Oil & gas production on the rise but Equinor’s profit plummets as energy prices go down

While Norway’s energy giant Equinor has continued supplying Europe with energy, managing to boost its hydrocarbon production in the process, the company’s net profit in the first quarter of 2024 has taken a hit, dropping by 46% compared to the figure recorded in 1Q 2023, amid a downturn in oil and gas prices.

On April 25, 2024, Equinor reported that its net operating income in 1Q 2024 fell to $7.63 billion from $8.75 billion in 4Q 2023 and $12.5 billion in 1Q 2023. The reported net income in 1Q 2024 was $2.67 billion, slightly higher than the $2.61 billion in 4Q 2023, but significantly lower than the $4.97 billion during the same period last year.

The company’s adjusted operating income showed a similar trend, amounting to $7.53 billion in the first quarter of 2024, which represents a decrease from 4Q 2023, when it was $8.56 billion, and a nearly 37% drop compared to the same period last year when it amounted to $11.92 billion. According to the company, the reasons for this are lower gas prices, but the decrease was partially offset by production growth and increased liquids prices.

The Norwegian company reported that the price for piped gas to Europe went down by 50% compared to 1Q 2023, amounting to $9.41 per MMbtu. However, the average liquids price was $76.0 per bbl, up 3% compared to the same period last year. 

Anders Opedal, President and CEO of Equinor, commented: “Equinor delivered solid financial results driven by strong operational performance across the business. Production on the Norwegian continental shelf was high, and the international portfolio contributed with solid production growth. We continue with significant capital distribution and expect to deliver a total distribution of 14 billion dollars in 2024.”

The Norwegian giant delivered total equity production of 2,164 mboe per day in the first quarter, down from 2,197 mboe per day in 4Q 2023, but up from 2,130 mboe per day in 1Q 2023. The company attributes production growth to its strong operational performance, including increased capacity at Johan Sverdrup field, which reached a record-high production level of 755,000 barrels of oil per day during a capacity test in May 2023.

Additionally, the activity level on the Norwegian continental shelf was said to be high throughout the quarter, which was further boosted by the start-up of the Breidablikk field four months ahead of schedule. The company completed nine exploration wells offshore with two commercial discoveries, three wells were ongoing at the quarter-end, and it won 39 new production licenses on the NCS.

“We remain a safe and reliable provider of energy to Europe. On the NCS we got approval for the Eirin project and the Sleipner and Gudrun fields are now partially operating with power from shore, all contributing to lower cost and emissions from production,” added Opedal.

The plan for the development of the Eirin field, a subsea tieback to Gina Krog, was approved in the quarter and the field is expected to contribute to Equinor’s gas volumes from next year. Emissions from operations are expected to be further reduced by the electrification of the Sleipner field center, as well as activities at the Gudrun platform – where a two-well extension is underway – and other associated fields.

The firm’s international production increased by 3%, partially due to the Vito field in the U.S. Gulf of Mexico and the Buzzard field in the UK, as well as new wells in Angola, where the Norwegian company produces hydrocarbons from three blocks.

In line with its energy transition strategy, Equinor continued to pursue growth in renewable energy sources, as confirmed by the production boost to 774 GWh in the first quarter of 2024, up by 48% from the same quarter last year. Onshore power plants in Brazil were the main reasons for this, with production starting at the 531 MW Mendubim solar plants, where the Norwegian player has a 30% ownership share. The firm also credits its subsidiary Rio Energy for contributing to the process. 

“We maintain a value-driven approach to renewables growth. In the quarter, we achieved significantly better terms for our Empire Wind 1 project in the US and started the commercial production from the Mendubim solar plants in Brazil,” noted Equinor’s CEO.

The Norwegian heavyweight also secured a significantly improved offtake price for its Empire Wind 1 project in the U.S. East Coast. Axess Technologies has recently signed a contract to provide an export cable pull-in system, which will be mounted on the offshore substation at the wind farm. The planned next steps for the project entail a final investment decision (FID), project financing, and farm-down to a new partner.

The marketing, midstream and processing (MMP) segment delivered an adjusted operating income of $887 million, which is above the guided range for the segment. This is mainly driven by strong results from liquids and LNG trading.

The reported cash flow provided by operating activities before taxes paid and working capital items amounted to $9 billion in 1Q 2024, compared to $2.74 billion in 4Q 2023 and $14.9 billion in 1Q 2023, representing a 39% drop y-o-y. Equinor’s cash flow from operations after taxes paid was $5.84 billion, up from $2.79 billion in the previous quarter, but down 40% from $9.72 billion in 1Q 2023. 

Equinor confirmed the payment of one NCS tax installment amounting to $3.52 billion in 1Q 2024, adding that the organic capital expenditure was $2.76 billion, and total capital expenditures were $3.36 billion. In addition, net cash flow amounted to $8 million after taxes, capital distribution to shareholders, and investments.

The company’s adjusted net debt to capital employed ratio was negative 19.8% at the end of 1Q 2024, which is a slight improvement from negative 21.6% at the end of 4Q 2023, and a significant improvement from negative 52.3% at the end of 1Q 2023.