Equinor Posts Adjusted Operating Income Beat on Higher Production, Oil Prices — Update

By Dominic Chopping

Equinor reported forecast-beating earnings for the second quarter on higher production volumes, though analysts questioned the quality of the beat given significant "overlift" effects.

The Norwegian energy major said Wednesday that adjusted operating income--its preferred metric--fell to $7.48 billion from $7.8 billion in the year-prior period, but came in above the $6.96 billion expected in a company-compiled consensus.

Net profit rose to $1.86 billion from $1.82 billion, versus $2.09 billion expected in a FactSet analyst poll.

Revenue rose 11% to $25.46 billion.

However, the quality of the beat is questionable given that it was primarily driven by an "overlift" position in both the Exploration & Production Norway and Exploration & Production International divisions, Kepler Cheuvreux analyst Bertrand Hodee said in a note to clients.

Overlift positions occur when an energy company takes a higher share of its entitled production from jointly-owned operations. Equinor's second-quarter earnings benefited from an overlift position of around $370 million, said Biraj Borkhataria at RBC Capital Markets.

The average price of liquids rose 10% on the year, but the European realized piped gas price fell 13% due to mild temperatures and lower market prices driven by high storage levels and reduced demand.

Equinor produced 2.05 million barrels of oil equivalent per day, slightly above the 2.03 million boe/d expected by analysts and up from 1.99 million boe/d in the same quarter a year ago.

Annual power production from renewable sources is now expected to rise 70% on last year, with the company having previously aimed to double production, amid delays at its U.K. Dogger Bank A offshore wind farm. The company is currently trying to boost its renewable energy output by growing within wind and solar while developing low-carbon solutions such as hydrogen and carbon capture and storage.

The U.K. wind-farm project now targets full commercial operations during the first half of 2025, having previously expected this in the third quarter of 2024.

The company still expects stable oil and gas production this year compared with 2023, with organic capital expenditure of around $13 billion.

Equinor proposed a quarterly dividend of $0.35, an extraordinary dividend of $0.35 and initiated the third tranche of its buyback worth up to $1.6 billion, all of which is in line with the company's planned 2024 total capital distribution of $14 billion.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

July 24, 2024 06:22 ET (10:22 GMT)

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