligations.
High production impacted by seasonal turnarounds contributed to energy security
Solid operational performance as well as optimised production to deliver more gas to Europe,
resulted in high production, with less
impact from the seasonal turnaround than for the same quarter last year. E&P Norway delivered a 18% increase in production of gas
and a 7% increase in overall production,
compared to the same quarter last year. In Brazil, the Peregrino field came back on stream in
July and will contribute with valuable volumes going forward.
The Renewables segment delivered 15% higher power generation compared to the
same quarter last year, mainly due to the
production from the Guanizuil IIA solar plant in Argentina.
In the second quarter Equinor completed 9 exploration wells offshore and 3 wells were ongoing at quarter
end. Equinor made 3
commercial discoveries in the quarter, all close to infrastructure on the NCS.
Strong financial results capturing high prices
Energy prices remained high in the quarter. Compared to last quarter Equinor realised higher prices for liquids, while the averaged
invoiced gas
price in Europe eased off slightly.
Adjusted earnings* for the quarter was USD 17.6 billion, up from USD 4.64 billion
in the same quarter last year. Adjusted earnings
after tax* was USD 5.00 billion, up from USD 1.58 billion in the same period last
year. In the quarter the operational and administrative
costs increased due to higher environmental costs, electricity prices and field cost, partially offset by currency effects.
The MMP segment contributed with strong results, particularly from European gas and power optimisation
and trading.
Equinor reported net operating income of USD 17.7 billion in the quarter, up from USD 5.30 billion in the same period in 2021. Net
income was USD 6.76 billion in the quarter, compared to USD 1.94 billion in the second quarter of 2021.
Continued strong cash flow and capital discipline further strengthening the balance sheet
Cash flows provided by operating activities before taxes and changes in working capital amounted to USD
18.1 billion for the second
quarter, compared to USD 6.54 billion for the same period in 2021. Organic capital expenditure* was USD 1.99 billion for
the quarter.
Free cash flow* was USD 6.96 billion for the second quarter, impacted by the two last NCS tax instalments for 2021 and the
increased
capital distribution from the fourth quarter in 2021. From the third quarter, the NCS tax instalments will be based on 2022 results
and
are expected at around NOK 70 billion for third quarter.
Strong cash flow and capital discipline resulted in a further reduction of adjusted net debt to capital
employed* to negative 38.6% at
the end of the quarter. This is improved from negative 22.2% in the first quarter of 2022.
Equinor second quarter 2022
4
Competitive capital distribution
The board of directors has decided a cash dividend of USD 0.20 per share for the second quarter. Based on continued strong
earnings in the quarter the board of directors has decided an increase in extraordinary cash dividend from
USD 0.20 to USD 0.50 per
share for second and third quarter of 2022. Furthermore, based on the strength of the brent
price, balance sheet and commodity
prices, the board of directors has decided to initiate a third tranche of share buy-back
of USD 1.83 billion and increase the share buy-
back programme for 2022 from previously communicated up to USD 5.00 billion to up to USD
6.00 billion. The third tranche will
commence on 28 July and will end no later than 26 October 2022.
Emissions and serious incident frequency
Average CO
2
-emissions from Equinor’s operated upstream production, on
a 100% basis, were 6.8 kg per boe for the first half of 2022,
expected to increase somewhat with fields back on stream. The twelve-month average serious incident
frequency (SIF) for the period
ending 30 June 2022 was 0.5.
Equinor second quarter 2022
5
GROUP REVIEW
Quarters
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
36,459
36,393
17,462
>100%
Total revenues and other income
72,852
35,052
>100%
36,315
36,712
17,173
>100%
Adjusted total revenues and other income*
73,027
33,118
>100%
(18,727)
(18,001)
(12,164)
54%
Total operating expenses
(36,727)
(24,534)
50%
(13,885)
(13,781)
(7,531)
84%
Adjusted purchases*
(27,666)
(14,602)
89%
(2,390)
(2,450)
(2,287)
4%
Adjusted operating and administrative expenses*
(4,840)
(4,461)
8%
(2,149)
(2,333)
(2,500)
(14%)
Adjusted depreciation, amortisation and net impairments*
(4,482)
(4,886)
(8%)
(301)
(157)
(212)
42%
Adjusted exploration expenses*
(458)
(443)
3%
17,733
18,392
5,298
>100%
Net operating income/(loss)
36,125
10,518
>100%
17,590
17,991
4,641
>100%
Adjusted earnings*
35,581
8,726
>100%
1,713
2,182
1,747
(2%)
Capital expenditures and Investments
3,895
3,897
(0%)
8,520
15,771
6,643
28%
Cash flows provided by operating activities
24,291
12,627
92%
Quarters
Change
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
Operational information
2022
2021
Change
1,984
2,106
1,997
(1%)
Total equity liquid and gas production (mboe/day)
2,045
2,082
(2%)
1,842
1,958
1,845
(0%)
Total entitlement liquid and gas production (mboe/day)
1,900
1,929
(2%)
325
511
283
15%
Power generation (GWh) Equinor share
837
733
14%
113.8
101.4
68.8
65%
Average Brent oil price (USD/bbl)
107.6
64.9
66%
106.9
97.1
63.7
68%
Group average liquids price (USD/bbl)
102.0
60.0
70%
25.53
29.77
7.08
>100%
E&P Norway average internal gas price (USD/mmbtu)
27.68
6.23
>100%
6.25
4.18
1.82
>100%
E&P USA average internal gas price (USD/mmbtu)
5.21
1.99
>100%
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures
in Supplementary
disclosures.
Operations
Total equity liquids and gas production for the second quarter of 2022 has remained stable compared to the same period last year.
Positive contributions from the new field Martin Linge on the NCS, and less impact
from maintenance and turnaround activities
compared to the same quarter last year, supported further increased production levels of gas for the quarter from E&P Norway, up
18% compared to same quarter last year, as focus on energy security and supply of gas to Europe continues. E&P International and
E&P USA production decreased in the second quarter relative to the second quarter
of 2021, impacted by Equinor’s exit from Russia
in the first quarter of 2022 and the divestment of a US onshore asset in the second quarter
of 2021.
Significantly higher realised prices for the period relative to 2021 contributed to the increase in
net operating income and adjusted
earnings* in the second quarter and the first half of 2022 compared to the same periods last year. Strong results were recorded from
European gas and power optimisation and trading, Danske Commodities as well as high refining
margins in the quarter resulted in a
significant increase in net operating income for the Marketing, Midstream and Processing segment, positively
contributing to the
overall business results in the quarter and first half of 2022 relative to the same periods
in the prior year.
Operating cost increased compared to the second quarter of 2021, impacted by the ramp-up of new fields,
increased field costs, high
electricity prices and environmental taxes offset by significant currency effects due to the strengthening of the USD against the NOK
and the EUR.
Taxes
The consistently high share of earnings from the NCS and lower effect of uplift deduction, increased the
effective reported income tax
for the second quarter and first half of 2022 relative to the corresponding periods in 2021. The
effective reported tax rate was 65.8%
for the second quarter of 2022 (60.4% for the second quarter of 2021), and 69.0% for first
half of 2022 (59.7% first half of 2021).
The effective tax rate on adjusted earnings* of 71.5% for the second quarter of 2022 and 71.4% for the first half
of 2022 also
increased compared to 66.0% and 67.1% in 2021 due to the high share of NCS earnings and lower
effect of uplift deduction.
Equinor second quarter 2022
6
Retrospective application of the Norwegian Petroleum Tax Act and Tax
Payment Act amendments adopted on 17 June 2022, effective
from 1 January 2022, had an immaterial cumulative impact to the financial statement in the
second quarter of 2022.
Cash flow, net debt and capital distribution
Cash flow provided by operating activities before taxes paid and working capital items improved by USD
11,523 million to USD 18,066
million from the second quarter of 2021 and by 24,961 million to USD 38,122 million
from the first half of 2021. This improvement was
impacted by strong financial results due to high production and increased commodity prices across both the
NCS and our international
businesses.
Taxes paid of USD 8,050 million in the second quarter of 2022 increased relative to the prior quarter primarily due to the two
payments of NCS taxes, totalling USD 7,750 million. One instalment was paid in the
first quarter.
Free cash flow* remained strong, at USD 19,653 million for the first half of 2022 compared to USD
9,681 million in the same period of
2021, despite the significant increase in tax payments, increased dividend payments
and the share buy-back programme.
The board of directors has decided a cash dividend of USD 0.20 per share for the second quarter. Based on continued strong
earnings in the quarter the board of directors has decided an increase in extraordinary cash dividend
from USD 0.20 to USD 0.50 per
share for second and third quarter of 2022. Furthermore, based on the strength of the
brent price, balance sheet and commodity
prices, the board of directors has decided to initiate a third tranche of share buy-back
of USD 1.83 billion and increase the share buy-
back programme for 2022 from previously communicated up to USD 5.00 billion to up to USD
6.00 billion. The third tranche will
commence on 28 July and will end no later than 26 October 2022.
OUTLOOK
●
Organic capital expenditures*
are estimated at an annual average of around USD 10 billion for 2022-2023 and at an annual
average of around USD 12 billion for 2024-2025
1
.
●
Production
for 2022 is estimated to be around 2% above 2021 level [6].
●
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 40 mboe per day for the full year of 2022.
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. Deferral of production to create
future value, gas off-take, timing of new capacity coming on stream, operational regularity and the ongoing impact
of Covid-19
represent the most significant risks related to the foregoing production guidance. Our future financial
performance, including cash flow
and liquidity, will be affected by the extent and duration of the current market conditions, the development in realised prices, including
price differentials and other factors discussed elsewhere in the report. For further information,
see section Forward-looking
statements.
1
USD/NOK exchange rate assumption of 9.
Equinor second quarter 2022
7
SUPPLEMENTARY
OPERATIONAL
DISCLOSURES
Quarters
Change
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
Operational data
2022
2021
Change
Prices
113.8
101.4
68.8
65%
Average Brent oil price (USD/bbl)
107.6
64.9
66%
109.8
100.3
64.9
69%
E&P Norway average liquids price (USD/bbl)
105.1
60.8
73%
109.2
96.3
65.3
67%
E&P International average liquids price (USD/bbl)
102.8
62.3
65%
91.6
82.5
56.7
61%
E&P USA average liquids price (USD/bbl)
87.3
53.5
63%
106.9
97.1
63.7
68%
Group average liquids price (USD/bbl) [1]
102.0
60.0
70%
1,009
859
533
89%
Group average liquids price (NOK/bbl) [1]
932
507
84%
25.53
29.77
7.08
>100%
E&P Norway average internal gas price (USD/mmbtu)
[8]
27.68
6.23
>100%
6.25
4.18
1.82
>100%
E&P USA average internal gas price (USD/mmbtu)
[8]
5.21
1.99
>100%
27.18
29.60
7.54
>100%
Average invoiced gas prices - Europe (USD/mmbtu) [7]
28.44
7.07
>100%
6.51
4.62
2.25
>100%
Average invoiced gas prices - North America (USD/mmbtu)
[7]
5.52
2.50
>100%
22.8
5.8
3.4
>100%
Refining reference margin (USD/bbl) [2]
14.3
2.4
>100%
Entitlement production (mboe per day)
576
638
604
(5%)
E&P Norway entitlement liquids production
607
633
(4%)
174
201
212
(18%)
E&P International entitlement liquids production
187
212
(12%)
123
114
138
(10%)
E&P USA entitlement liquids production
119
144
(18%)
873
953
954
(9%)
Group entitlement liquids production
913
989
(8%)
767
798
652
18%
E&P Norway entitlement gas production
782
687
14%
36
37
39
(7%)
E&P International entitlement gas production
37
47
(22%)
166
170
199
(17%)
E&P USA entitlement gas production
168
206
(18%)
969
1,005
891
9%
Group entitlement gas production
987
940
5%
1,842
1,958
1,845
(0%)
Total entitlement liquids and gas production [3]
1,900
1,929
(2%)
Equity production (mboe per day)
576
638
604
(5%)
E&P Norway equity liquids production
607
633
(4%)
260
287
295
(12%)
E&P International equity liquids production
273
297
(8%)
137
127
153
(10%)
E&P USA equity liquids production
132
161
(18%)
973
1,051
1,052
(7%)
Group equity liquids production
1,012
1,091
(7%)
767
798
652
18%
E&P Norway equity gas production
782
687
14%
46
54
54
(15%)
E&P International equity gas production
50
57
(13%)
198
203
239
(17%)
E&P USA equity gas production
200
246
(19%)
1,011
1,055
945
7%
Group equity gas production
1,032
991
4%
1,984
2,106
1,997
(1%)
Total equity liquids and gas production [4]
2,045
2,082
(2%)
REN power generation
325
511
283
15%
Power generation (GWh)
837
733
14%
Equinor second quarter 2022
8
Health, safety and the environment
Twelve months
average per
Full year
Health, safety and the environment
Q2 2022
2021
Total recordable injury frequency (TRIF)
2.5
2.4
Serious Incident Frequency (SIF)
3)
0.5
0.4
Oil and gas leakages (number of)
1)
10
12
First half
Full year
Climate
2022
2021
Upstream CO
2
intensity (kg CO
2
/boe)
2)
6.8
7.0
1)
Number of leakages with rate above 0.1 kg/second during the past 12 months.
2)
Total
scope 1 emissions of CO
2
(kg CO
2
) from exploration and production, divided by total production (boe).
3)
As of the second quarter of 2022, work-related illness is excluded from SIF
Equinor second quarter 2022
9
EXPLORATION
& PRODUCTION NORWAY
Quarter
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudtied, in USD million)
2022
2021
Change
16,712
18,454
6,245
>100%
Total revenues and other income
35,166
12,060
>100%
16,491
18,663
6,224
>100%
Adjusted total revenues and other income*
35,154
11,896
>100%
(2,231)
(1,521)
(1,825)
22%
Total operating expenses
(3,752)
(4,293)
(13%)
(914)
(884)
(846)
8%
Adjusted operating and administrative expenses*
(1,798)
(1,544)
16%
(1,203)
(1,421)
(1,362)
(12%)
Adjusted depreciation, amortisation and net impairments*
(2,624)
(2,706)
(3%)
(44)
(101)
(48)
(8%)
Adjusted exploration expenses*
(146)
(118)
24%
14,482
16,933
4,420
>100%
Net operating income/(loss)
31,414
7,767
>100%
14,330
16,256
3,967
>100%
Adjusted earnings/(loss)*
30,586
7,527
>100%
1,339
1,072
1,322
1%
Additions to PP&E, intangibles and equity accounted
investments
2,410
2,587
(7%)
Quarters
Change
Operational information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
E&P Norway
2022
2021
Change
1,343
1,436
1,257
7%
E&P entitlement liquid and gas production (mboe/day)
1,389
1,320
5%
109.8
100.3
64.9
69%
Average liquids price (USD/bbl)
105.1
60.8
73%
25.53
29.77
7.08
>100%
Average internal gas price (USD/mmbtu)
27.68
6.23
>100%
For items impacting net operating income/(loss),
see Use and reconciliation of non-GAAP financial measures
in the Supplementary
disclosures.
Production & Revenues
The increase in production compared to the second quarter of 2021 was mainly due to positive contributions
from the new field Martin
Linge and narrower scope of planned turnarounds. In addition, Snøhvit resumed production this quarter contributing
an average of 15
mboe per day. The change in short-term strategy from gas injection to gas export for Gina Krog continues and has been granted until
30 September 2022. Partially offsetting this, Oseberg has reduced production by approximately 15 mboe per day this quarter
due to
time limited low gas prices in UK and in combination with natural decline. Overall, production of gas
volumes increased 18% and
liquids decreased by 5% compared to the second quarter of 2021. For the first half of 2022 there
is an increase in gas volumes of
14% and a reduction in liquids of 4% compared to the first half of 2021.
Operating expenses and financial results
Net operating income is driven by high energy prices. increased operating and administrative expenses partly
offset the higher energy
prices.
The increase in adjusted operating and administrative expenses compared to the second quarter of 2021 was
primarily related to
ramp-up of new fields and increased maintenance costs. Higher environmental taxes and electricity
prices added to the increase,
partially offset by the NOK/USD exchange rate development. The same factors combined with higher transportation costs
also drove
the increase for the first half of 2022.
Lower field development and drilling development costs resulted in lower adjusted exploration
expenses in the second quarter of 2022. Net operating income for the second quarter of 2022 was
positively impacted by net
overlifted volumes of USD 152 million.
Equinor second quarter 2022
10
EXPLORATION
& PRODUCTION INTERNATIONAL
Quarters
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
1,838
1,453
1,479
24%
Total revenues and other income
3,290
2,531
30%
1,956
1,852
1,318
48%
Adjusted total revenues and other income*
3,808
2,519
51%
(856)
(1,822)
(886)
(3%)
Total operating expenses
(2,678)
(1,676)
60%
(373)
(423)
(364)
3%
Adjusted operating and administrative expenses*
(796)
(683)
17%
(324)
(339)
(433)
(25%)
Adjusted depreciation, amortisation and net impairments*
(663)
(799)
(17%)
(111)
(40)
(136)
(18%)
Adjusted exploration expenses*
(151)
(239)
(37%)
982
(369)
593
66%
Net operating income/(loss)
613
855
(28%)
1,111
1,078
400
>100%
Adjusted earnings/(loss)*
2,189
783
>100%
573
626
430
33%
Additions to PP&E, intangibles and equity accounted
investments
1,199
819
46%
Quarters
Change
Operational information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
E&P International
2022
2021
Change
306
341
349
(12%)
E&P equity liquid and gas production (mboe/day)
323
354
(9%)
210
239
252
(17%)
E&P entitlement liquid and gas production (mboe/day)
224
259
(13%)
109.2
96.3
65.3
67%
Average liquids price (USD/bbl)
102.8
62.3
(65%)
For items impacting net operating income/(loss),
see Use and reconciliation of non-GAAP financial measures
in the Supplementary
disclosures.
Production & Revenues
The decrease in production was primarily due to no Russian production volumes in the second quarter
of 2022 following the decision
in the first quarter of 2022 to exit the country, and natural decline in several mature fields. The net effects from production sharing
agreements (PSA) decreased to 95 mboe per day in the second quarter of 2022, from 97 mboe
per day in the second quarter of 2021,
primarily caused by the lower equity production.
The main driver for the increase in revenues is the continued increase in realised liquids and gas
prices for the second quarter and the
first half of 2022 relative to the same periods last year. The increase is partially offset by the lower entitlement production.
Operating expenses and financial results
Adjusted operating and administrative expenses increased in the second quarter and the first half
of 2022 compared to the same
periods last year, mainly due to higher operations and maintenance expenses. Increased royalties and production fees primarily
driven by higher prices added to the increase for the first half of 2022. Adjusted exploration
expenses decreased in the second quarter
and first half of 2022 compared to the same periods last year, mainly due to lower expensed drilling costs, lower field development
and lower other cost. In the first half of 2022, net operating income was negatively impacted by impairments
of USD 1,096 million,
primarily related to the exit from Russia.
Equinor second quarter 2022
11
EXPLORATION
& PRODUCTION USA
Quarters
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
1,629
1,269
968
68%
Total revenues and other income
2,898
1,961
48%
1,629
1,269
968
68%
Adjusted total revenues and other income*
2,898
1,961
48%
(757)
(24)
(764)
(1%)
Total operating expenses
(782)
(1,605)
(51%)
(240)
(221)
(272)
(12%)
Adjusted operating and administrative expenses*
(461)
(606)
(24%)
(362)
(320)
(438)
(17%)
Adjusted depreciation, amortisation and net impairments*
(682)
(846)
(19%)
(146)
(15)
(28)
>100%
Adjusted exploration expenses*
(161)
(86)
88%
872
1,245
204
>100%
Net operating income/(loss)
2,117
356
>100%
881
713
230
>100%
Adjusted earnings/(loss)*
1,594
422
>100%
170
126
180
(6%)
Additions to PP&E, intangibles and equity accounted
investments
296
337
(12%)
Quarters
Change
Operational information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
E&P USA
2022
2021
Change
335
329
391
(14%)
E&P equity liquid and gas production (mboe/day)
332
407
(18%)
289
284
337
(14%)
E&P entitlement liquid and gas production (mboe/day)
287
350
(18%)
91.6
82.5
56.7
61%
Average liquids price (USD/bbl)
87.3
53.5
63%
6.25
4.18
1.82
>100%
Average internal gas price (USD/bbl)
5.21
1.99
>100%
For items impacting net operating income/(loss),
see Use and reconciliation of non-GAAP financial measures
in the Supplementary
disclosures.
Production & Revenues
The decrease in production was primarily due to natural decline from the Appalachia Basin assets, the divestment
of Bakken in 2021
as well as decrease in the Gulf of Mexico production due to increased effect from turnarounds in 2022.
The continued increase in realised liquids and gas prices for the second quarter and the first
half of 2022 relative to the same periods
last year has been the main driver for the increase in revenues. The increase in prices has been
partially offset by the lower
entitlement production.
Operating expenses and financial results
Adjusted operating expenses decreased in the second quarter and the first half of 2022 compared
to the same periods last year
mainly due to
lower operations and maintenance expenses and depletion due to lower production and improved
reserves
. Increased
royalties and production fees primarily driven by higher prices partially offset the decrease for the first half of 2022.
Adjusted
exploration expenses increased in the second quarter and first half of 2022 compared to the
same periods last year mainly due to
expensing of previously capitalised well costs. In the first half of 2022, net operating income was
positively impacted by net
impairment reversals of USD 526 million, primarily related to the change in short term commodity
prices. In the first half of 2021, net
operating income was negatively impacted by impairment and losses recognised on the divestment
of the Bakken asset of USD 66
million.
Equinor second quarter 2022
12
MARKETING, MIDSTREAM & PROCESSING
Quarters
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
36,012
35,917
16,986
>100%
Total revenues and other income
71,929
32,780
>100%
35,971
35,715
16,879
>100%
Adjusted total revenues and other income*
71,686
32,402
>100%
(34,556)
(35,425)
(16,842)
>100%
Total operating expenses
(69,981)
(32,236)
>100%
(33,429)
(34,470)
(15,535)
>100%
Adjusted purchases*
(67,899)
(29,816)
>100%
(1,012)
(1,001)
(968)
5%
Adjusted operating and administrative expenses*
(2,013)
(1,918)
5%
(221)
(212)
(222)
(1%)
Adjusted depreciation, amortisation and net impairments*
(433)
(445)
(3%)
1,456
492
144
>100%
Net operating income/(loss)
1,948
544
>100%
1,310
31
154
>100%
Adjusted earnings*
1,341
224
>100%
91
235
58
56%
- Liquids
325
214
52%
972
(383)
80
>100%
- Natural Gas Europe
590
51
>100%
19
123
37
(50%)
- Natural Gas US
142
39
>100%
228
55
(22)
N/A
- Other
284
(80)
N/A
253
265
138
83%
Additions to PP&E, intangibles and equity accounted
investments
518
190
>100%
Quarters
Change
Operational information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
2022
2021
Change
180.5
185.5
180.6
(0%)
Liquids sales volumes (mmbl)
366.0
378.0
(3%)
15.4
16.5
14.2
9%
Natural gas sales Equinor (bcm)
32.0
29.8
7%
13.7
14.1
12.6
9%
Natural gas entitlement sales Equinor (bcm)
27.8
26.1
6%
27.18
29.60
7.54
>100%
Average invoice gas price - Europe (USD/mmbtu)
28.44
7.07
>100%
6.51
4.62
2.25
>100%
Average invoice gas price - North America (USD/mmbtu)
5.52
2.50
>100%
For items impacting net operating income/(loss),
see Use and reconciliation of non-GAAP financial measures
in the Supplementary
disclosures.
Volumes, Pricing & Revenues
Average invoiced European natural gas sales price was significantly higher than second quarter of
2021 due to increased market
prices driven by low gas stocks in Europe, high demand and tight supply. Average invoiced North American piped gas sales price
increased significantly compared to second quarter last year as market prices were driven by both
supply and demand factors;
production growth was weaker than expected whilst demand, especially from power generation
was strong.
Financial Results
Adjusted earnings* in the second quarter of 2022 increased significantly from the second quarter
of 2021. Adjusted earnings in
Natural Gas Europe were mainly driven by strong results from geographical optimisation and positively
influenced by derivatives
applied to price risk manage bilateral gas contracts and geographical optimisation of future physical
flows. The result is reduced by
negative mark to market effects from derivatives applied to lock in value on future LNG deliveries and loss related to an
oil linked gas
sales contract. Adjusted earnings in Natural Gas US were driven by strong trading results partially
offset by losses on derivatives used
to hedge future physical deliveries. Adjusted earnings in Liquids were primarily driven by products trading.
The Other section was
dominated by strong trading results in Danske Commodities. It is also positively influenced by
realising high refining margins despite
turnaround during large part of quarter and negatively influenced by losses on methanol production
from natural gas at
Tjeldbergodden.
Net operating income of USD 1,456 million in the quarter includes net positive effect from changes in fair
value of embedded
derivatives and in estimates of certain non-operational losses provided for, periodisation of inventory hedging effect and gains on
operational storage value.
In the second quarter of 2021 adjusted earnings for Natural Gas Europe were impacted by losses
on derivatives on gas forward
contracts, offset by gains in other contracts. Adjusted earnings for Liquids were relatively weak due to trading
losses. Adjusted
earnings from Natural Gas US were driven by physical gas sales and trading gains. Negative
adjusted earnings in the Other section
were heavily influenced by low refinery margins.
Equinor second quarter 2022
13
The increase in adjusted earnings in the first half of 2022 compared to same period
last year is mainly explained by stronger results
from Natural Gas Europe both from derivatives and trading. In addition, there were higher results
in 2022 from Danske Commodities
and refining.
From the first quarter to the second quarter of 2022, adjusting earnings have increased driven by the
strong result from geographical
optimisation and higher derivatives result within Natural Gas Europe.
RENEWABLES
Quarters
Change
Financial information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(unaudited, in USD million)
2022
2021
Change
3
90
7
(56%)
Revenues third party, other revenue and other income
93
1,389
(93%)
12
29
(6)
N/A
Net income/(loss) from equity accounted investments
41
(6)
N/A
15
119
2
>100%
Total revenues and other income
134
1,383
(90%)
16
32
2
>100%
Adjusted total revenues and other income*
47
3
>100%
(57)
(41)
(33)
74%
Total operating expenses
(99)
(73)
35%
(56)
(41)
(32)
77%
Adjusted operating and administrative expenses*
(97)
(72)
35%
(1)
(1)
(1)
(6%)
Adjusted depreciation, amortisation and net impairments*
(2)
(1)
48%
(42)
77
(31)
(35%)
Net operating income/(loss)
35
1,310
(97%)
(42)
(10)
(31)
(34%)
Adjusted earnings*
(52)
(70)
26%
57
43
159
(64%)
Additions to PP&E, intangibles and equity accounted
investments
100
286
(65%)
Quarters
Change
Operational information
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
2022
2021
Change
325
511
283
15%
Power Generation (GWh) Equinor share
837
733
14%
For items impacting net operating income/(loss), see Use
and reconciliation of non-GAAP financial measures
in the Supplementary disclosures.
Power generation
The increase in power generation compared to second quarter last year was mainly due to
start-up of production from Guanizuil IIA in
the third quarter of 2021. This is consistent with the year-on-year trend.
Results from equity accounted investments
Net income/(loss) from equity accounted investments increased compared to the second quarter
last year. The increased result
compared to the second quarter last year was mainly due to a lower portion of project costs
being expensed because the Empire
Wind project in the US started capitalisation of project costs in the first quarter of 2022.
Operating expenses and financial results
Operating and administrative expenses increased due to increased business development costs driven by higher
activity level in the
US, the UK and in Asia. This is consistent with the year-on-year trend.
Net operating income was negative and adjusted earnings was negative USD 42 million in the second
quarter of 2022 compared to
negative USD 31 million in the second quarter of 2021. The decrease was driven by increased business
development costs partially
offset by increased net results from equity accounted investments.
Net operating income in the first half of 2022 decreased significantly compared to last year due to lower
divestment gains in 2022.
Net
income in the first half of 2022 was positively impacted by divestment gain on USD 87 million. Net
operating income in the first half of
2021 was positively impacted by divestments gains of USD 1,382 million.
Capital expenditure for the second quarter and first half of 2022 decreased compared to
same periods last year. This was mainly due
to the acquisition of Wento and higher capital contribution to equity accounted investments last year.
Equinor second quarter 2022
14
CONDENSED INTERIM FINANCIAL STATEMENTS
Second quarter 2022
CONSOLIDATED STATEMENT
OF INCOME
Quarters
First half
Q2 2022
Q1 2022
Q2 2021
(unaudited, in USD million)
Note
2022
2021
36,387
36,050
17,380
Revenues
2
72,437
33,508
51
99
16
Net income/(loss) from equity accounted investments
151
47
21
244
66
Other income
3
265
1,497
36,459
36,393
17,462
Total revenues and other income
2
72,852
35,052
(13,851)
(13,510)
(7,399)
Purchases [net of inventory variation]
(27,361)
(14,565)
(2,200)
(1,989)
(2,134)
Operating expenses
(4,189)
(4,076)
(205)
(282)
(195)
Selling, general and administrative expenses
(487)
(413)
(2,140)
(2,017)
(2,111)
Depreciation, amortisation and net impairments
2
(4,158)
(4,908)
(331)
(203)
(326)
Exploration expenses
(534)
(572)
(18,727)
(18,001)
(12,164)
Total operating expenses
2
(36,727)
(24,534)
17,733
18,392
5,298
Net operating income/(loss)
2
36,125
10,518
(327)
(266)
(304)
Interest expenses and other financial expenses
(593)
(616)
2,351
(903)
(90)
Other financial items
1,447
(485)
2,023
(1,169)
(393)
Net financial items
4
854
(1,101)
19,756
17,223
4,905
Income/(loss) before tax
36,979
9,417
(12,995)
(12,509)
(2,962)
Income tax
5
(25,503)
(5,620)
6,762
4,714
1,943
Net income/(loss)
11,476
3,797
6,757
4,710
1,938
Attributable to equity holders of the company
11,467
3,789
5
4
5
Attributable to non-controlling interests
9
8
2.12
1.46
0.60
Basic earnings per share (in USD)
3.57
1.17
2.11
1.46
0.60
Diluted earnings per share (in USD)
3.56
1.16
3,188
3,228
3,247
Weighted average number of ordinary shares outstanding
(in millions)
3,208
3,248
3,197
3,237
3,257
Weighted average number of ordinary shares outstanding
diluted (in millions)
3,217
3,257
Equinor second quarter 2022
15
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Quarters
First half
Q2 2022
Q1 2022
Q2 2021
(unaudited, in USD million)
2022
2021
6,762
4,714
1,943
Net income/(loss)
11,476
3,797
27
(419)
107
Actuarial gains/(losses) on defined benefit pension
plans
(392)
224
(6)
93
(24)
Income tax effect on income and expenses recognised
in OCI
1)
87
(50)
21
(326)
83
Items that will not be reclassified to the Consolidated
statement of income
(305)
174
(4,410)
173
119
Foreign currency translation effects
(4,238)
73
(4,410)
173
119
Items that may be subsequently reclassified to
the Consolidated statement of
income
(4,238)
73
(4,389)
(153)
202
Other comprehensive income/(loss)
(4,542)
247
2,372
4,561
2,144
Total comprehensive income/(loss)
6,933
4,044
2,368
4,557
2,140
Attributable to the equity holders of the company
6,925
4,036
5
4
5
Attributable to non-controlling interests
9
8
1) Other comprehensive income (OCI).
Equinor second quarter 2022
16
CONSOLIDATED BALANCE SHEET
At 30 June
At 31 December
(unaudited, in USD million)
Note
2022
2021
1)
ASSETS
Property, plant and equipment
2
54,787
62,075
Intangible assets
5,307
6,452
Equity accounted investments
1,659
2,686
Deferred tax assets
6,478
6,259
Pension assets
815
1,449
Derivative financial instruments
660
1,265
Financial investments
2,788
3,346
Prepayments and financial receivables
6
1,579
1,087
Total non-current assets
74,073
84,618
Inventories
5,257
3,395
Trade and other receivables
17,741
17,927
Derivative financial instruments
6,856
5,131
Financial investments
25,105
21,246
Cash and cash equivalents
20,582
14,126
Total current assets
75,541
61,826
Assets classified as held for sale
3
2,352
676
Total assets
151,966
147,120
EQUITY AND LIABILITIES
Shareholders' equity
41,206
39,010
Non-controlling interests
21
14
Total equity
41,226
39,024
Finance debt
4
24,062
27,404
Lease liabilities
2,318
2,449
Deferred tax liabilities
13,393
14,037
Pension liabilities
4,086
4,403
Provisions and other liabilities
6
15,814
19,899
Derivative financial instruments
2,035
767
Total non-current liabilities
61,708
68,959
Trade, other payables and provisions
10,985
14,310
Current tax payable
5
21,636
13,119
Finance debt
4
5,775
5,273
Lease liabilities
1,138
1,113
Dividends payable
1,262
582
Derivative financial instruments
6,416
4,609
Total current liabilities
47,214
39,005
Liabilities directly associated with the assets classified
as held for sale
3
1,818
132
Total liabilities
110,740
108,096
Total equity and liabilities
151,966
147,120
1) Audited
Equinor second quarter 2022
17
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 1 January 2021
1)
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)
Share buy-back
0
0
0
0
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
At 1 January 2022
1)
1,164
6,408
36,683
(5,245)
39,010
14
39,024
Net income/(loss)
11,467
11,467
9
11,476
Other comprehensive income/(loss)
(305)
(4,238)
(4,542)
(4,542)
Total comprehensive income/(loss)
6,933
Dividends
(2,551)
(2,551)
(2,551)
Share buy-back
2)
(22)
(2,148)
(2,170)
(2,170)
Other equity transactions
(9)
0
(8)
(2)
(11)
At 30 June 2022
1,142
4,252
45,295
(9,483)
41,206
21
41,226
1) Audited
2) For more information see note 7 Capital distribution.
Equinor second quarter 2022
18
CONSOLIDATED STATEMENT
OF CASH FLOWS
Quarters
First half
First half
Q2 2022
Q1 2022
Q2 2021
(unaudited, in USD million)
Note
2022
2021
19,756
17,223
4,905
Income/(loss) before tax
36,979
9,417
2,140
2,017
2,111
Depreciation, amortisation and net impairment
2
4,158
4,908
87
73
25
Exploration expenditures written off
161
89
(2,821)
284
43
(Gains)/losses on foreign currency transactions and
balances
4
(2,537)
(27)
(6)
(89)
16
(Gains)/losses on sale of assets and businesses
3
(94)
(1,367)
(920)
(300)
(565)
(Increase)/decrease in other items related to operating
activities
1)
(1,220)
(343)
3
953
170
(Increase)/decrease in net derivative financial instruments
956
746
59
11
39
Interest received
70
78
(233)
(118)
(199)
Interest paid
(351)
(340)
18,066
20,055
6,543
Cash flows provided by operating activities before
taxes paid and working
capital items
38,122
13,161
(8,050)
(4,307)
(344)
Taxes paid
(12,357)
(428)
(1,496)
23
444
(Increase)/decrease in working capital
(1,473)
(106)
8,520
15,771
6,643
Cash flows provided by operating activities
24,291
12,627
168
0
(111)
Cash used/received in business combinations
2)
3
168
(111)
(1,713)
(2,182)
(1,747)
Capital expenditures and investments
3)
(3,895)
(3,897)
(3,069)
(2,850)
(4,224)
(Increase)/decrease in financial investments
(5,920)
(3,525)
940
424
(65)
(Increase)/decrease in derivatives financial instruments
1,364
(370)
29
4
(134)
(Increase)/decrease in other interest-bearing items
33
(137)
77
140
692
Proceeds from sale of assets and businesses
3
217
1,839
(3,567)
(4,465)
(5,589)
Cash flows used in investing activities
(8,032)
(6,202)
0
0
(1)
Repayment of finance debt
0
(1,425)
(344)
(317)
(308)
Repayment of lease liabilities
(661)
(610)
(1,310)
(582)
(389)
Dividends paid
(1,893)
(744)
(304)
(439)
0
Share buy-back
(742)
0
(2,250)
(2,804)
687
Net current finance debt and other financing activities
(5,054)
(327)
(4,208)
(4,142)
(10)
Cash flows provided by/(used in) financing activities
(8,350)
(3,107)
745
7,165
1,044
Net increase/(decrease) in cash and cash equivalents
7,910
3,318
(1,064)
(270)
3
Effect of exchange rate changes on cash and cash equivalents
(1,334)
(170)
20,882
13,987
8,857
Cash and cash equivalents at the beginning
of the period (net of overdraft)
13,987
6,757
20,562
20,882
9,904
Cash and cash equivalents at the end of the
period (net of overdraft)
4)
20,562
9,904
The line Increase (decrease) in other items related
to operating activities in the first half of 2022 included
payment of USD
189
million
which represent the accretion related to the payment
of the acquisition and disposal of the interests
in the Bacalhau field as described
below.
Net after cash and cash equivalents acquired. The
line item includes cash consideration related to
the acquisition of Statfjord licences in
second quarter of 2022 as described in note
3 Acquisitions and disposals
The line Capital expenditures and investments for
the first half of 2022 includes USD
336
million which represents the net of an USD
769
million payment of a contingent consideration related
to the acquisition of interests in the Bacalhau
field in 2016 and 2017, and a
corresponding receipt of USD
433
million for the simultaneous payment of contingent consideration
related to disposal of parts of the
acquired interests in 2018.
At 30 June 2022 cash and cash equivalents included
a net overdraft of USD
20
million compared to a net overdraft of USD
7
million at
30 June 2021 and USD
140
million at 31 December 2021.
Equinor second quarter 2022
19
Notes to the Condensed interim financial statements
1 Organisation and basis of preparation
Organisation and principal activities
Equinor Group (Equinor) consists of
Equinor ASA
and its subsidiaries. Equinor ASA is incorporated and domiciled in
Norway
and
listed on the Oslo Børs (
Norway
) and the New York Stock Exchange (USA). The address of its registered office is
Forusbeen 50, N-
4035 Stavanger, Norway
.
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 Energy AS, a
100
% owned operating subsidiary of Equinor ASA and
owner of all of Equinor's oil and gas activities and net assets on the Norwegian continental shelf,
is co-obligor or guarantor of certain
debt obligations of Equinor ASA.
Equinor's condensed interim financial statements for the second quarter of 2022 were authorised
for issue by the board of directors on
26 July 2022.
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 2021. 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 2021.
There have been no changes to the significant accounting policies during 2022 compared to the Consolidated annual
financial
statements for 2021. With effect from the second quarter 2022, due to the evolving trading business in the
Group, Equinor has
determined that fair value less cost to sell (FV) is an appropriate measurement basis for
commodity inventories held for trading
purposes with subsequent changes in FV recognised in the Consolidated statement
of income. Comparative numbers have not been
restated due to materiality.
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. When determining fair
value, there have been no changes to the valuation techniques or models and Equinor applies the
same sources of input and the
same criteria for categorisation in the fair value hierarchy as disclosed in the Consolidated
annual financial statements for 2021.
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 reviewed on an on-going basis and 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.
Equinor second quarter 2022
20
2 Segments
Equinor’s operations are managed through operating segments (business areas). The
reportable 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) correspond to the operating segments.
The operating segments
Projects, Drilling & Procurement (PDP), Technology,
Digital & Innovation (TDI) and Corporate staff and functions are aggregated into
the reportable segment Other based on materiality. The majority of the costs in PDP and TDI are allocated to the three Exploration &
Production segments, MMP and REN.
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 the segments is IFRS as applied by the group,
except for the line-item Additions to PP&E, intangibles and
equity accounted investments in which movements related to changes in asset retirement obligations
are excluded. With effect from
the second quarter 2022, Equinor has changed the measurement basis for the segments related to
leases. Since the implementation
of IFRS 16 Leases in 2019, all leases have been presented within the Other segment and
lease costs have been allocated to the
operating segments based on underlying lease payments with a corresponding credit in the Other
segment. As from the second
quarter 2022, lease contracts are accounted for in accordance with IFRS 16 in all segments
based on functional responsibility. This
change does not affect Equinor’s consolidated financial statements. Comparative numbers in the
segments have been restated.
Second quarter 2022
E&P
Norway
E&P
International
E&P
USA
MMP
REN
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenue and
other income
132
237
82
35,921
3
33
0
36,408
Revenues inter-segment
16,580
1,559
1,548
93
0
9
(19,789)
0
Net income/(loss) from equity accounted
investments
0
42
0
(2)
12
0
0
51
Total revenues and other income
16,712
1,838
1,629
36,012
15
42
(19,789)
36,459
Purchases [net of inventory variation]
0
(36)
(0)
(33,379)
0
(1)
19,564
(13,851)
Operating, selling, general and
administrative expenses
(984)
(370)
(244)
(956)
(56)
(3)
209
(2,404)
Depreciation, amortisation and net
impairment losses
(1,202)
(315)
(362)
(221)
(1)
(39)
0
(2,140)
Exploration expenses
(45)
(135)
(151)
0
0
0
0
(331)
Total operating expenses
(2,231)
(856)
(757)
(34,556)
(57)
(43)
19,774
(18,727)
Net operating income/(loss)
14,482
982
872
1,456
(42)
(1)
(16)
17,733
Additions to PP&E, intangibles and equity
accounted investments
1,339
573
170
253
57
14
(0)
2,405
Equinor second quarter 2022
21
First quarter 2022
E&P
Norway
1)
E&P
International
1)
E&P
USA
MMP
1)
REN
Other
1)
Eliminations
1)
Total
(in USD million)
Revenues third party, other revenue and
other income
1)
209
62
78
35,825
90
31
0
36,294
Revenues inter-segment
1)
18,245
1,324
1,191
89
0
10
(20,859)
0
Net income/(loss) from equity accounted
investments
0
67
0
3
29
0
0
99
Total revenues and other income
1)
18,454
1,453
1,269
35,917
119
41
(20,859)
36,393
Purchases [net of inventory variation]
0
27
0
(34,289)
0
0
20,752
(13,510)
Operating, selling, general and
administrative expenses
1)
(816)
(390)
(220)
(923)
(41)
(78)
197
(2,271)
Depreciation, amortisation and net
impairment losses
1)
(600)
(1,378)
212
(212)
(1)
(39)
0
(2,017)
Exploration expenses
(106)
(81)
(16)
0
0
0
0
(203)
Total operating expenses
1)
(1,521)
(1,822)
(24)
(35,425)
(41)
(116)
20,949
(18,001)
Net operating income/(loss)
1)
16,933
(369)
1,245
492
77
(76)
90
18,392
Additions to PP&E, intangibles and equity
accounted investments
1)
1,072
626
126
265
43
56
(0)
2,188
1) Restated due to implementation of IFRS 16 in
the segments, mainly affecting the line item Operating,
selling, general and administrative
expenses in MMP (reduction of USD
136
million) and Other (increase of USD
177
million) and the line item Depreciation, amortisation
and net
impairments in MMP (increase of USD
134
million) and Other (reduction USD
201
million).
Equinor second quarter 2022
22
Second quarter 2021
E&P
Norway
1)
E&P
International
1)
E&P
USA
MMP
1)
REN
Other
1)
Eliminations
1)
Total
(in USD million)
Revenues third party, other revenue and
other income
1)
78
291
101
16,897
7
72
0
17,446
Revenues inter-segment
1)
6,167
1,170
867
82
0
10
(8,296)
0
Net income/(loss) from equity accounted
investments
0
19
0
7
(6)
(4)
0
16
Total revenues and other income
1)
6,245
1,479
968
16,986
2
78
(8,296)
17,462
Purchases [net of inventory variation]
0
14
(0)
(15,448)
0
(0)
8,035
(7,399)
Operating, selling, general and
administrative expenses
1)
(811)
(425)
(286)
(969)
(32)
(112)
307
(2,329)
Depreciation, amortisation and net
impairment losses
1)
(959)
(244)
(438)
(424)
(1)
(44)
0
(2,111)
Exploration expenses
(55)
(231)
(39)
0
0
0
0
(326)
Total operating expenses
1)
(1,825)
(886)
(764)
(16,842)
(33)
(156)
8,342
(12,164)
Net operating income/(loss)
1)
4,420
593
204
144
(31)
(78)
46
5,298
Additions to PP&E, intangibles and equity
accounted investments
1)
1,322
430
180
138
159
14
0
2,243
1) Restated due to implementation of IFRS 16 in
the segments, mainly affecting the line item Operating,
selling, general and administrative
expenses in MMP (reduction of USD
128
million) and Other (increase of USD
169
million) and the line item Depreciation, amortisation and
net
impairments in MMP (increase of USD
140
million) and Other (reduction of USD
208
million).
Equinor second quarter 2022
23
First half 2022
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
341
298
160
71,746
93
64
0
72,702
Revenues inter-segment
34,825
2,883
2,739
182
0
19
(40,648)
0
Net income/(loss) from equity accounted
investments
0
109
0
1
41
0
0
151
Total revenues and other income
35,166
3,290
2,898
71,929
134
83
(40,648)
72,852
Purchases [net of inventory variation]
0
(9)
(0)
(67,668)
0
(0)
40,316
(27,361)
Operating, selling, general and
administrative expenses
(1,799)
(760)
(465)
(1,880)
(97)
(81)
406
(4,675)
Depreciation, amortisation and net
impairment losses
(1,802)
(1,693)
(150)
(433)
(2)
(78)
0
(4,158)
Exploration expenses
(150)
(216)
(168)
0
0
0
0
(534)
Total operating expenses
(3,752)
(2,678)
(782)
(69,981)
(99)
(159)
40,723
(36,727)
Net operating income/(loss)
31,414
613
2,117
1,948
35
(77)
75
36,125
Additions to PP&E, intangibles and equity
accounted investments
2,410
1,199
296
518
100
70
(0)
4,593
Balance sheet information
Equity accounted investments
3
490
0
113
1,001
52
(0)
1,659
Non-current segment assets
29,176
14,975
11,121
3,631
183
1,009
0
60,094
Non-current assets not allocated to
segments
12,319
Total non-current assets
74,073
Equinor second quarter 2022
24
First half 2021
E&P
Norway
1)
E&P
International
1)
E&P
USA
1)
MMP
1)
REN
1)
Other
1)
Eliminations
1)
Total
(in USD million)
Revenues third party, other revenue and
other income
1)
138
514
222
32,599
1,389
143
0
35,005
Revenues inter-segment
1)
11,923
1,975
1,739
166
0
20
(15,823)
0
Net income/(loss) from equity accounted
investments
0
42
0
15
(6)
(4)
0
47
Total revenues and other income
1)
12,060
2,531
1,961
32,780
1,383
160
(15,823)
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)
(1,589)
(662)
(621)
(1,908)
(72)
(231)
593
(4,489)
Depreciation, amortisation and net
impairment losses
1)
(2,579)
(661)
(874)
(704)
(1)
(88)
0
(4,908)
Exploration expenses
(125)
(338)
(109)
0
0
0
0
(572)
Total operating expenses
1)
(4,293)
(1,676)
(1,605)
(32,236)
(73)
(320)
15,669
(24,534)
Net operating income/(loss)
1)
7,767
855
356
544
1,310
(160)
(154)
10,518
Additions to PP&E, intangibles and equity
accounted investments
1)
2,587
819
337
190
286
38
0
4,258
Balance sheet information
Equity accounted investments
3
1,181
0
96
1,067
32
0
2,377
Non-current segment assets
1)
38,337
17,839
11,967
4,786
145
1,086
0
74,160
Non-current assets not allocated to
segments
13,303
Total non-current assets
89,841
1) Restated due to implementation of IFRS 16 in
the segments, mainly affecting the line item Operating,
selling, general and administrative
expenses in MMP (reduction of USD
258
million) and Other (increase of USD
341
million) and the line item Depreciation, amortisation and
net
impairments in MMP (increase of USD
268
million) and Other (reduction of USD
404
million).
Equinor has not recognised any significant impairments or reversals of impairments in the second quarter
of 2022.
Net impairment reversals amounted to USD
276
million in the second quarter of 2021, of which USD
113
million related to acquisition
cost and signature bonuses classified as exploration expenses. In the second quarter of 2021, net impairment
reversals of USD
396
million and USD
93
million were recognised in the E&P Norway segment and E&P International segment respectively. In the MMP
segment, the impairments amounted to USD
185
million in the second quarter of 2021.
Net impairment reversals in the first half of 2022 amounted to USD
245
million (net impairment of USD
152
million in the first half of
2021), of which USD
832
million related to impairment of equity accounted investments in the first quarter of 2022.
The recoverable amounts in the impairment assessments are normally 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 forecast on cost,
production profiles and commodity prices.
Equinor second quarter 2022
25
Non-current assets by country
At 30 June
At 31 December
(in USD million)
2022
2021
Norway
32,886
40,564
USA
12,077
12,323
Brazil
8,929
8,751
UK
1,868
2,096
Azerbaijan
1,609
1,654
Canada
1,294
1,403
Angola
932
948
Algeria
656
708
Argentina
550
474
Denmark
486
536
Other
467
1,757
Total non-current assets
1)
61,754
71,213
1) Excluding deferred tax assets, pension assets and non-current financial assets.
The decrease in non-current assets in Norway from 31 December 2021 to 30 June 2022 is mainly
due to currency effect of USD
4.2
billion and increased interest rates which have effect on the asset retirement obligation of USD
2.7
billion.
Revenues from contracts with customers by geographical areas
When attributing the line item Revenues from contracts with customers to the country of the legal entity
executing the sale for the
second quarter of 2022, Norway constitutes
84
% and USA constitutes
14
% of such revenues (
85
% and
12
% respectively for the first
half of 2022). For the second quarter of 2021, Norway and USA constituted
76
% and
16
% of such revenues, respectively (
78
% and
16
% for the first half of 2021).
Revenues from contracts with customers and other revenues
Quarters
First half
Q2 2022
Q1 2022
Q2 2021
(in USD million)
2022
2021
16,397
15,034
9,060
Crude oil
31,431
17,774
12,923
15,538
3,443
Natural gas
28,461
6,741
11,457
14,350
2,908
- European gas
25,808
5,569
766
621
319
- North American gas
1,387
741
699
567
215
- Other incl. Liquefied natural gas
1,266
431
2,531
2,904
2,682
Refined products
5,435
5,055
2,529
2,576
1,672
Natural gas liquids
5,106
3,582
310
282
205
Transportation
592
461
651
1,117
341
Other sales
1,768
454
35,342
37,451
17,402
Revenues from contracts with customers
72,793
34,067
1,045
(1,401)
(23)
Total other revenues
1)
(356)
(558)
36,387
36,050
17,380
Revenues
72,437
33,508
1) Principally relates to commodity derivatives.
Equinor second quarter 2022
26
3 Acquisitions and disposals
Acquisition
Acquisition of Statfjord
On 31 May 2022, Equinor closed a transaction to acquire all of Spirit Energy’s interests in production
licenses in the Statfjord area
which covers the Norwegian and UK Continental Shelves and consists of three integrated
production platforms and satellite subsea
installations. All licenses are operated by Equinor. Spirit Energy’s ownership shares in the licenses covered by the transaction range
from
11.56
% to
48.78
%. The cash consideration received was USD
193
million, whereof USD
25
million related to Spirit’s lifting of
volumes on Equinor’s behalf in June 2022. The assets and liabilities acquired have been reflected
in accordance with the principles in
IFRS 3 Business Combination. The transaction is reflected in the E&P Norway and E&P
International segments with a cash
consideration of USD
96
million and USD
72
million respectively.
In the segment E&P Norway, the acquisition resulted in an increase of USD
98
million in Property, Plant and Equipment, an increase
of USD
390
million in Asset Retirement Obligation, a reduction of Deferred Tax Liability of USD
298
million and an increase in taxes
payable of USD
98
million. In the segment E&P International, the acquisition resulted in an increase
of USD
98
million in Property,
Plant and Equipment, an increase of USD
241
million in Asset Retirement Obligation and an increase of Deferred Tax Asset of USD
86 million. Both the consideration and the purchase price allocation are preliminary.
Acquisition of Triton Power
On 28 June 2022, Equinor and SSE Thermal entered into an agreement to acquire the power company Triton Power from Energy
Capital Partners (ECP) for a combined consideration of USD
413
million (GBP
341
million) before adjustments that mainly relates to
net debt and working capital. The key plant included in the purchase of Triton Power is the Saltend Power Station with
an installed
capacity of
1.2
GW. Equinor and SSE Thermal will own
50
% each of Triton Power. Closing of the transaction is expected during 2022,
subject to approvals by the UK National Security Filing and EU Merger Control.
Disposals
10% of Dogger Bank C
On 10 February 2022, Equinor closed the transaction with Eni to sell a
10
% equity interest in the Dogger Bank C project in the UK for
a total consideration of USD
91
million (GBP
68
million), resulting in a gain of USD
87
million (GBP
65
million). After closing, Equinor’s
ownership share is
40
%. 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.
Exit Russia
Following Russia’s invasion of Ukraine, Equinor announced that it had decided to stop new investments in
Russia and start the
process of exiting Equinor’s joint arrangements. Based on this decision, Equinor
evaluated its assets in Russia and recognised net
impairments of USD
1.083
billion in the first quarter, of which USD
251
million was related to property, plant and equipment and
intangible assets and USD
832
million was related to investments accounted for using the equity method. The impairments were net
of contingent consideration from the time of acquiring the assets. The impairments were recognised
in the line items Depreciation,
amortisation and net impairment losses and Exploration expenses in the Consolidated statement
of income based on the nature of the
impaired assets and reflected in the E&P International segment. During the second quarter, Equinor has transferred its participating
interests in four Russian entities to Rosneft and is released from all future commitments
and obligations with no material impact on the
financial statements. The ownership interests in Kharyaga have been transferred to the operator.
Equinor has stopped trading in Russian oil. This means that Equinor will not enter into any new
trades or engage in new transport of
oil and oil products from Russia. Equinor has assessed the accounting impact of certain commitments
arising from such contracts
entered into prior to the invasion and deem the impact to be immaterial.
Held for sale
Equinor Energy Ireland Limited
In the fourth quarter of 2021, Equinor entered into an agreement with Vermilion Energy Inc (Vermilion) to sell Equinor’s non-operated
equity position in the Corrib gas project in Ireland. The transaction covers a sale of
100
% of the shares in Equinor Energy Ireland
Limited (EEIL). EEIL owns
36.5
% of the Corrib field alongside the operator Vermilion (
20
%) and Nephin Energy (
43.5
%). Equinor and
Vermilion have agreed a consideration of USD
434
million before closing adjustments and contingent consideration linked to 2022
production level and gas prices. The effective date for the transaction is 1 January 2022. Closing is expected in the
second half of
2022.
Ekofisk and Martin Linge on the Norwegian Continental Shelf
On 10 May 2022, Equinor entered into an agreement with Sval Energi to divest Equinor’s
ownership share in the Greater Ekofisk
Area, a
19
% ownership share in Martin Linge and an
18,5
% share in Norpipe Oil AS for a cash consideration of USD
1
billion before
interim period settlement, and a contingent consideration linked to realised oil and gas prices for 2022 and
2023. Equinor will retain a
51
% ownership share in Martin Linge and continue as operator of the field. Closing of the
transaction is expected in the second half of
2022, subject to customary government and license approvals.
Equinor second quarter 2022
27
4 Financial items
Quarters
First half
Q2 2022
Q1 2022
Q2 2021
(in USD million)
2022
2021
2,821
(284)
(43)
Net foreign currency exchange gains/(losses)
2,537
27
280
114
28
Interest income and other financial items
394
72
(224)
(134)
27
Gains/(losses) on financial investments
(357)
(123)
(526)
(599)
(101)
Gains/(losses) other derivative financial instruments
(1,126)
(462)
(327)
(266)
(304)
Interest and other finance expenses
(593)
(616)
2,023
(1,169)
(393)
Net financial items
854
(1,101)
Equinor has a US Commercial paper programme available with a limit of USD
5
billion. USD
799
million has been utilised as of 30
June 2022, compared to USD
2,600
million utilised as of 31 December 2021.
Equinor reports significant unrealised foreign currency gains in the second quarter 2022, mainly related to
a significant strengthening
of USD versus NOK.
5 Income taxes
Quarters
First half
Q2 2022
Q1 2022
Q2 2021
(in USD million)
2022
2021
19,756
17,223
4,905
Income/(loss) before tax
36,979
9,417
(12,995)
(12,509)
(2,962)
Income tax
(25,503)
(5,620)
65.8
%
72.6
%
60.4
%
Effective tax rate
69
%
59.7
%
The effective tax rate for the second quarter of 2022 was primarily influenced by low share of income before tax
from the Norwegian
continental shelf and positive income in countries with lower tax rates and with unrecognised deferred
tax assets. The effective rate
for the first half of 2022 was primarily influenced by high share of income before tax from the Norwegian
continental shelf and losses
including impairments recognised in countries with lower effective tax rates, partially offset by positive income in countries with lower
tax rates and with unrecognised deferred tax assets. The effective tax rate for the second quarter of 2022 and for the
first half of 2022
was also influenced by currency effects in entities that are taxable in other currencies than the functional
currency.
Retrospective application of the Norwegian Petroleum Tax Act amendments adopted on 17 June 2022, effective from 1 January 2022,
had an immaterial cumulative impact on the interim financial statement in the second quarter 2022.
The effective 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 effective 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.
6 Provisions, commitments, contingent items and related parties
Asset retirement obligation
Equinor's estimated asset retirement obligations (ARO) have decreased by USD
4.432
billion to USD
12.985
billion at 30 June 2022
compared to year-end 2021, mainly due to increased discount rates and strengthening of USD versus
other currencies. Main impact
on currency is in NOK within E&P Norway. Changes in ARO are reflected within Property, plant and equipment and Provisions and
other liabilities in the Consolidated balance sheet.
Deviation notices and disputes with Norwegian tax authorities
In the fourth quarter of 2020, Equinor received a decision from the Norwegian tax authorities
related to the capital structure of the
subsidiary Equinor Service Center Belgium N.V., concluding that the capital structure had to be based on the arm length’s principle,
Equinor second quarter 2022
28
affecting the fiscal years 2012 to 2016. Equinor received a claim of USD
182
million that was paid in 2021. During the second quarter
of 2022, the tax authorities reversed its position and accepted Equinor’s initial position. As
such, the tax payment will be reimbursed to
Equinor. As no amounts were previously expensed in the financial statements, the decision does not affect the Consolidated
statement of income.
Equinor has an ongoing dispute regarding the level of Research & Development cost to be allocated
to the offshore tax regime.
During the second quarter of 2022, the Oil Taxation Office informed
Equinor that it had decided to accept Equinor’s position regarding
certain disputed items, resulting in a reduction in Equinor’s maximum exposure to
approximately USD
149
million. Equinor has
provided for its best estimate in the matter.
During the normal course of its business, Equinor is involved in legal and other proceedings,
and several unresolved claims are
currently outstanding. The ultimate liability or asset in respect of such litigation and claims
cannot be determined at this time. 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.
Related parties
The line item Prepayments and Financial Receivables includes USD
1.206
billion which represent a gross receivable from the
Norwegian state under the Marketing Instruction in relation to the state’s (SDFI) expected participation in the gas
sales activities of a
foreign subsidiary of Equinor. At year-end 2021, the corresponding amount was USD
435
million. The increase is mainly related to
increased volumes as well as higher cost price on the gas storage.
7 Capital distribution
In February 2022 Equinor launched a share buy-back programme for 2022 of up to USD
5,000
million, where the first tranche of
around USD
1,000
million was finalised in March 2022. USD
330
million of the first tranche was acquired in the open market and
recognised as a reduction in equity as treasury shares in the first quarter 2022. The treatment of
the proportionate share of
67
% from
the Norwegian State is described below.
In May 2022, Equinor launched the second tranche of the 2022 share buy-back programme of
USD
1,333
million. For the second
tranche Equinor entered into an irrevocable agreement with a third party for up to USD
440
million of shares to be purchased in the
open market, while up to USD
893
million of shares from the Norwegian State will, in accordance with an agreement with the
Ministry
of Trade, Industry and Fisheries,
be redeemed at the annual general meeting in May 2023 in order for the Norwegian State
to
maintain its ownership percentage in Equinor. As of 30 June 2022, USD
338
million has been acquired in the open market, of which
USD
304
million has been settled.
The second tranche of USD
440
million (both acquired and remaining order) has been recognised as a reduction in equity as treasury
shares due to the irrevocable agreement with the third party. The remaining order of the second tranche is accrued for and classified
as Trade, other payables and provisions, and this tranche was completed 13 July 2022.
In line with the objective for the share buy-back programme which was executed by Equinor ASA
in the period 28 July 2021 to 25
March 2022, a proportionate share of
67
% from the Norwegian State was redeemed in accordance with an agreement with the
Ministry of Petroleum and Energy for the Norwegian State to maintain their ownership percentage
in Equinor. The redemption was
approved by the annual general meeting held on 11 May 2022. The State’s share including interest and dividends was recognised as
a short-term liability and as a reduction in equity as treasury shares in the second quarter 2022, subsequent
to the decision at the
annual general meeting held on 11 May 2022. The shares were cancelled 29 June 2022 and the liability of USD
1,399
million (NOK
13,496
million) to the Norwegian State was settled 20 July 2022.
On 26 July 2022, the board of directors decided a cash dividend for the second quarter of 2022
of USD
0.20
per share and an
increase in the extraordinary cash dividend from USD
0.20
per share to USD
0.50
per share for the second and third quarter of 2022.
The Equinor shares will be traded ex-dividend 11 November 2022 on the Oslo Børs and for ADR holders on the New York Stock
Exchange. Record date will be 14 November 2022 and payment date will be 29 November 2022.
On 26 July 2022, the board of directors decided to initiate the third tranche of the share
buy-back programme for 2022 of around USD
1,833
million, including shares to be redeemed from the Norwegian State (subject to
annual general meeting approval in May 2023),
and increase the share buy-back programme for 2022 from previously communicated up to USD
5,000
million to up to USD
6,000
million. The third tranche will commence on 28 July and will end no later than 26 October
2022
.
Equinor second quarter 2022
29
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 2022.
To the best of our knowledge, we confirm that:
●
the Equinor ASA Condensed interim financial statements for the first half of 2022 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, 26
July 2022
THE BOARD
OF DIRECTORS
OF EQUINOR
ASA
/s/ JON ERIK REINHARDSEN
CHAIR
/s/ ANNE DRINKWATER
DEPUTY CHAIR
/s/ BJØRN
TORE GODAL
/s/ REBEKKA GLASSER
HERLOFSEN
/s/ MICHAEL
LEWIS
/s/ JONATHAN
LEWIS
/s/ FINN BJØRN
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 2022
30
SUPPLEMENTARY
DISCLOSURES
Exchange rates
Quarters
Change
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
Exchange rates
2022
2021
Change
0.1059
0.1130
0.1195
(11%)
NOK/USD average daily exchange rate
0.1095
0.1184
(8%)
0.1004
0.1143
0.1168
(14%)
NOK/USD period-end exchange rate
0.1004
0.1168
(14%)
9.4411
8.8483
8.3697
13%
USD/NOK average daily exchange rate
9.1327
8.4445
8%
9.9629
8.7479
8.5592
16%
USD/NOK period-end exchange rate
9.9629
8.5592
16%
1.0636
1.1216
1.2058
(12%)
EUR/USD average daily exchange rate
1.0928
1.2053
(9%)
1.0387
1.1101
1.1884
(13%)
EUR/USD period-end exchange rate
1.0387
1.1884
(13%)
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.
●
Capital employed adjusted –
this measure is defined as Equinor's total equity (including non-controlling interests) and
net
interest-bearing debt adjusted.
Equinor second quarter 2022
31
●
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.
●
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
2.4 billion in the second quarter
of 2022 (second quarter of 2021: USD 2.2 billion). 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
2022, a total of USD 0.4 billion (second quarter of 2021: USD 0.2 billion) is 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 of 2022 and 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 (2022: USD
18.1 billion | 2021: USD
6.5 billion), taxes paid (2022: negative USD 8.0 billion | 2021: negative USD 0.3 billion), cash
used/received in business
combinations (2022: USD 0.2 billion | 2021: negative USD 0.1 billion), capital expenditures and investments (2022:
negative USD
1.7 billion | 2021: negative USD 1.7 billion), increase/decrease in other items interest-bearing (2022: USD
0.0 billion | 2021:
negative USD 0.1 billion), proceeds from sale of assets and businesses (2022: USD 0.1 billion | 2021: USD 0.7
billion), dividend
paid (2022: negative USD 1.3 billion | 2021: negative USD 0.4 billion) and share buy-back (2022: negative USD
0.3 billion | 2021:
USD 0.0 billion), resulting in a free cash flow of USD 7.0 billion in the second quarter
of 2022 (2021: 4.5 billion).
●
Free cash flow for the first half of 2022 and 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 (2022: USD
38.1 billion | 2021: USD 13.2
billion), taxes paid (2022: negative USD 12.4 billion | 2021: negative USD 0.4 billion), cash
used/received in business
combinations (2022: USD 0.2 billion | 2021: negative USD 0.1 billion), capital expenditures and investments (2022:
negative USD
3.9 billion | 2021: negative USD 3.9 billion), increase/decrease in other items interest-bearing (2022: USD
0.0 billion | 2021:
negative USD 0.1 billion), proceeds from sale of assets and businesses (2022: USD 0.2 billion | 2021: USD
1.8 billion), dividend
paid (2022: negative USD 1.9 billion | 2021: negative USD 0.7 billion) and share buy-back (2022: negative USD
0.7 billion | 2021:
USD 0.0 billion), resulting in a free cash flow of USD 19.7 billion in the first half
of 2022 (2021: USD 9.7 billion).
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 several 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
therefore adjusted, to show estimated revenues and associated costs based upon the production
for the period to reflect
operational performance and comparability with peers.
Equinor second quarter 2022
32
●
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.
●
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 2021 Annual Report and Form 20-F.
Equinor second quarter 2022
33
Reconciliation of 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 2022
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Rene-
wables
Other
(in USD million)
Total revenues and other income
36,459
16,712
1,838
1,629
36,012
15
(19,748
)
Adjusting items
(144)
(221)
118
-
(41)
0
-
Changes in fair value of derivatives
(34)
-
40
-
(74)
-
-
Periodisation of inventory hedging effect
42
-
-
-
42
-
-
Over-/underlift
(144)
(221)
78
-
-
-
-
Gain/loss on sale of assets
(9)
-
-
-
(9)
-
-
Adjusted total revenues and other income
36,315
16,491
1,956
1,629
35,971
16
(19,748
)
Purchases [net of inventory variation]
(13,851)
0
(36)
(0)
(33,379)
-
19,564
Adjusting items
(34)
-
-
-
(50)
-
16
Operational storage effects
(50)
-
-
-
(50)
-
-
Eliminations
16
-
-
-
-
-
16
Adjusted purchases [net of inventory variation]
(13,885)
0
(36)
(0)
(33,429)
-
19,580
Operating and administrative expenses
(2,404)
(984)
(370)
(244)
(956)
(56)
206
Adjusting items
15
70
(3)
4
(56)
-
-
Over-/underlift
60
70
(10)
-
-
-
-
Other adjustments
6
-
6
-
-
-
-
Gain/loss on sale of assets
4
-
0
4
-
-
-
Provisions
(56)
-
-
-
(56)
-
-
Adjusted operating and administrative expenses
(2,390)
(914)
(373)
(240)
(1,012)
(56)
206
Depreciation, amortisation and net impairments
(2,140)
(1,202)
(315)
(362)
(221)
(1)
(39)
Adjusting items
(9)
(0)
(9)
-
-
-
-
Impairment
(9)
-
(9)
-
-
-
-
Adjusted depreciation, amortisation and net
impairments
(2,149)
(1,203)
(324)
(362)
(221)
(1)
(39)
Exploration expenses
(331)
(45)
(135)
(151)
-
-
-
Adjusting items
30
0
24
5
-
-
-
Impairment
30
0
24
5
-
-
-
Adjusted exploration expenses
(301)
(44)
(111)
(146)
-
-
-
Net operating income/(loss)
17,733
14,482
982
872
1,456
(42)
(17)
Sum of adjusting items
(143)
(152)
130
10
(146)
0
16
Adjusted earnings/(loss)
17,590
14,330
1,111
881
1,310
(42)
(1)
Tax on adjusted earnings
(12,590)
(11,121)
(405)
(21)
(1,050)
7
(1)
Adjusted earnings/(loss) after tax
5,000
3,210
707
861
259
(34)
(1)
Equinor second quarter 2022
34
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
Rene-
wables
Other
(in USD million)
Total revenues and other income
1)
17,462
6,245
1,479
968
16,986
2
(8,218)
Adjusting items
(289)
(22)
(161)
-
(107)
0
-
Changes in fair value of derivatives
(60)
(19)
-
-
(41)
-
-
Periodisation of inventory hedging effect
(67)
-
-
-
(67)
-
-
Operating and administrative expenses
0
-
-
-
-
0
-
Over-/underlift
(106)
(2)
(103)
-
-
-
-
Provisions
(57)
-
(57)
-
-
-
-
Adjusted total revenues and other income
1)
17,173
6,224
1,318
968
16,879
2
(8,218)
Purchases [net of inventory variation]
(7,399)
-
14
(0)
(15,448)
-
8,035
Adjusting items
(133)
-
-
-
(87)
-
(46)
Operational storage effects
(87)
-
-
-
(87)
-
-
Eliminations
(46)
-
-
-
-
-
(46)
Adjusted purchases [net of inventory variation]
(7,531)
-
14
(0)
(15,535)
-
7,989
Operating and administrative expenses
1)
(2,329)
(811)
(425)
(286)
(969)
(32)
195
Adjusting items
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
-
-
Adjusted operating and administrative expenses
1)
(2,287)
(846)
(364)
(272)
(968)
(32)
195
Depreciation, amortisation and net impairments
1)
(2,111)
(959)
(244)
(438)
(424)
(1)
(44)
Adjusting items
(389)
(403)
(188)
-
202
-
-
Impairment
211
-
9
-
202
-
-
Reversal of impairment
(600)
(403)
(197)
-
-
-
-
Adjusted depreciation, amortisation and net
impairments
1)
(2,500)
(1,362)
(433)
(438)
(222)
(1)
(44)
Exploration expenses
(326)
(55)
(231)
(39)
-
-
0
Adjusting items
113
7
95
11
-
-
-
Impairment
113
7
95
11
-
-
-
Adjusted exploration expenses
(212)
(48)
(136)
(28)
-
-
0
Net operating income/(loss)
1)
5,298
4,420
593
204
144
(31)
(32)
Sum of adjusting items
(656)
(453)
(193)
26
10
0
(46)
Adjusted earnings/(loss)
1)
4,641
3,967
400
230
154
(31)
(78)
Tax on adjusted earnings
(3,064)
(2,861)
(106)
0
(124)
4
22
Adjusted earnings/(loss) after tax
1)
1,578
1,106
294
230
29
(27)
(56)
1) E&P Norway, E&P International, MMP and Other segments are restated due
to implementation of IFRS 16 in the segments.
Equinor second quarter 2022
35
Items impacting net operating income/(loss) in the
first quarter of 2022
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Rene-
wables
Other
(in USD million)
Total revenues and other income
1)
36,393
18,454
1,453
1,269
35,917
119
(20,818)
Adjusting Items
319
209
400
-
(202)
(87)
(1)
Changes in fair value of derivatives
205
(154)
314
-
45
-
-
Periodisation of inventory hedging effect
(247)
-
-
-
(247)
-
-
Over-/underlift
449
363
86
-
-
-
-
Gain/loss on sale of assets
(88)
-
-
-
-
(87)
(1)
Adjusted total revenues and other income
1)
36,712
18,663
1,852
1,269
35,715
32
(20,819)
Purchases [net of inventory variation]
(13,510)
0
27
0
(34,289)
-
20,752
Adjusting Items
(272)
-
-
-
(181)
-
(90)
Operational storage effects
(181)
-
-
-
(181)
-
-
Eliminations
(90)
-
-
-
-
-
(90)
Adjusted purchases [net of inventory variation]
(13,781)
0
27
0
(34,470)
-
20,662
Operating and administrative expenses
1)
(2,271)
(816)
(390)
(220)
(923)
(41)
119
Adjusting Items
(179)
(68)
(33)
(0)
(78)
-
-
Over-/underlift
(101)
(68)
(33)
-
-
-
-
Provisions
(78)
-
-
-
(78)
-
-
Adjusted operating and administrative
expenses
1)
(2,450)
(884)
(423)
(221)
(1,001)
(41)
119
Depreciation, amortisation and net impairments
1)
(2,017)
(600)
(1,378)
212
(212)
(1)
(39)
Adjusting Items
(315)
(821)
1,039
(533)
-
-
-
Impairment
1,039
-
1,039
-
-
-
-
Reversal of Impairment
(1,354)
(821)
-
(533)
-
-
-
Adjusted depreciation, amortisation and net
impairments
1)
(2,333)
(1,421)
(339)
(320)
(212)
(1)
(39)
Exploration expenses
(203)
(106)
(81)
(16)
-
-
-
Adjusting Items
46
4
41
1
-
-
-
Impairment
46
4
41
1
-
-
-
Adjusted exploration expenses
(157)
(101)
(40)
(15)
-
-
-
Net operating income/(loss)
1)
18,392
16,933
(369)
1,245
492
77
15
Sum of adjusting items
(401)
(676)
1,447
(532)
(461)
(87)
(91)
Adjusted earnings/(loss)
1)
17,991
16,256
1,078
713
31
(10)
(76)
Tax on adjusted earnings
(12,812)
(12,602)
(234)
(13)
7
3
28
Adjusted earnings/(loss) after tax
1)
5,179
3,655
844
700
38
(7)
(49)
1) E&P Norway, E&P International, MMP and Other segments are restated due
to implementation of IFRS 16 in the segments.
Equinor second quarter 2022
36
Items impacting net operating income/(loss) in the
first half of 2022
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Rene-
wables
Other
(in USD million)
Total revenues and other income
72,852
35,166
3,290
2,898
71,929
134
(40,565)
Adjusting items
174
(13)
517
-
(243)
(87)
(1)
Changes in fair value of derivatives
170
(154)
354
-
(29)
-
-
Periodisation of inventory hedging effect
(205)
-
-
-
(205)
-
-
Over-/underlift
305
142
164
-
-
-
-
Gain/loss on sale of assets
(97)
-
-
-
(9)
(87)
(1)
Adjusted total revenues and other income
73,027
35,154
3,808
2,898
71,686
47
(40,566)
Purchases [net of inventory variation]
(27,361)
0
(9)
(0)
(67,668)
-
40,316
Adjusting items
(306)
-
-
-
(231)
-
(75)
Operational storage effects
(231)
-
-
-
(231)
-
-
Eliminations
(75)
-
-
-
-
-
(75)
Adjusted purchases [net of inventory variation]
(27,666)
0
(9)
(0)
(67,899)
-
40,242
Operating and administrative expenses
(4,675)
(1,799)
(760)
(465)
(1,880)
(97)
326
Adjusting items
(165)
2
(36)
4
(134)
-
-
Over-/underlift
(41)
2
(43)
-
-
-
-
Other adjustments
6
-
6
-
-
-
-
Gain/loss on sale of assets
4
-
0
4
-
-
-
Provisions
(134)
-
-
-
(134)
-
-
Adjusted operating and administrative expenses
(4,840)
(1,798)
(796)
(461)
(2,013)
(97)
326
Depreciation, amortisation and net impairments
(4,158)
(1,802)
(1,693)
(150)
(433)
(2)
(78)
Adjusting items
(324)
(821)
1,030
(533)
-
-
-
Impairment
1,030
-
1,030
-
-
-
-
Reversal of impairment
(1,354)
(821)
-
(533)
-
-
-
Adjusted depreciation, amortisation and net
impairments
(4,482)
(2,624)
(663)
(682)
(433)
(2)
(78)
Exploration expenses
(534)
(150)
(216)
(168)
-
-
-
Adjusting items
76
4
65
6
-
-
-
Impairment
76
4
65
6
-
-
-
Adjusted exploration expenses
(458)
(146)
(151)
(161)
-
-
-
Net operating income/(loss)
36,125
31,414
613
2,117
1,948
35
(2)
Sum of adjusting items
(544)
(828)
1,576
(523)
(607)
(87)
(75)
Adjusted earnings/(loss)
35,581
30,586
2,189
1,594
1,341
(52)
(78)
Tax on adjusted earnings
(25,401)
(23,722)
(639)
(34)
(1,043)
10
27
Adjusted earnings/(loss) after tax
10,180
6,864
1,550
1,560
297
(42)
(50)
Equinor second quarter 2022
37
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
Rene-
wables
Other
(in USD million)
Total revenues and other income
1)
35,052
12,060
2,531
1,961
32,780
1,383
(15,663)
Adjusting Items
(1,934)
(165)
(12)
-
(378)
(1,379)
-
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
-
-
-
-
Gain/loss on sale of assets
(1,382)
-
-
-
-
(1,382)
-
Provisions
(57)
-
(57)
-
-
-
-
Adjusted total revenues and other income
1)
33,118
11,896
2,519
1,961
32,402
3
(15,663)
Purchases [net of inventory variation]
(14,565)
0
(15)
(0)
(29,625)
-
15,075
Adjusting Items
(37)
-
-
-
(191)
-
154
Operational storage effects
(191)
-
-
-
(191)
-
-
Eliminations
154
-
-
-
-
-
154
Adjusted purchases [net of inventory variation]
(14,602)
0
(15)
(0)
(29,816)
-
15,229
Operating and administrative expenses
1)
(4,489)
(1,589)
(662)
(621)
(1,908)
(72)
362
Adjusting Items
28
45
(21)
15
(10)
-
-
Over-/underlift
21
42
(21)
-
-
-
-
Change in accounting policy
(23)
2
-
-
(25)
-
-
Gain/loss on sale of assets
15
-
-
15
-
-
-
Provisions
15
-
-
-
15
-
-
Adjusted operating and administrative expenses
1)
(4,461)
(1,544)
(683)
(606)
(1,918)
(72)
362
Selling, general and administrative expenses
(413)
(2)
(42)
(104)
(195)
(44)
(26)
Adjusted selling, general and administrative
expenses
(413)
(2)
(42)
(104)
(195)
(44)
(26)
Depreciation, amortisation and net impairments
1)
(4,908)
(2,579)
(661)
(874)
(704)
(1)
(88)
Adjusting Items
22
(127)
(138)
28
259
-
-
Impairment
622
276
59
28
259
-
-
Reversal of impairment
(600)
(403)
(197)
-
-
-
-
Adjusted depreciation, amortisation and net
impairments
1)
(4,886)
(2,706)
(799)
(846)
(445)
(1)
(88)
Exploration expenses
(572)
(125)
(338)
(109)
-
-
0
Adjusting Items
130
7
99
24
-
-
-
Impairment
130
7
99
24
-
-
-
Adjusted exploration expenses
(443)
(118)
(239)
(86)
-
-
0
Net operating income/(loss)
1)
10,518
7,767
855
356
544
1,310
(314)
Sum of adjusting items
(1,792)
(240)
(72)
66
(321)
(1,379)
154
Adjusted earnings/(loss)
1)
8,726
7,527
783
422
224
(70)
(160)
Tax on adjusted earnings
(5,859)
(5,447)
(312)
0
(153)
9
44
Adjusted earnings/(loss) after tax
1)
2,867
2,081
472
422
71
(61)
(117)
1) E&P Norway, E&P International, MMP and Other segments are restated due
to implementation of IFRS 16 in the segments
Equinor second quarter 2022
38
Adjusted earnings after tax by reporting segment
Quarters
Q2 2022
Q1 2022
Q2 2021
(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
1)
14,330
(11,121)
3,210
16,256
(12,602)
3,655
3,967
(2,861)
1,106
E&P International
1)
1,111
(405)
707
1,078
(234)
844
400
(106)
294
E&P USA
881
(21)
861
713
(13)
700
230
0
230
MMP
1)
1,310
(1,050)
259
31
7
38
154
(124)
29
REN
(42)
7
(34)
(10)
3
(7)
(31)
4
(27)
Other
1)
(1)
(1)
(1)
(76)
28
(49)
(78)
22
(56)
Equinor group
17,590
(12,590)
5,000
17,991
(12,812)
5,179
4,641
(3,064)
1,578
Effective tax rates on adjusted
earnings
71.6%
71.2%
66.0%
1) Q1 2022 and Q2 2021 are restated due
to implementation of IFRS 16 in the segments.
First half
2022
2021
(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
1)
30,586
(23,722)
6,864
7,527
(5,447)
2,081
E&P International
1)
2,189
(639)
1,550
783
(312)
472
E&P USA
1,594
(34)
1,560
422
0
422
MMP
1)
1,341
(1,043)
297
224
(153)
71
REN
(52)
10
(42)
(70)
9
(61)
Other
1)
(78)
27
(50)
(160)
44
(117)
Equinor group
35,581
(25,401)
10,180
8,726
(5,859)
2,867
Effective tax rates on adjusted earnings
71.4%
67.1%
1) First half 2021 is restated due to implementation
of IFRS 16 in the segments.
Equinor second quarter 2022
39
Reconciliation of adjusted earnings after tax to net income
Quarters
Reconciliation of adjusted earnings after tax to net income
First half
Q2 2022
Q1 2022
Q2 2021
(in USD million)
2022
2021
17,733
18,392
5,298
Net operating income/(loss)
A
36,125
10,518
13,075
12,572
3,025
Income tax less tax on net financial items
B
25,647
5,888
4,658
5,820
2,272
Net operating income after tax
C = A-B
10,478
4,630
(143)
(401)
(656)
Items impacting net operating income/(loss)
1)
D
(544)
2)
(1,792)
(485)
239
38
Tax on items impacting net operating income/(loss)
E
(246)
2)
(29)
5,000
5,179
1,578
Adjusted earnings after tax*
F = C+D-E
10,180
2)
2,867
2,023
(1,169)
(393)
Net financial items
G
854
(1,101)
81
64
64
Tax on net financial items
H
144
268
6,762
4,714
1,943
Net income/(loss)
I = C+G+H
11,476
3,797
1) For items impacting net operating income/(loss),
see Reconciliation of adjusted earnings in the Supplementary
disclosures.
Quarters
Change
Adjusted exploration expenses
First half
Q2 2022
Q1 2022
Q2 2021
Q2 on Q2
(in USD million)
2022
2021
Change
121
127
186
(35%)
E&P Norway exploration expenditures
248
300
(17%)
115
43
127
(10%)
E&P International exploration expenditures
159
260
(39%)
26
51
29
(10%)
E&P USA exploration expenditures
77
46
66%
262
221
342
(23%)
Group exploration expenditures
484
606
(20%)
58
26
(88)
N/A
Expensed, previously capitalised exploration expenditures
85
(41)
N/A
(19)
(91)
(42)
(54%)
Capitalised share of current period's exploration
activity
(110)
(123)
(10%)
30
46
113
(74%)
Impairment (reversal of impairment)
76
130
(41%)
331
203
326
2%
Exploration expenses according to IFRS
534
572
(7%)
(30)
(46)
(113)
(74%)
Items impacting net operating income/(loss)
1)
(76)
(130)
(41%)
301
157
212
42%
Adjusted exploration expenses
458
443
3%
1) For items impacting net operating income/(loss),
see Reconciliation of adjusted earnings in the Supplementary
disclosures.
Equinor second quarter 2022
40
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 December
(in USD million)
2022
2021
Shareholders' equity
41,206
39,010
Non-controlling interests
21
14
Total equity
A
41,226
39,024
Current finance debt and lease liabilities
6,913
6,386
Non-current finance debt and lease liabilities
26,380
29,854
Gross interest-bearing debt
B
33,293
36,239
Cash and cash equivalents
20,582
14,126
Current financial investments
25,105
21,246
Cash and cash equivalents and financial investment
C
45,687
35,372
Net interest-bearing debt [9]
B1 = B-C
(12,393)
867
Other interest-bearing elements
1)
4,361
2,369
Net interest-bearing debt adjusted normalised for
tax payment, including lease liabilities*
B2
(8,033)
3,236
Lease liabilities
3,457
3,562
Net interest-bearing debt adjusted*
B3
(11,490)
(326)
Calculation of capital employed*
Capital employed
A+B1
28,833
39,891
Capital employed adjusted, including lease liabilities
A+B2
33,194
42,259
Capital employed adjusted
A+B3
29,737
38,697
Calculated net debt to capital employed*
Net debt to capital employed
(B1)/(A+B1)
(43.0%)
2.2%
Net debt to capital employed adjusted, including
lease liabilities
(B2)/(A+B2)
(24.2%)
7.7%
Net debt to capital employed adjusted
(B3)/(A+B3)
(38.6%)
(0.8%)
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.
Equinor second quarter 2022
41
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, its impacts, consequences
and risks and Equinor's response to it; the
decision to stop new investments into Russia and trading in Russian oil; estimates regarding
tax payments; the commitment to
develop as a broad energy company; the ambition to be a leader in the energy transition
and reduce net group-wide greenhouse gas
emissions; future financial performance, including cash flow and liquidity; accounting policies; the ambition to grow
cash flow and
returns; expectations regarding returns from Equinor’s oil and gas portfolio; plans to develop
fields and increase gas exports; plans for
renewables production capacity and investments in renewables; expectations regarding development of renewables
projects, CCUS
and hydrogen businesses; market outlook and future economic projections and assumptions, including commodity
price assumptions;
organic capital expenditures through 2025; expectations and estimates regarding production; the
ambition to keep unit of production
cost in the top quartile of our peer group; scheduled maintenance activity and the effects thereof on equity production;
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 recent significant oil price volatility
and production and the uncertainty regarding demand created by the Covid-19 pandemic;
Russia’s invasion of Ukraine and our
subsequent decision to stop new investments into Russia and exiting our Russian joint ventures; 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 supply chain disruptions; health, safety and environmental risks; 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; 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 and in Equinor's Annual
Report on Form 20-F for the year ended December 31, 2021, filed with the U.S. Securities and Exchange
Commission (including
section 2.13 Risk review - Risk factors thereof). Equinor's 2021 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 2022
42
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 gross margin and 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.
Transactions with the
Norwegian State.
The Norwegian State, represented by the Ministry of Trade, Industry and Fisheries, 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, and related expenditures are refunded by the State.
6.
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. The
growth percentage is based on historical production numbers, adjusted for portfolio measures.
7.
The group's
average invoiced gas prices
include volumes sold by the MMP segment.
8.
The internal
transfer price
paid from the MMP segment to the E&P Norway and E&P USA segments.
9.
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: 27 July, 2022
By: ___/s/ Ulrica Fearn
Name: Ulrica Fearn
Title:
Chief Financial Officer