Equinor(EQNR) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted operating income of $6.5 billion before tax, with a net income of $300 million impacted by an impairment on U.S. offshore wind projects [6][7] - Adjusted earnings per share was NOK 0.64, with cash flow from operations after tax being strong at $9.2 billion [8][22] - The net debt to capital employed ratio increased to 15.2%, reflecting the state's share of the buyback from last year booked as finance debt [23] Business Line Data and Key Metrics Changes - E&P Norway adjusted operating income totaled $5.7 billion before tax, while E&P International saw higher production from Brazil and new wells in Argentina and Angola [20] - U.S. Onshore gas production increased by 50%, capturing almost 80% higher gas prices [12] - Renewable production increased by 26%, mainly driven by the ramp-up of Dogger Bank A in the UK [19] Market Data and Key Metrics Changes - The European gas market is impacted by lower storage levels, with inventories almost 20 percentage points lower than last year [8] - Liquids prices were lower than the same quarter last year, while gas prices were higher in Europe and the U.S. [19] Company Strategy and Development Direction - The company is focused on maintaining production levels on the Norwegian Continental Shelf (NCS) until 2035, with strategic progress in projects like Johan Castberg and Johan Sverdrup Phase III [11] - Long-term contracts for gas supply to the UK and Germany demonstrate the demand for Norwegian gas in Europe [11] - The company is optimizing its portfolio internationally, with a focus on U.S. Onshore gas and divesting from less strategic assets like the Peregrino field in Brazil [13][44] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of geopolitical unrest and trade wars on energy markets, emphasizing a commitment to cost and capital discipline [8][9] - The company expects to maintain a robust financial position despite lower price environments and is focused on delivering capital distributions of around $9 billion for the year [10][16] Other Important Information - The company announced an ordinary cash dividend of $0.37 per share and a share buyback of up to $1.265 billion [16] - An impairment of $955 million was recorded due to changes in regulations for future offshore wind projects in the U.S. [14][15] Q&A Session Summary Question: Empire Wind impairment and discount rate rationale - Management clarified that the 3% discount rate used for Empire Wind is an unlevered real discount rate after tax, justified by a fixed revenue profile for 25 years [28][29] Question: Working capital and volatility - Working capital is currently $5 billion, a reduction of $550 million, driven by upstream segment movements rather than trading activities [30][31] Question: New tax system in Norway - Tax payments will be evenly distributed over the year, with five installments in the second half of 2025 and five in the first half of 2026 [35][36] Question: Peregrino divestment timing and Bacalau project - The divestment of Peregrino is expected to close towards the end of the year, with Bacalau progressing well and expected to contribute significantly to international production [44][46] Question: Unit OpEx costs in Norway - Unit production costs are stable quarter on quarter, with efforts to keep costs flat despite inflation [53][54] Question: Johan Sverdrup production plateau - Production from Johan Sverdrup is expected to remain high, with ongoing efforts to manage water production and enhance recovery rates [92][94] Question: CapEx and competitive distributions - Management emphasized that CapEx is a pretax number, and cash flow from operations is after tax, affecting comparisons with peers [86][87]