Equinor returns another $3 billion to owners as Q2 profit beats forecast

Equinor will return additional $3 billion to shareholders, the Norwegian oil group said on Wednesday after reporting better-than-expected second-quarter profit on the back of soaring gas prices fuelled by the war in Ukraine.

Adjusted earnings before tax jumped to $17.6 billion in the April-June quarter from $4.6 billion a year earlier, beating the $16.9 billion predicted in a poll of 26 analysts compiled by the company.

“Solid operational performance and high production combined with high prices resulted in strong financial results,” Chief Executive Anders Opedal said in a statement.

The company raised its dividend and share buyback guidance for 2022 by 30% to a total of around $13 billion from $10 billion announced in February.

Equinor lifted its extraordinary dividend, paid as a result of high oil and gas prices, to $0.50 per share for the second and third quarters from $0.20, with the increase corresponding to about $2 billion.

The company’s regular quarterly payment, which remains at $0.20 per share.

“Given Equinor’s net cash position, it is plausible that the specials (dividends) are likely to continue into 2023,” RBC Capital Markets wrote in a note to clients.

The company said it now plans share buybacks of $6 billion in 2022, up from a previous projection of $5 billion.

Majority state-owned Equinor is the first European oil company to publish its second-quarter results, with Shell (LON:RDSa) and TotalEnergies reporting on Thursday.

Equinor’s Oslo-listed shares rose 2.0% in early trade and were up 55% so far this year, beating a 13% rise in European oil and gas stocks.

SOARING GAS DEMAND

Norway has become Europe’s largest supplier of piped natural gas, according to Refinitiv data, as Russia has cut deliveries amid a standoff with the West over Moscow’s invasion of Ukraine.

Equinor’s natural gas output in Norway rose by 18% year-on-year in the second quarter as the company sought to meet the soaring demand in Europe.

“Equinor puts its best effort into securing safe and reliable deliveries of energy to Europe, whilst continuing to invest in the energy transition,” Opedal said.

The company restarted in May its LNG plant outside the Arctic town of Hammerfest after a 20-month outage.

Russia’s Gazprom (MCX:GAZP) warned on Monday that supplies through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity due to technical issues, threatening Europe’s plans to fill its gas storages before the winter heating season.

European Union energy ministers on Tuesday approved a proposal for EU member states to voluntarily cut gas use by 15% from August to March.

Equinor’s overall oil and gas production was broadly unchanged year-on-year, however, at 2.0 million barrels of oil equivalent per day (boed) as its international output fell.

The company maintained its full-year production guidance of a 2% increase from 2021.

As Equinor’s cash flow continued to grow, its adjusted net debt headed further into negative territory, meaning that the company had more cash and financial investments at hand than gross debts.

Its net debt to capital employed ratio stood at a negative 38.6% at the end of June compared to negative 22.2% at the end of March.

Equinor earlier this year pulled out of Russia following Moscow’s Feb. 24 invasion of Ukraine, booking a $1.1 billion impairment in the first quarter. It has also stopped trading in Russian oil.