Equinor ASA Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Safety: Top priority, with best safety results (serious incident frequency 0.27, personal injury rate 2.2).
• Production: Second quarter production 2,096,000 barrels per day, up over 2% y-o-y. NCS liquids production up 4% due to Johan Castberg ramp-up and Halten East start. U.S. onshore gas production offset international production losses. Renewable production up 26%.
• Financials: Adjusted operating income $6.5 billion before tax. IFRS net income $1.3 billion impacted by U.S. offshore wind impairment. Cash flow from operations after tax $9.3 billion YTD. CapEx guidance firm; balance sheet robust.
• Strategic Progress: Johan Castberg reached plateau; final investment decisions on Johan Sverdrup Phase 3 and Fram South; large gas contracts with U.K. and Germany; divestment of Peregrino; Empire Wind 1 project back in execution but $955M impairment; capital distribution: $0.37 per share dividend, $1.265B share buyback.

Segment Performance

• E&P Norway: Adjusted operating income before tax totaled $5.7 billion. Revenue contribution from E&P Norway was significant, with strong performance driven by operational factors.
• E&P International: Delivered higher production from Brazil and new wells in Argentina and Angola. Peregrino and assets under U.K. IGD are classified as held for sale, representing around $10 billion.
• E&P U.S.: Results were driven by high onshore gas production.
• MMP: Delivered solid gas trading, but results were below the guided range due to Hammerfest LNG maintenance and weaker crude trading.
• Renewables: Renewable production increased by 26% mainly due to the ramp-up of Dogger Bank A in the U.K., but business development and early phase costs were lower.

Guidance

• Maintain guidance communicated at CMU in February. Production growth target 4% for the year. CapEx guidance remains firm. Net debt to capital employed ratio expected to remain around current levels based on current forward prices.

Risks

• Energy markets impacted by geopolitical unrest, conflicts, tariffs, and trade wars. European gas inventories low, warm weather driving additional gas to power demand. Changes in U.S. offshore wind regulations impacted Empire Wind impairment. Hammerfest LNG shutdown impacted MMP's results.

Question and Answer

Q: On Empire Wind impairment and the 3% discount rate used for impairment testing.

A: Torgrim explains the 3% is an unlevered, real discount rate after tax, justified by the fixed 25-year revenue profile of the project.

Q: Regarding working capital movements.

A: Working capital is $5 billion, a reduction of $550 million, not driven by trading activities; trading volatility is lower, reducing risk in trading.

Q: About Brazil, including the Peregrino divestment and Bacalhau production expectations.

A: Peregrino divestment closing end of year, Bacalhau expected to contribute production in the second half of the year.

Q: On U.S. onshore gas growth and downstream investments.

A: More opportunities in U.S. onshore gas, watching gas-fired power plants space as gas markets link more with power markets.