UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a -16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
29 October 2020
Commission File Number 1- 15200
Equinor ASA
(Translation of registrant’s name into English)
FORUSBEEN 50, N-4035, STAVANGER, NORWAY
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20 -F or Form 40-F:
Form 20-F
X
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S -T Rule 101(b)(1):_____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S -T Rule 101(b)(7):_____
This report on Form 6-K is being filed for the purposes of incorporation by reference in the Registration Statements on Form F-3 (File No. 333-
239808) and Form S-8 (File No. 333-168426). This report shall be deemed filed and incorporated by reference in such Registration
Statements and shall be deemed to be a part thereof from the date on which this report is furnished, to the extent not superseded by
documents or reports subsequently filed or furnished.
This document includes portions from the previously published results announcement of Equinor ASA as of, and for the nine months ended 30
September 2020, as revised to comply with the requirements of Item 10(e) of Regulation S-K regarding non-GAAP financial information
promulgated by the U.S. Securities and Exchange Commission regarding non-GAAP financial information. This document does not update or
otherwise supplement the information contained in the previously published results announcement.
Equinor third quarter 2020 results
Equinor reports IFRS net operating income of negative USD 2.02 billion and IFRS net income of negative USD 2.12 billion in
the third quarter of 2020 , following net impairments of USD 2.93 billion mainly due to reduced future price assumptions.
●
●
●
●
(1)
“Our financial results are impacted by weak prices as regions across the world are still severely affected by the pandemic. We see the
results of our forceful response to the market turmoil, with significant cost improvements and strict financial discipline. Net impairments
in the quarter are mainly due to reduced price assumptions. Significant uncertainty remains around the future commodity price
development underlining the importance of increased competitiveness and financial resilience,” says Eldar Sætre, President and CEO
of Equinor ASA.
“We deliver solid operational results in the quarter with an underlying production growth of nine percent. We progress our competitive
project portfolio, supported by the tax policy measures in Norway, with the delivery of Plan for Development and Operation of the
Breidablikk field. Our specialised organisation for late-life production at the Norwegian continental shelf had a successful start -up
showing improved production efficiency and reduced cost,“ says Sætre.
“We continue to capture value from our renewable energy portfolio and position ourselves for profitable growth in value chains for
carbon capture and storage. This quarter we announced our partnership with BP, including the divestment of half of our share of
offshore wind projects Empire Wind and Beacon Wind in the US. We are progressing H2H Saltend, a project for large-scale
production of hydrogen in the UK, and in Norway we are progressing the Northern Lights project as part of creating full value chains
for carbon capture, transportation and storage ,” says Sætre.
Equinor is on track to deliver on the action plan launched in March 2020 of USD 3 billion to strengthen financial resilience, including a
reduction of operating costs of USD 0.70 billion. Unit production costs are significantly reduced from third quarter last year.
In the E&P Norway segment , Equinor saw weak prices impacting the results but took advantage of the flexibility in gas production as
gas prices in Europe recovered through the quarter.
Results in the E&P International segment were impacted by low prices, partially offset by a substantial reduction in costs. The E&P
USA segment was also impacted by weak prices, while continuing efforts to reduce activity and costs.
The Marketing, midstream and processing segment captured value from gas sales to Europe, offset by slightly negative refinery
margins in the quarter.
New energy solutions delivered a positive result in the quarter, including costs related to maturation of new projects. A capital gain of
around USD 1 billion from the divestment of a 50% non-operated interest of the offshore wind projects Empire Wind and Beacon Wind
in the US is expected to be booked in the first quarter of 2021.
IFRS net operating income was negative USD 2.02 billion in the third quarter, down from negative USD 0.47 billion in the same period
of 2019. IFRS net income was negative USD 2.12 billion in the third quarter, down from negative USD 1.11 billion in the third quarter
of 2019. Net operating income was impacted by net impairment of USD 2.93 billion mainly due to reduced future price assumptions as
well as some reduction s in reserves estimates. Net impairment include USD 1.38 billion in the E&P USA segment, of which USD 1.21
billion is related to US onshore. Impairments in the E&P International segment were USD 1.18 billion, while impairments within the
E&P Norway segment was USD 0.37 billion. In total, USD 0.58 billion of the net impairment was recognised as exploration expenses.
Equinor delivered total equity production of 1,994 mboe per day in the third quarter, up from 1,909 mboe per day in the same period in
2019, with an increased share of gas. Adjusting for portfolio transactions and government -imposed curtailments, this represents an
1
net debt to capital employed ratio as shown under the Supplementary section in the report.
underlying production growth of around 9% compared to the third quarter of 2019.
At the end of the third quarter Equinor has completed 26 exploration wells with 13 commercial discoveries and two wells under
evaluation. At the quarter end, 16 wells were ongoing. Exploration expenses in the quarter were USD 0.89 billion, compared to USD
0.87 billion in the same quarter of 2019.
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 10.2 billion in the first
nine months of 2020, compared to USD 16.6 billion in the first nine months of 2019. IFRS capital expenditure
(2)
for the first nine months of 2020. Organic capital expenditure [5] was USD 5.99 billion for the first nine months of 2020. At the closing
of the quarter net debt to capital employed
(3)
the net impairment in the quarter, as well as share buy-back from the Norwegian state . Following the implementation of IFRS 16, net
debt to capital employed
(3)
The board of director s has decided a cash dividend of USD 0.11 per share for the third quarter 2020.
The twelve-month average Serious Incident Frequency (SIF) for the period ending 30 September was 0.6 for 2020, similar to the
same period for 2019. The twelve-month average Recordable Injury Frequency (TRIF) for the period ending 30 September was 2.3 for
2020, compared to 2.5 in 2019.
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million, unless stated otherwise)
2020
2019
Change
(2,019)
(472)
(469)
>(100%)
Net operating income/(loss)
(2,434)
7,783
N/A
(2,124)
(251)
(1,107)
(92%)
Net income/(loss)
(3,080)
2,081
N/A
1,994
2,011
1,909
4%
Total equity liquids and gas production (mboe per day) [4]
2,079
2,032
2%
38.3
22.9
52.5
(27%)
Group average liquids price (USD/bbl) [1]
35.2
55.8
(37%)
2
Defined as Additions to PP&E, intangibles and equity accounted investments in note 2 Segments to the Con densed financial interim
statements.
3
This is a non-GAAP figure. Comparison numbers and reconciliation to IFRS are presented in the table Calculation of capital employed and
net debt to capital employed ratio as shown under the Supplementary section in the report.
GROUP REVIEW
Third quarter 2020
Total equity liquids and gas production
[4] was 1,994 mboe per day in the third quarter of 2020, up 4% compared to 1,909 mboe per day in
the third quarter of 2019 mainly due to new fields on the NCS and UKCS. Increased flexible gas production added to the increase, partially
offset by expected natural decline mainly on the NCS, production halt in Brazil and divestment of the Eagle Ford asset in the E&P USA
segment in the fourth quarter of 2019.
Total entitlement liquids and gas production
[3] was 1,865 mboe per day in the third quarter of 2020, up 7% compared to 1,745 mboe per
day in the third quarter of 2019. In addition to the factors mentioned above, production was positively influenced by lower effects from
production sharing agreements (PSA) [4], and lower US royalty volumes. The net effect of PSA and US royalties was 129 mboe per day in
total in the third quarter of 2020 compared to 164 mboe per day in the third quarter of 2019.
Quarters
Change
Condensed income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(unaudited, in USD million)
2020
2019
Change
11,339
7,603
15,610
(27%)
Total revenues and other income
34,073
49,189
(31%)
(5,307)
(2,750)
(7,667)
(31%)
Purchases [net of inventory variation]
(15,453)
(22,928)
(33%)
(2,368)
(2,411)
(2,922)
(19%)
Operating and administrative expenses
(7,382)
(8,063)
(8%)
(4,798)
(2,522)
(4,619)
4%
Depreciation, amortisation and net impairment losses
(11,757)
(9,039)
30%
(886)
(393)
(871)
2%
Exploration expenses
(1,914)
(1,374)
39%
(2,019)
(472)
(469)
>(100%)
Net operating income/(loss)
(2,434)
7,783
N/A
(201)
(248)
340
N/A
Net financial items
(426)
489
N/A
(2,220)
(720)
(129)
>(100%)
Income before tax
(2,859)
8,272
N/A
95
469
(978)
>(100%)
Income tax
(221)
(6,191)
(96%)
(2,124)
(251)
(1,107)
(92%)
Net income/(loss)
(3,080)
2,081
N/A
Net operating income
quarter of 2019. The decrease was mainly due to lower liquids and gas prices in addition to net impairments
4
reduced price assumptions
5
operational and administrative expenses, especially in the MMP segment, partially offset the decrease.
In the third quarter of 2020, net operating income was negatively impacted by net impairments of USD 2,928 million and provisions of
USD 108 million. Changes in fair value of derivatives and inventory hedge contracts of USD 352 million partially offset the decrease.
In the third quarter of 2019, net operating income was negatively impacted mainly by net impairment s of USD 2,794 million, provisions
of USD 560 million and changes in fair value of derivatives and inventory hedge contracts of USD 444 million and positively affected
by gain from sale of assets of USD 849 million.
Total revenues and other income
were USD 11 ,339 million in the third quarter of 2020 compared to USD 15,610 million in the third
quarter of 2019. The decrease was mainly due to lower average prices for liquids and gas.
Purchases [net of inventory variation]
third quarter of 2019. The decrease was mainly due to lower average prices for liquids and gas.
4
5
Operating and administrative expenses
were USD 2,368 million in the third quarter of 2020, compared to USD 2,922 million in the
third quarter of 2019. The decrease was mainly due to lower activity level as a result of the Covid -19 pandemic and the divest ment of
the Eagle Ford asset in the fourth quarter of 2019. Lower royalties and production fees added to the decrease. Higher transportation
costs for liquids, especially in the MMP segment, partially offset the decrease.
Depreciation, amortisation and net impairment losses
were USD 4,798 million in the third quarter of 2020, compared to USD
4,619 million in the third quarter of 2019. The increase was mainly due to ramp-up of new fields on the NCS and higher investments
especially in the E&P segments in addition to higher net impairments in the third quarter of 2020. Higher proved reserves estimates
especially in the E&P International and E&P USA segments in addition to lower depreciation basis resulting from net impairments in
previous periods partially offset the increase.
Exploration expenses
were USD 886 million in the third quarter of 2020, compared to USD 871 million in the third quarter of 2019.
The increase was mainly due to a lower portion of exploration expenditures being capitalised and a higher portion of exploration
expenditure capitali sed in earlier years being expensed this quarter. The increase was partially offset by lower drilling costs and lower
net impairments of assets amounting to USD 575 million in the third quarter of 2020, compared to USD 608 million in the same period
last year. For more information, see the table titled Exploration expenses in the Supplementary disclosures.
Net financial items
third quarter of 2019. The decrease of USD 541 million was mainly due to a loss of USD 131 million on net foreign exchange in the
third quarter of 2020, compared to a gain of USD 295 million in the third quarter of 2019. In addition, lower gain on derivatives related
to the long-term debt portfolio with a gain of USD 39 million in the third quarter of 2020, compared to a gain of USD 209 million in the
third quarter of 2019 , added to the decrease. Positive change in interest income and other financial items due to positive effects of
USD 235 million in the third quarter of 2020, compared to positive effects of USD 180 million in the third quarter of 2019 partially offset
the decrease.
Income tax
was negative USD 978 million and the effective tax rate was more than 100 %. For more information, see note
5
Income taxes
to the
Condensed interim financial statements.
Net income
2019. The decrease was mainly due to negative changes in net operating income as discussed above in addition to negative changes
for net financial items, partially offset by lower and positive income tax.
Cash flows provided by operating activities
decreased by USD 1,549 million compared to the third quarter of 2019. The decrease was
mainly due to lower liquids and gas prices and a change in working capital, partially offset by decreased tax payments.
Cash flows used in investing activities
increased by USD 2,877 million compared to the third quarter of 2019. The increase was mainly due
to increased financial investments and reduced proceeds from sale of assets, partially offset by lower cash flow used for business
combinations and capital expenditures.
Cash flows provided by financing activities
increased by USD 820 million compared to the third quarter of 2019. The increase was mainly
due to increased short-term debt, increased collateral received and decreased dividend paid, partially offset by increased payments related to
the share buy-back programme and repayment of finance debt.
Total cash flows
decreased by USD 3,606 million compared to the third quarter of 2019.
Free cash flow
increase was mainly due to lower cash flow used for business combinations, decreased tax payments and lower capital expenditures, partially
offset by reduced proceeds from sale of assets, lower liquids and gas prices and increased payments related to the share buy- back
programme.
First nine months 2020
Net operating income
nine months of 2019. The decrease was mainly due to lower liquids and gas prices in addition to net impairments
6
price assumptions
7
6
In the first nine months of 2020, net operating income was negatively impacted mainly by net impairments of USD 5,752 million and provisions
of USD 290 million.
In the first nine months of 2019, net operating income was negatively affected mainly by net impairments of USD 2,678 million, provisions of
USD 557 million and positively impacted by net gain of sale of assets of USD 999 million and changes in the fair value of derivatives and
inventory hedge contracts of USD 267 million.
Total revenues and other income
were USD 34,073 million in the first nine months of 2020 compared to USD 49,189 million in the first nine
months of 2019. The decrease was mainly due to lower average prices for liquids and gas.
Purchases
[6]
were USD 15,453 millio n in the first nine months of 2020 compared to USD 22,928 million in the first nine months of 2019. The
decrease was mainly due to lower average prices for liquids and gas.
Operating and administrative expenses
were
USD 7,382 million in the first nine months of 2020, a decrease of USD 681 million compared
to in the first nine months of 2019. The decrease was mainly due to the NOK/USD exchange rate development in addition to lower royalties
and production fees driven by lower volumes and prices. The divestment of the Eagle Ford asset in the E&P USA segment in the fourth
quarter of 2019 and reduced Gassled removal costs added to the decrease. Higher transportation costs for liquids in the MMP segment
partially offset the decrease.
Depreciation, amortisation and net impairment losses
million compared to the first nine months of 2019. The increase was mainly due to higher net impairments mainly related to reduced price
assumptions and negative reserve updates
2
. Ramp-up of new fields especially on the NCS and UKCS and higher investments mainly in the
US added to the increase. The increase was partially offset by higher proved reserves estimates for several fields, lower depreciation basis
resulting from net impairments in previous periods and the NOK/USD exchange rate development.
Exploration expenses
increased by USD 540 million to USD 1,914 million in the first nine months of 2020, primarily due to net impairment of
assets, higher portion of exploration expenditure capitalised in earlier years being expensed this period and higher drilling costs. A higher
portion of exploration expenses being capitalised and lower seismic costs and other costs compared to the first nine months of 2019 partially
offset the increase. For more information, see the table titled Exploration expenses in the Supplementary disclosures.
Net financial items
the first nine months of 2019. The decrease of USD 914 million was mainly due to a gain of USD 421 million on derivatives related to
a long-term debt portfolio in the first nine months of 2020 compared to a gain of USD 781 million in the first nine months of 2019. A
loss of USD 156 million on net foreign exchange in the first nine months of 2020 compared to a gain of USD 201 million in the first
nine months of 2019 in addition to lower gain of USD 375 million on Interest income and other financial items in the first nine months
of 2020 compared to a gain of USD 535 million in the first nine months of 2019, added to the decrease.
Income tax
the first nine months of 2019 was USD 6,191 million and the effective tax rate was 74,8%. For more information, see note 5 Income
tax to the Condensed interim financial statements.
Net income
in the first nine months of 2020 was negative USD 3,080 million compared to positive USD 2,081 million in the first nine
months of 2019. The decrease was mainly due to the negative changes in net operating income as discussed above in addition to
negative changes in net financial items, partially offset lower income tax.
Cash flows provided by operating activities
mainly due to lower liquids and gas prices and a change in working capital, partially offset by decreased tax payments and increased cash
flow from derivatives.
Cash flows used in investing activities
increased by USD 920 million compared to the first nine months of 2019. The increase was mainly
due to increased financial investments and reduced proceeds from sale of assets, partially offset by lower cash flow used for business
combinations and capital expenditures.
Cash flows provided by financing activities
mainly due to bond issues in the seco nd quarter of 2020, increased short -term debt and decreased dividend paid, partially offset by increased
payments related to the share buy- back program and increased repayment of finance debt.
Total cash flows
Free cash flow
[5] for the first nine months of 2020 was negative USD 1,277 million including USD 332 million received from the Lundin
divestment included in the line item (increase)/decrease in financial investment in the cash flow statement, compared to USD 338 million in the
7
first nine months of 2019. The decrease was mainly due to lower liquids and gas prices, reduced proceeds from sale of assets and increased
payments related to the share buy- back program, partially offset by decreased tax payments, lower cash flow used for busin ess combinations,
lower capital expenditures and increased cash flow from derivatives.
OUTLOOK
●
Organic capital expenditures
8
, around USD 10 billion for 2021
8
, and
around USD 12 billion annual average for 2022-2023
●
exploration activity
of around USD 1.1 billion for 2020, excluding signature bonuses, accruals and field development costs
●
unit of production cost
●
the period 2019–2026,
production growth
(Compound Annual Growth Rate) based on current forecast
●
Scheduled maintenance activity
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and
uncertainties because they relate to events and depend on circumstances that will occur in the future. We continue to monitor the
impact of Covid-19 on our operations. Deferral of production to create future value, production cuts, gas off-take, timing of new
capacity coming on stream, operational regularity, impact of Covid-19 and activity level in the US onshore represent the most
significant risks related to the foregoing production guidance. There has been considerable uncertainty created by the Covid-19
pandemic and we are still unable to predict the ultimate impact of this event, including impact on general economic conditions
worldwide. Our future financial performance, including cash flow and liquidity, will be impacted by the extent and duration of the
current market conditions, the development in realised prices, including price differentials and the effectiveness of actions taken in
response to the pandemic. For further information, see section Forward-looking statements.
8
USD/NOK exchange rate assumption of 9.5.
EXPLORATION & PRODUCTION NORWAY
Third quarter 2020 review
Average daily production of liquids and gas
1,067 mboe per day in the third quarter of 2019. The increase was mainly due to ramp-up of new fields.
Net operating income
The decrease was mainly due to lower liquids price and gas transfer price in addition to impairments. Higher volumes partially offset
the decrease.
In the third quarter of 2020, net operating income was negatively impacted by impairments of USD 360 million, partially offset by
overlifted volumes of USD 23 million. In the third quarter of 2019, net operating income was positively impacted by gain on sale of
assets of USD 840 million, partially offset by a negative impact of USD 25 million related to underlifted volumes.
Total revenues and other income
the decrease.
Operating and administrative expenses
decreased mainly due to the NOK/USD exchange rate development, lower transportation cost
in addtion to lower activity and reduced cost level as a result of the Covid -19 restrictions. Lower well maintenance cost added to the
decrease.
Depreciation, amortisation and net impairment losses
updates and reduced price assumptions. Ramp-up of new fields added to the increase .
Exploration expenses
increased mainly due to lower portion of exploration expenditure being capitalised, a higher portion of
exploration expenditure capitalised earlier years being expensed this quarter and higher field development costs. Lower drilling costs
partially offset the increase.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
2,822
1,659
4,498
(37%)
Total revenues and other income
8,018
13,876
(42%)
(735)
(706)
(817)
(10%)
Operating and administrative expenses
(2,076)
(2,441)
(15%)
(1,486)
(992)
(981)
51%
Depreciation, amortisation and net impairment losses
(4,318)
(2,945)
47%
(170)
(65)
(142)
20%
Exploration expenses
(330)
(335)
(2%)
431
(104)
2,558
(83%)
Net operating income/(loss)
1,294
8,155
(84%)
First nine months 2020
Net operating income
first nine months of 2019. The decrease was mainly due to lower liquids price and gas transfer price in addition to impairments in the
first nine months of 2020. Higher liquids volumes partially offset the decrease.
In the first nine months of 2020, net operating income was negatively impacted by impairments of USD 1,219 million and underlifted
volumes of USD 26 million . In the first nine months of 2019, net operating income was positively impacted by a gain on sale of assets
of USD 977 million, partially offset by a negative impact of USD 94 million from underlifted volumes in the period and an
implementation effect of USD 42 million from a change in accounting policy for lifting imbalances.
Total revenues and other income
due to lower liquids prices and gas transfer price . Higher liquids volumes partially offset the decrease .
Operating and administrative expenses
removal costs.
Depreciation, amortis ation and net impairment losses
2019, mainly due to impairments primarily related to negative reserve updates and reduced price assumptions in addition to ramp-up
of new fields. The NOK/USD exchange rate development and higher proved reserves estimates for several fields partially offset the
increase.
Exploration expenses
higher portion of exploration expenditure capitalised earlier years being expensed this period partially offset the decrease.
EXPLORATION & PRODUCTION INTERNATIONAL
In the second quarter of 2020, Equinor changed its internal reporting to management, impacting the composition of Equinor's
operating and reporting segments. Equinor’s upstream activities in the USA are now reported separately to management, and such
information is also considered to be useful to the users of the financial statements, resulting in the exploration and production activities
in the USA being considered a separate operating- and reporting segment as of the second quarter of 2020. Previously these
activities were included in the DPI operating segment and presented as part of the E&P International reporting segment.
Third quarter 2020 review
Average daily equity production of liquids and gas
day in the third quarter of 2019. The decrease was primarily due to repairs on Peregrino (Brazil) resulting in a production halt, lower
gas nominations, natural decline in mature fields, partially offset by production ramp -up of new fields in the UK.
Average daily entitlement production of liquids and gas
was 255 mboe per day in the third quarter of 2020 compared to
312 mboe per day in the third quarter of 2019. The decrease was due to lower equity production partially offset by lower effects from
production sharing agreements (PSA). The net effects from PSA were 68 mboe per day in the third quarter of 2020 compared to
97 mboe per day in the third quarter of 2019.
Net operating income
was negative USD 1,328 million in the third quarter of 2020 compared to positive USD 325 million in the third
quarter of 2019. The decrease was mainly due to higher impairments in the third quarter of 2020, lower liquids and gas prices in
addition to lower entitlement production.
In the third quarter of 2020, net operating income was negatively impacted by impairments of USD 1,176 million. In the third quarter of
2019, net operating income was negatively impacted by net impairments of USD 56 million.
Total revenues and other income
Operating and administrative expenses
costs. The increase was partially offset by lower operation and maintenance expenses in addition to lower royalties and production
fees, driven by lower volumes and prices.
Depreciation, amortisation and net impairment losses increased
estimates and lower production from mature fields. Ramp-up of new fields on stream partially offset the decrease.
Exploration expenses
portion of exploration expenditure capitalised earlier years being expensed this quarter. Lower drilling and field develo pment costs
partially offset the increase.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
840
555
1,351
(38%)
Total revenues and other income
2,742
4,608
(40%)
12
(26)
16
(25%)
Purchases [net of inventory variation]
(56)
(9)
>100%
(373)
(281)
(321)
16%
Operating and administrative expenses
(1,152)
(1,324)
(13%)
(1,504)
(509)
(620)
>100%
Depreciation, amortisation and net impairment losses
(2,883)
(1,491)
93%
(304)
(288)
(100)
>100%
Exploration expenses
(840)
(367)
>100%
(1,328)
(548)
325
N/A
Net operating income/(loss)
(2,189)
1,418
N/A
First nine months 2020
Net operating income
USD 1,418 million in the first nine months of 2019. The decrease was mainly due to higher net impairments in the first nine months of
2020 and lower liquids and gas prices.
In the first nine months of 2020, net operating income was negatively impacted by net impairments of USD 1,705 million.
In the first nine months of 2019, net operating income was positively impacted by net impairment reversals of USD 60 million and
negatively impacted by an implementation effect of USD 63 million from a change in accounting policy for lifting imbalances.
Total revenues and other income
Operating and administrative expenses
decreased mainly due to lower royalties and production fees driven by lower volumes and
prices. Lower operation and maintenance expenses added to the decrease.
Depreciation, amortisation and net impairment losses
offset by higher proved reserves estimates and lower production from mature fields.
Exploration expenses
a higher portion of exploration expenditure capitalised in earlier
years being expensed this period and higher drilling costs. Lower field development costs partially offset the increase.
EXPLORATION & PRODUCTION USA
In the second quarter of 2020, Equinor changed its internal reporting to management, impacting the composition of Equinor's
operating and reporting segments. Equinor’s upstream activities in the USA are now reported separately to management, and such
information is also considered to be useful to the users of the financial statements, resulting in the exploration and production activities
in the USA being considered a separate operating- and reporting segment as of the second quarter of 2020. Previously these
activities were included in the DPI operating segment and presented as part of the E&P International reporting segment.
Third quarter 2020 review
Average daily equity production of liquids and gas
day in the third quarter of 2019. The divestment of the Eagle Ford asset in 2019 resulted in a decrease, as well as planned
maintenance and weather shutdowns in the US offshore. New wells in the US onshore and additional ownership in the Caesar Tonga
field acquired in the third quarter of 2019 partially offset the decrease.
Average daily entitlement production of liquids and gas
decreased slightly to 337 mboe per day in the third quarter of 2020
compared to 366 mboe per day in the third quarter of 2019. The decrease was due to lower equity production slightly offset by lower
effects from US onshore royalty volumes after the divestment of the Eagle Ford asset. The net effects from US royalties were 61
mboe per day in the third quarter of 2020 compared to 67 mboe per day in the third quarter of 2019.
Net operating income
was negative USD 1,606 million in the third quarter of 2020 compared to negative USD 2,587 million in the
third quarter of 2019. The increase was mainly due to lower depreciation, net impairments and lower operating costs due to the
divestment of the Eagle Ford asset. Lower commo dity prices partially offset the increase.
In the third quarter of 2020, net operating income was negatively impacted by net impairments of USD 1,377 million, with the largest
effect on unconventional US onshore assets.
In the third quarter of 2019, net operating income was negatively impacted by net impairments of USD 2,532 million.
Total revenues and other income
Operating and administrative expenses
to reduced production volumes in addition to lower production fees driven by lower prices.
Depreciation, amortisation and net impairment losses
resulting from impairments in previous periods and higher proved reserves estimates in US offshore. Increased investments in the
third quarter of 2020 and acquired interest in the Caesar Tonga field during 2019 partially offset the decrease.
Exploration expenses
expenditure being capitalised, partially offset by higher drilling costs.
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
611
475
996
(39%)
Total revenues and other income
1,971
3,179
(38%)
(344)
(293)
(425)
(19%)
Operating and administrative expenses
(1,008)
(1,226)
(18%)
(1,460)
(475)
(2,529)
(42%)
Depreciation, amortisation and net impairment losses
(3,171)
(3,558)
(11%)
(413)
(40)
(629)
(34%)
Exploration expenses
(745)
(672)
11%
(1,606)
(332)
(2,587)
38%
Net operating income/(loss)
(2,953)
(2,278)
(30%)
First nine months 2020
Net operating income
2,278 million in the first nine months of 2019. The decrease was mainly due to higher net impairments in the first nine months of 2020
in addition to lower liquids and gas prices. Lower operating and administrative expenses in addition to lower depreciation expenses
partially offset the decrease.
In the first nine months of 2020, net operating income was negatively impacted by net impairment losses of USD 2,296 million, mainly
due to reduced price assumptions with the largest effect being on an unconventional US onshore asset.
In the first nine months of 2019, net operating income was negatively impacted by net impairments of USD 2,532 million, with the
largest effect on unconventional US onshore assets.
Total revenues and other income
Operating and administrative expenses
addition to lower severance taxes due to lower prices.
Depreciation, amortisation and net impairment losses
resulting from impai rments in previous periods and higher proved reserves estimates in US offshore. Increased investments and
acquired interest in the Caesar Tonga field during 2019 partially offset the decrease.
Exploration expenses
being capitalised partially offset the increase.
.
MARKETING, MIDSTREAM & PROCESSING
Third quarter 2020 review
Natural gas sales volumes
amounted to 14.1 billion standard cubic meters (bcm) in the third quarter of 2020, an increase of 1.6 bcm
compared to the third quarter of 2019. Of the total gas sales in the third quarter of 2020, entitlement gas was 12.6 bcm, up 1.4 bcm
from the third quarter of 2019. The increase was mainly due to higher NCS entitlement volumes.
Liquids sales volumes
quarter of 2019 mainly due to increased NCS volumes.
Average invoiced European natural gas sales price
was 48% lower in the third quarter of 2020 compared to the third quarter of
2019 mainly due to drop in European gas prices.
Average invoiced North American piped gas sales price
the same period mainly due to the decreased Henry Hub price.
Net operating income
was positive USD 551 million in the third quarter of 2020 compared to negative USD 757 million in the third
quarter of 2019. The increase was mainly due to inventory hedging effects and unrealised gain on derivatives amounting of USD 325
million in the third quarter of 2020, compared to a loss on derivatives of USD 453 million in the third quarter of 2019. In addition,
provisions and impairment s related to damage to the South Riding Point oil terminal in Bahamas negatively impacted net operating
income in the third quarter of 2019.
Total revenues and other income and Purchases [net of inventory variation] decreased mainly due to negative refinery margins and
lower prices for all products. Strong piped gas result partially offset the decrease.
Operating and administrative expenses
third quarter of 2019 .
Depreciation, amortisation and net impairment losses
Quarters
Change
Income statement under IFRS
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
11,055
7,486
14,188
(22%)
Total revenues and other income
33,344
46,481
(28%)
(9,171)
(5,127)
(13,048)
(30%)
Purchases [net of inventory variation] [6]
(27,799)
(41,581)
(33%)
(1,231)
(1,423)
(1,585)
(22%)
Operating and administrative expenses
(3,998)
(3,753)
7%
(102)
(326)
(311)
(67%)
Depreciation, amortisation and net impairment losses
(709)
(504)
41%
551
610
(757)
N/A
Net operating income/(loss)
839
644
30%
First nine months 2020
Net operating income
months of 2019. The increase was mainly due to strong results from liquids trading and price review settlement in addition to lower
provisions of USD 246 million in the first nine months of 2020 compared to USD 510 million in the first nine months of 2019. Weaker
refinery results and higher impairments related to refinery and infrastructure assets in the third quarter of 2020 partially offset the
increase.
Total revenues and other income
prices for all products , partially offset by increased results from gas and liquids trading in addition to settlement of price revisions.
Operating and administrative expenses
Depreciation, amortisation and net impairment losses
compared to the first nine months of 2019.
CONDENSED INTERIM FINANCIAL STATEMENTS
Third quarter 2020
CONSOLIDATED STATEMENT OF INCOME
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
Note
2020
2019
2019*
11,250
7,563
14,704
Revenues
33,878
48,011
62,911
86
33
46
Net income/(loss) from equity accounted investments
190
149
164
3
7
860
Other income
5
1,028
1,283
11,339
7,603
15,610
Total revenues and other income
2
34,073
49,189
64,357
(5,307)
(2,750)
(7,667)
Purchases [net of inventory variation]
(15,453)
(22,928)
(29,532)
(2,187)
(2,234)
(2,732)
Operating expenses
(6,826)
(7,422)
(9,660)
(181)
(177)
(190)
Selling, general and administrative expenses
(555)
(642)
(809)
(4,798)
(2,522)
(4,619)
Depreciation, amortisation and net impairment losses
6
(11,757)
(9,039)
(13,204)
(886)
(393)
(871)
Exploration expenses
(1,914)
(1,374)
(1,854)
(13,359)
(8,075)
(16,079)
Total operating expenses
2
(36,506)
(41,405)
(55,058)
(2,019)
(472)
(469)
Net operating income/(loss)
2
(2,434)
7,783
9,299
(343)
(379)
(343)
Interest expenses and other financial expenses
(1,066)
(1,029)
(1,450)
142
130
683
Other financial items
640
1,517
1,443
(201)
(248)
340
Net financial items
4
(426)
489
(7)
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
95
469
(978)
Income tax
5
(221)
(6,191)
(7,441)
(2,124)
(251)
(1,107)
Net income/(loss)
(3,080)
2,081
1,851
(2,127)
(254)
(1,107)
Attributable to equity holders of the company
(3,088)
2,079
1,843
3
3
1
Attributable to non-controlling interests
8
2
8
(0.65)
(0.08)
(0.33)
Basic earnings per share (in USD)
(0.94)
0.62
0.55
(0.65)
(0.08)
(0.33)
Diluted earnings per share (in USD)
(0.94)
0.62
0.55
3,248
3,276
3,329
Weighted average number of ordinary shares outstanding (in millions)
3,276
3,330
3,326
3,257
3,284
3,337
Weighted average number of ordinary shares outstanding diluted (in
millions)
3,284
3,338
3,334
* Audited
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
2020
2019
2019*
(2,124)
(251)
(1,107)
Net income/(loss)
(3,080)
2,081
1,851
34
41
192
Actuarial gains/(losses) on defined benefit pension plans
197
365
427
(6)
(8)
(49)
Income tax effect on income and expenses recognised in OCI
1)
(56)
(86)
(98)
27
33
142
Items that will not be reclassified to the Consolidated statement of
income
141
279
330
888
1,560
(1,726)
Currency translation adjustments
(1,734)
(1,254)
(51)
0
0
57
Share of OCI from equity accounted investments
0
44
44
888
1,560
(1,668)
Items that may be subsequently reclassified to the Consolidated
statement of income
(1,734)
(1,210)
(7)
915
1,593
(1,526)
Other comprehensive income/(loss)
(1,593)
(930)
323
(1,209)
1,342
(2,633)
Total comprehensive income/(loss)
(4,673)
1,151
2,174
(1,212)
1,340
(2,633)
Attributable to the equity holders of the company
(4,682)
1,149
2,166
3
3
1
Attributable to non-controlling interests
8
2
8
* Audited
1) Other comprehensive income (OCI).
CONSOLIDATED BALANCE SHEET
At 30 September
At 30 June
At 31 December
At 30 September
(unaudited, in USD million)
Note
2020
2020
2019*
2019
ASSETS
Property, plant and equipment
6
62,988
63,941
69,953
69,954
Intangible assets
6
9,667
10,317
10,738
10,877
Equity accounted investments
1,650
1,599
1,442
1,421
Deferred tax assets
4,251
3,794
3,881
3,435
Pension assets
1,103
963
1,093
871
Derivative financial instruments
1,964
1,630
1,365
1,486
Financial investments
3,437
3,157
3,600
3,185
Prepayments and financial receivables
1,240
1,311
1,214
1,174
Total non-current assets
86,300
86,711
93,285
92,403
Inventories
2,860
2,974
3,363
2,501
Trade and other receivables
6,108
5,489
8,233
6,917
Derivative financial instruments
570
589
578
949
Financial investments
10,563
9,319
7,426
7,203
Cash and cash equivalents
7,844
9,700
5,177
6,838
Total current assets
27,944
28,072
24,778
24,408
Assets classified as held for sale
3
188
0
0
297
Total assets
114,432
114,783
118,063
117,108
EQUITY AND LIABILITIES
Shareholders' equity
34,084
35,587
41,139
40,983
Non-controlling interests
24
23
20
16
Total equity
34,108
35,610
41,159
40,999
Finance debt
4
32,193
31,647
24,945
24,401
Deferred tax liabilities
9,451
8,907
9,410
9,731
Pension liabilities
3,705
3,572
3,867
3,765
Provisions and other liabilities
7
19,191
18,097
17,951
18,269
Derivative financial instruments
787
967
1,173
1,409
Total non-current liabilities
65,328
63,191
57,346
57,576
Trade, other payables and provisions
8,118
8,620
10,450
8,663
Current tax payable
5
543
674
3,699
4,115
Finance debt
4
5,277
5,463
4,087
4,375
Dividends payable
292
297
859
864
Derivative financial instruments
765
928
462
516
Total current liabilities
14,996
15,982
19,557
18,533
Total liabilities
80,324
79,173
76,904
76,109
Total equity and liabilities
114,432
114,783
118,063
117,108
* Audited
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited, in USD million)
Share
capital
Additional
paid-in
capital
Retained
earnings
Currency
translation
adjustments
OCI from
equity
accounted
investments
Share-
holders'
equity
Non-
controlling
interests
Total equity
At 31 December 2018*
1,185
8,247
38,790
(5,206)
(44)
42,970
19
42,990
Net income/(loss)
2,079
2,079
2
2,081
Other comprehensive income/(loss)
279
(1,254)
44
(930)
(930)
Total comprehensive income/(loss)
1,151
Dividends
(2,596)
(2,596)
(2,596)
Share buy-back
1)
(500)
(500)
(500)
Other equity transactions
(12)
(29)
(40)
(5)
(45)
At 30 September 2019
1,185
7,735
38,523
(6,460)
0
40,983
16
40,999
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
Net income/(loss)
(3,088)
(3,088)
8
(3,080)
Other comprehensive income/(loss)
141
(1,734)
0
(1,593)
(1,593)
Total comprehensive income/(loss)
(4,673)
Dividends
(1,476)
(1,476)
(1,476)
Share buy-back
1)
(21)
(869)
(890)
(890)
Other equity transactions
(8)
(0)
(8)
(4)
(12)
At 30 September 2020
1,164
6,855
33,056
(6,991)
0
34,084
24
34,108
* Audited
1) In September 2019 Equinor launched a USD 5 billion share buy-back programme, where the first tranche of the programme of around
USD 1.5 billion has been finalis ed. A proportionate share of 67% from the Norwegian State was redeemed in accordance with an
agreement with the Ministry of Petroleum and Energy for the Norwegian State to maintain their ownership percentage in Equinor. The
redemption was approved by the annual general meeting held 14 May 2020.
quarter 2019. The State’s share including interest and dividends has been recognised as a short-term obligation and as a reduction in
equity as treasury shares, subsequent to the decision at the annual general meeting held on 14 May 2020. The liability of USD 0.9 billion
(NOK 9.1 billion) was settled 23 July 2020. The corresponding shares of the first tranche of the buyback programme were cancelled
on 16 July 2020.
Equinor has suspended the remaining share buy-back programme until further notice. The announced second tranche of around
USD 675 million, including the Norwegian State share, will under the current market conditions not be executed as previously announced
and planned.
CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(unaudited, in USD million)
Note
2020
2019
2019*
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
4,798
2,522
4,619
Depreciation, amortisation and net impairment losses
6
11,757
9,039
13,204
662
125
650
Exploration expenditures written off
1,222
673
777
131
321
(295)
(Gains)/losses on foreign currency transactions and balances
4
156
(201)
(224)
(1)
(15)
(851)
(Gains)/losses on sale of assets and businesses
3
(2)
(994)
(1,187)
258
257
678
(Increase)/decrease in other items related to operating
activities
750
1,159
1,016
(182)
25
141
(Increase)/decrease in net derivative financial instruments
(446)
(988)
(595)
41
43
50
Interest received
150
166
215
(146)
(198)
(226)
Interest paid
(526)
(526)
(723)
3,342
2,360
4,637
Cash flows provided by operating activities before taxes paid
and working capital items
10,201
16,600
21,776
(110)
(1,744)
(1,447)
Taxes paid
(2,742)
(5,636)
(8,286)
(600)
(248)
990
(Increase)/decrease in working capital
583
1,010
259
2,632
368
4,180
Cash flows provided by operating activities
8,043
11,975
13,749
0
(0)
(1,794)
Cash used in business combinations
1)
3
0
(2,274)
(2,274)
(1,723)
(1,899)
(2,637)
Capital expenditures and investments
(5,972)
(7,504)
(10,204)
(1,034)
(2,730)
2,584
(Increase)/decrease in financial investments
2)
(3,165)
(801)
(1,012)
(261)
(45)
182
(Increase)/decrease in derivatives financial instruments
(332)
295
298
(18)
2
0
(Increase)/decrease in other interest- bearing items
(16)
8
(10)
14
0
1,519
Proceeds from sale of assets and businesses
3
16
1,726
2,608
(3,023)
(4,671)
(146)
Cash flows used in investing activities
(9,469)
(8,549)
(10,594)
0
8,347
0
New finance debt
8,347
0
984
(1,642)
(318)
(855)
Repayment of finance debt
(2,266)
(1,389)
(2,419)
(287)
(904)
(859)
Dividends paid
(2,037)
(2,492)
(3,342)
(1,001)
0
(91)
Share buy-back
3)
(1,059)
(91)
(442)
1,308
(150)
(639)
Net current finance debt and other
1,110
(41)
(277)
(1,623)
6,975
(2,443)
Cash flows provided by/(used in) financing activities
4,095
(4,012)
(5,496)
(2,014)
2,672
1,590
Net increase/(decrease) in cash and cash equivalents
2,669
(587)
(2,341)
158
162
(154)
Effect of exchange rate changes on cash and cash
equivalents
(1)
(153)
(38)
9,700
6,866
5,379
Cash and cash equivalents at the beginning of the period (net
of overdraft)
5,177
7,556
7,556
7,844
9,700
6,816
Cash and cash equivalents at the end of the period (net of
overdraft)
4)
7,844
6,816
5,177
* Audited
1) Net after cash and cash equivalents acquired.
2) Includes sale of Lundin shares in the second quarter of 2020. For more information, see note 3 Acquisition and disposals.
3) For more information, see Consolidated statement of changes in equity.
4) At 30 September 2020 cash and cash equivalents net overdraft was zero. At 30 September 2019 net overdraft was USD 22 million and
at 31 December 2019 net overdraft was zero.
Notes to the Condensed interim financial statements
1 Organisation and basis of preparation
Organisation and principal activities
Equinor ASA, originally Den Norske Stats Oljeselskap AS, was founded in 1972 and is incorporated and domiciled in Norway. The
address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway.
The Equinor group’s (Equinor’s) business consists principally of the exploration, production, transportation, refining and marketing of
petroleum and petroleum -derived products, and other forms of energy. Equinor ASA is listed on the Oslo Børs (Norway) and the New
York Stock Exchange (USA).
All of Equinor's oil and gas activities and net assets on the Norwegian continental shelf (NCS) are owned by Equinor Energy AS, a
100% owned operating subsidiary of Equinor ASA. Equinor Energy AS is co -obligor or guarantor of certain debt obligations of Equinor
ASA.
Following changes in Equinor's internal reporting to management the composition of Equinor's operating and reporting segments has
changed as of the second quarter of 2020. Segment information for prior periods has been restated to align with the new segment
presentation. For further information see note 2 Segments to these Condensed interim financial statements.
Equinor's Condensed interim financial statements for the third quarter of 2020 were authorised for issue by the board of directors on
28 October 2020.
Basis of preparation
These Condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim
Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU).
The Condensed interim financial statements do not include all the information and disclosures required by International Financial
Reporting Standards (IFRS) for a complete set of financial statements, and these Condensed interim financial statements should be
read in conjunction with the Consolidated annual financial statements for 2019. IFRS as adopted by the EU differs in certain respects
from IFRS as issued by the IASB, but the d ifferences do not impact Equinor's financial statements for the periods presented. A
description of the significant accounting policies applied in preparing these Condensed interim financial statements is included in
Equinor`s Consolidated annual financial statements for 2019.
On 1 January 2020, Equinor implemented amendments to IFRS 3 Business Combinations, which apply to relevant transactions that
occur on or after the implementation date. The amendments introduce clarification to the definition of a business, and also establish
an optional test to identify a concentration of fair value that, if applied and met, will lead to the conclusion that an acquired set of
activities and assets is not a business.
There have been no other changes to the significant accounting policies during the first nine months of 2020 compared to the
Consolidated annual financial statements for 2019.
The Condensed interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period
results are not necessarily indicative of results of operations or cash flows for an annual period. Certain amounts in the comparable
periods in the note disclosures have been reclassified to conform to current period presentation. The subtotals and totals in some of
the tables may not equal the sum of the amounts shown due to roundin g.
The Condensed interim financial statements are unaudited.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed
on an on-going basis, considering current and expected future market conditions. A change in an accounting estimate is recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods. The ongoing Covid-19 pandemic and the steep oil price decline experienced
during 2020 create additional estimation uncertainties and impact key assumptions applied by Equinor in the valuation of our assets
and the measurement of our liabilities, and related sensitivities. Reference is made to note 8 Impact of the Covid-19 pandemic and oil
price decline for further information.
2 Segments
Equinor’s operations are managed through the following operating segments (business areas): Development & Production Norway
(DPN), Development & Production International (DPI), Development & Production Brazil (DPB), Development & Production USA
(DPUSA), Marketing, Midstream & Processing (MMP), New Energy Solutions (NES), Technology, Projects & Drilling (TPD),
Exploration (EXP) and Global Strategy & Business Development (GSB).
The reporting segments Exploration & Production Norway (E&P Norway), Exploration & Production USA (E&P USA) and MMP consist
of the business areas DPN, DPUSA and MMP respectively. The operating segments DPI and DPB are aggregated into the reporting
segment Exploration & Production International (E&P International). The aggregation has its basis in similar economic characteristics,
such as similar long-term average gross margins, the assets’ long term and capital-intensive nature and exposure to volatile oil and
gas commodity prices, the nature of products, service and production processes, the type and class of customers, the methods of
distribution and regulatory environment. The operating segments NES, GSB, TPD, EXP and corporate staffs and support functions
are aggregated into the reporting segment “Other” due to the immateriality of these operating segments. The majority of the costs
within the operating segments GSB, TPD and EXP are allocated to the E&P Norway, E&P USA, E&P International and MMP reporting
segments.
In the second quarter of 2020, Equinor changed its internal reporting to management, impacting the composition of Equinor's
operating and reporting segments. Equinor’s upstream activities in the USA is as from the second quarter reported separately to
management. The fact that such information is also considered to be useful to the users of the financial statements, resulted in the
exploration and production activities in the USA as of the second quarter of 2020 were considered a separate operating- and reporting
segment. Previously these activities were included in the DPI operating segment and presented as part of the E&P International
reporting segment.
The eliminations section includes the elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil
and natural gas. Inter-segment revenues are based upon estimated market prices.
Segment data for the third quarter and the first nine months of 2020 and 2019 is presented below. The reported measure of segment
profit is net operating income/(loss)
.
segments.
The measurement basis for segments is IFRS as applied by the group with the exception of IFRS 16 Leases and the line item
Additions to PP&E, intangibles and equity accounted investments. All IFRS 16 leases are presented within the Other segment. The
lease costs for the period are allocated to the different segments based on underlying lease payments, with a corresponding credit in
the Other segment. Lease costs allocated to licence partners are recognised as other revenues in the Other segment. Additions to
PP&E, intangible assets and equity accounted investments in the E&P and MMP segments include the period’s allocated lease costs
related to activity being capitalised with a corresponding negative addition in the Other segment. The line item Additions to PP&E,
intangibles and equity accounted investments excludes movements related to changes in asset retirement obligations.
Third quarter 2020
E&P
Norway
E&P
Internationa
l
E&P USA
MMP
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenues and other
income
15
91
76
11,000
71
0
11,253
Revenues inter-segment
2,806
731
535
47
1
(4,121)
0
Net income/(loss) from equity accounted investments
0
18
0
8
60
0
86
Total revenues and other income
2,822
840
611
11,055
132
(4,121)
11,339
Purchases [net of inventory variation]
0
12
0
(9,171)
1
3,851
(5,307)
Operating, selling, general and administrative
expenses
(735)
(373)
(344)
(1,231)
152
163
(2,368)
Depreciation, amortisation and net impairment losses
(1,486)
(1,504)
(1,460)
(102)
(247)
0
(4,798)
Exploration expenses
(170)
(304)
(413)
0
1
0
(886)
Total operating expenses
(2,391)
(2,168)
(2,217)
(10,504)
(93)
4,014
(13,359)
Net operating income/(loss)
431
(1,328)
(1,606)
551
39
(107)
(2,019)
Additions to PP&E, intangibles and equity accounted
investments
1,103
357
252
35
278
0
2,025
Third quarter 2019
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
Other
Eliminations
Total
(in USD million)
(restated)
(restated)
Revenues third party, other revenues and other
income
866
403
106
14,099
90
0
15,564
Revenues inter-segment
3,630
939
888
85
1
(5,543)
0
Net income/(loss) from equity accounted investments
2
9
2
4
29
0
46
Total revenues and other income
4,498
1,351
996
14,188
121
(5,543)
15,610
Purchases [net of inventory variation]
0
16
(1)
(13,048)
(0)
5,366
(7,667)
Operating, selling, general and administrative
expenses
(817)
(321)
(425)
(1,585)
41
185
(2,922)
Depreciation, amortisation and net impairment losses
(981)
(620)
(2,529)
(311)
(177)
0
(4,619)
Exploration expenses
(142)
(100)
(629)
0
0
0
(871)
Total operating expenses
(1,940)
(1,025)
(3,583)
(14,945)
(137)
5,551
(16,079)
Net operating income/(loss)
2,558
325
(2,587)
(757)
(16)
8
(469)
Additions to PP&E, intangibles and equity accounted
investments
2,920
511
1,408
127
111
0
5,077
First nine months 2020
E&P
Norway
E&P
Internationa
l
E&P USA
MMP
Other
Eliminations
Total
(in USD million)
Revenues third party, other revenue and other income
33
308
285
33,087
169
0
33,882
Revenues inter-segment
7,985
2,412
1,686
232
3
(12,318)
0
Net income/(loss) from equity accounted investments
0
22
0
26
142
0
190
Total revenues and other income
8,018
2,742
1,971
33,344
315
(12,318)
34,073
Purchases [net of inventory variation]
0
(56)
0
(27,799)
1
12,400
(15,453)
Operating, selling, general and administrative
expenses
(2,076)
(1,152)
(1,008)
(3,998)
336
516
(7,382)
Depreciation, amortisation and net impairment losses
(4,318)
(2,883)
(3,171)
(709)
(676)
0
(11,757)
Exploration expenses
(330)
(840)
(745)
0
1
0
(1,914)
Total operating expenses
(6,724)
(4,931)
(4,924)
(32,505)
(338)
12,916
(36,506)
Net operating income/(loss)
1,294
(2,189)
(2,953)
839
(23)
599
(2,434)
Additions to PP&E, intangibles and equity accounted
investments
3,511
1,582
945
142
768
0
6,948
Balance sheet information
Equity accounted investments
2
581
0
90
977
0
1,650
Non-current segment assets
31,442
18,710
14,113
4,427
3,964
0
72,655
Non-current assets not allocated to segments
11,995
Total non-current assets
86,300
First nine months 2019
E&P
Norway
E&P
Internationa
l
E&P
USA
MMP
Other
Eliminations
Total
(in USD million)
(restated)
(restated)
Revenues third party, other revenue and other income
1,026
1,310
320
46,149
235
0
49,040
Revenues inter-segment
12,835
3,271
2,854
312
3
(19,275)
0
Net income/(loss) from equity accounted investments
15
27
5
20
82
0
149
Total revenues and other income
13,876
4,608
3,179
46,481
320
(19,275)
49,189
Purchases [net of inventory variation]
1
(9)
(1)
(41,581)
(0)
18,661
(22,928)
Operating, selling, general and administrative
expenses
(2,441)
(1,324)
(1,226)
(3,753)
103
578
(8,063)
Depreciation, amortisation and net impairment losses
(2,945)
(1,491)
(3,558)
(504)
(541)
0
(9,039)
Exploration expenses
(335)
(367)
(672)
0
0
0
(1,374)
Total operating expenses
(5,721)
(3,190)
(5,457)
(45,837)
(439)
19,239
(41,405)
Net operating income/(loss)
8,155
1,418
(2,278)
644
(120)
(36)
7,783
Additions to PP&E, intangibles and equity accounted
investments
5,860
2,291
2,486
674
596
0
11,907
Balance sheet information
Equity accounted investments
2
306
81
88
943
0
1,421
Non-current segment assets
33,737
20,562
17,307
4,956
4,270
0
80,831
Non-current assets not allocated to segments
10,151
Total non-current assets
92,403
In the third quarter of 2020 Equinor recognised net impairment of USD 2,928 million of which USD 575 million was classified as
exploration expenses.
In the E&P Norway segment the impairments were USD 365 million of which USD 5 million related to exploration assets. The
impairments were mainly due to price reductions and reduced reserve estimates.
In the E&P International segment the impairments were USD 1,176 million of which USD 183 million related to exploration asset s. The
impairments were caused by reduced price assumptions and reduction in reserve estimates in the Europa and Asia and the North
America - conventional other areas.
In the E&P USA segment the net impairment was USD 1,37 7 million of which USD 386 million was classified as exploration expenses.
Impairment losses of USD 1,611 million were mainly caused by reduced price assumptions. USD 1,447 million related to North
America non-conventional assets and USD 164 million related to North America - conventional offshore Gulf of Mexico assets .
Impairment reversals of USD 234 million related to North America non -conventional assets due to performance trends and
accelerated production.
Most of the renewabl e assets in Equinor Group are accounted for using equity method and the results are presented in the Other
reporting segment. The net income from the equity accounted investments within the operating segment NES was USD 60 million in
the third quarter of 2020 and USD 142 million in the first nine months of 2020, which compares to USD 29 million in the third quarter of
2019 and USD 82 million in the first nine months of 2019. Current quarter result was materially impacted by the reversal of losses in
the Dogger Bank projects . This was partially offset by lower income from other equity accounted investments including the effect of
reduced ownership share in Arkona wind farm compared to 2019.
For information regarding acquisition and dispo sal of interests, see note 3 Acquisitions and disposals.
See also note 8 Impact of the Covid-19 pandemic and oil price decline.
Revenues from contract s with customers by geographical areas
When attributing the line item Revenues third party, other revenues and other income to the country of the legal entity executing the
sale for the third quarter of 2020, Norway constitutes 82% and the US constitutes 13% of such revenues. For the third quarter of 2019 ,
Norway and the US constituted 73% and 20% of such revenues, respectively.
For the first nine months of 2020, Norway constitutes 81% and the US constitutes 14% of such revenues. For the first nine months of
2019, Norway and the US constituted 74% and 19% of such revenues , respectively.
Non-current assets by country
At 30 September
At 30 June
At 31 December
At 30 September
(in USD million)
2020
2020
2019
2019
Norway
37,327
36,383
40,292
39,994
USA
14,858
16,524
17,776
18,455
Brazil
8,752
8,796
8,724
8,669
UK
4,175
4,913
5,657
5,261
Azerbaijan
1,684
1,696
1,598
1,551
Canada
1,468
1,435
1,672
1,651
Angola
1,270
1,331
1,564
1,669
Tanzania
985
964
964
964
Denmark
911
887
984
958
Algeria
845
866
915
930
Other countries
2,030
2,064
1,986
2,149
Total non-current assets
1)
74,305
75,858
82,133
82,252
1) Excluding deferred tax assets, pension assets and non -current financial assets.
Revenues from contracts with customers and other revenues
Quarters
Full Year
(in USD million)
Q3 2020
Q2 2020
Q3 2019
2019
Crude oil
6,635
4,018
8,667
33,505
Natural gas
1,351
1,188
2,236
11,281
1,048
923
1,847
9,366
229
196
290
1,359
74
68
99
556
Refined products
1,560
1,258
2,404
10,652
Natural gas liquids
1,282
839
1,224
5,807
Transportation
295
286
205
967
Other sales
91
88
123
445
Revenues from contracts with customers
11,215
7,677
14,859
62,657
Taxes paid in-kind
27
(9)
83
344
Physically settled commodity derivatives
(16)
152
(610)
(1,086)
Gain/(loss) on commodity derivatives
(44)
(318)
298
732
Other revenues
70
61
74
265
Total other revenues
36
(114)
(155)
254
Revenues
11,250
7,563
14,704
62,911
3 Acquisitions and disposals
Divestment of non-operated interest in the Empire Wind and Beacon Wind assets on the US east coast
On 10 September 2020 Equinor entered into an agreement with BP to sell 50% non-operated interests in the Empire Wind and
Beacon Wind assets for a total consideration before adjustments of USD 1.1 billion. Through this transaction, the two companies are
also establishing a strategic partnership for further growth within offshore wind in the US. Following the transaction, Equinor will
remain the operator with a 50% interest. The 100% of interest share has been reclassified as held for sale. The transaction has an
effective date of
1 January 2020 and is expected to close in early 2021, subject to customary conditions including purchase price adjustments and
authority approval. Upon transaction closing, the gain will be presented in the line item Other income in the Consolidated statement of
income in the Other segment.
Divestment of remaining shares in Lundin
On 8 May 2020 Equinor closed the divestment of its remaining (4.9%) financial shareholding in Lundin Energy AB (formerly Lundin
Petroleum AB). The consideration is SEK 3.3 billion (USD 0.3 billion). The impact on the Consolidated statement of income in the
second quarter was a loss of USD 0.1 billion and was recognised as Interest income and other financial items.
Investment in interest onshore Argentina
On 30 January 2020 Equinor closed a transaction to acquire a 50% ownership share in SPM Argentina S.A (SPM) from Schlumberger
Production Management Holding Argentina B.V.
Shell acquired the remaining 50% ownership share of SPM.
SPM holds a 49%
interest in the Bandurria Sur onshore block in Argentina, and the block is in the pilot phase of development. The consideration
including final adjustments is USD 187 million. In the second quarter , Equinor increased its shareholding in the Bandurria Sur by 5.5%
to 30% for a final consideration of USD 44 million. The investment in SPM was accounted for as a joint venture using the equity
method and reported in the E&P International segment.
4 Financial items
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(in USD million)
2020
2019
2019
(131)
(321)
295
Gains/(losses) on net foreign exchange
(156)
201
224
235
262
180
Interest income and other financial items
375
535
746
39
189
208
Gains/(losses) on derivative financial instruments
421
781
473
(343)
(379)
(343)
Interest and other finance expenses
(1,066)
(1,029)
(1,450)
(201)
(248)
340
Net financial items
(426)
489
(7)
Gains on derivative financial instruments for the first nine months of 2020 of USD 421 million and for the first nine months of 2019 of
USD 781 million, are mainly due to decreased interest rates.
Equinor has a US Commercial paper programme available with a limit of USD 5 billion of which USD 787 million has been utilised as
of
30 September 2020.
In the first nine months of 2020, Equinor recorded total lease payments of USD 1,054 million, of which USD 93 million were payment
of interests and USD 961 million were down-payment of lease liabilities. Lease liabilities as at 30 September 2020 were USD 4,218
million, presented in the balance sheet within the line items Current and Non-current finance debt with USD 1,039 million and USD
3,120 million, respectively.
In the second quarter of 2020 Equinor ASA issued bonds with maturities from 5 to 30 years for a total amount of USD 8.3 billion. The
bonds were issued in USD and EUR, amounting to USD 6.5 billion and EUR 1.75 billion, and are fully and unconditionally guaranteed
by Equinor Energy AS.
5 Income taxes
Quarters
First nine months
Full year
Q3 2020
Q2 2020
Q3 2019
(in USD million)
2020
2019
2019
(2,220)
(720)
(129)
Income/(loss) before tax
(2,859)
8,272
9,292
95
469
(978)
Income tax
(221)
(6,191)
(7,441)
4.3%
65.2%
>(100%)
Effective tax rate
(7.7%)
74.8%
80.1%
The tax rate for the third quarter 2020 and for the first nine months of 2020 was primarily influenced by losses including net
impairments recognised in countries with unrecognised deferred taxes or in countries with lower than average tax rates. The tax rate
was also influenced by currency effects in entities that are taxable in other currencies than the functional currency, partially offset by
the temporary changes to Norway’s petroleum tax system.
The tax rate for the first nine months of 2020 was also influenced by changes in best estimates for uncertain tax positions.
The tax rate for the third quarter of 2019 and the first nine months of 2019 was primarily influenced by losses recognised in countries
with unrecognised deferred tax assets partially offset by the tax exempted divestment of shares in Lundin.
The tax rate for the full year 2019 was primarily influenced by losses recognised in countries with unrecognised deferred tax assets or
in countries with lower than average tax rates, partially offset by tax exempted gains on divestments.
6 Property, plant and equipment and intangible assets
(in USD million)
Property, plant and
equipment
Intangible
assets
Balance at 31 December 2019
69,953
10,738
Additions
7,595
551
Transfers
67
(67)
Disposals and reclassifications
(15)
(6)
Transferred to assets classified as held for sale
(10)
(177)
Expensed exploration expenditures and net impairment losses
-
(1,222)
Depreciation, amortisation and net impairment losses
(11,737)
(20)
Effect of foreign currency translation adjustments
(2,864)
(130)
Balance at 30 September 2020
62,988
9,667
Right-of-use (RoU) assets are included within property, plant and equipment with a net book value of USD 3,944 million as at
30 September 2020. Additions to RoU assets amount to USD 1,001 million. Gross depreciation and impairment of RoU assets
amounts to USD 927 million in the first nine months of 2020, of which depreciation costs of USD 278 million have been allocated to
exploration and development activities and are presented net on the Depreciation, amortisation and net impairment losses and
Additions lines in the table above.
Equinor’s Block 2 Exploration License in Tanzania was due to expire in June 2018 but based on indications from the Tanzanian
authorities that the license would be extended the asset has remained capitalised. The license was formally extended by 3.5 years in
and from the second quarter of 2020. The capitalised expenditures included in intangible assets related to the license are USD 962
million.
Impairments and impairment reversals
For information on impairment losses and reversals per reporting segment, see note 2 Segments.
First nine months 2020
Property, plant and
equipment
Intangible
assets
Total
(in USD million)
Producing and development assets
4,732
589
5,321
Goodwill
-
1
1
Acquisition costs related to oil and gas prospects
-
434
434
Total net impairment losses/(reversals) recognised
4,732
1,023
5,755
The net impairments have been recognised in the Consolidated statement of income as Depreciation, amortisation and net
impairment losses and Exploration expenses based on the impaired assets’ nature of property, plant and equipment and intangible
assets, respectively.
The recoverable amounts in the third quarter of 2020 were discounted cash flows based on value in use.
Value in use estimates and discounted cash flows used to determine the recoverable amount of assets tested for impairment are
based on internal forecasts on costs, production profiles and commodity prices.
Changes to accounting assumptions
Management’s future commodity price assumptions and currency assumptions are used for value-in-use impairment testing. The
same assumptions are also used for evaluating investment opportunities, together with other relevant criteria, including among others
robustness targets (value creation in lower commodity price scenarios). While there are inherent uncertainties in the assumptions, the
commodity price assumptions as well as currency assumptions reflect management’s best estimate of the price and currency
development over the life of the Group’s assets based on its view of relevant current circumstances and the likely future development
of such circumstances, including energy demand development, energy and climate change policies as well as the speed of the energy
transition, population and economic growth, geopolitical risks, technology and cost development, and other factors. Management’s
best estimate also takes into consideration a range of external forecasts.
During the third quarter, Equinor has performed a thorough and broad analysis of the expected development in drivers for the different
commodity markets and exchange rates, following the recent and ongoing Covid-19 situation and management has gained more
insight into the development of the different markets in which we operate. Significant uncertainty continues to exist regarding future
commodity price development due to the potential long-term impact on demand resulting from the ongoing Covid-19 pandemic and
the measures taken to contain it, energy investments in the transition to a lower carbon economy and future supply actions by OPEC+
and other factors. Following management’s analysis of the expected development in drivers for the different commodity markets and
exchange rates, Equinor has decided to revise the assumptions. As a result, both short- and long-term prices have been reduced,
some by more than twenty percent. Management will continue to monitor these developments and the impact they may have on its
commodity price assumptions.
For Brent-blend, compared to current prices, we expect a strengthening of the prices through the 2020s. In 2025, the assumption is 65
USD/bbl (78 USD/bbl) , with a further increase towards 2030. Beyond 2030 , we expect a gradual decline with an estimate of 64
USD/bbl in 2040 (82 USD/bbl), which approximates the average price level for the period 2021-2050. In 2050, the oil prices are
expected to be below 60 USD/bbl. All commodity prices are on a real 2020 basis, and comparables as per fourth quarter 2019 are
given in brackets.
For natural gas in the UK (NBP), we expect some volatility, where the trend is a gradua l increase in prices from today’s current prices
up to 6.5 USD/mmBtu in 2030 (7.7 USD/mmBtu). From 2030, we expect prices at levels sufficient to incentivise the next LNG
investment cycle and a flatter price-curve, with the price gradually increasing to 7.8 USD/mmBtu close to 2040 (7.7 USD/mmBtu).
Beyond 2040, a declining price trend is foreseen as the energy transition is expected to impact the demand side. For 2050, the price
has been set at the pre-2035 level. Henry Hub follows the same pattern, gradually increasing from today’s current prices to 3.3
USD/mmBtu in 2030 (3.7 USD/mmBtu) and gradually increasing to 3 .7 USD/mmBtu in 2040 (3.7 USD/mmBtu) before gradually
declining through the 2040s.
Equinor has performed analyses of the NOK currency exchange rates, which suggests that a return to a previously assumed long-
term equilibrium is less likely. This conclusion is supported by the historical 5-year average and spot prices in the currency market, as
well as an expected lower oil price and increased market uncertainty. Equinor has therefore implemented new long-term exchange
rates from 2023 onwards. The NOK/USD rate has been revised to 8.5 (previously 7.0), while the NOK/EUR rate has been revised to
10.0 (from previously 9.0).
In 2020 we have continued to see a significant drop in risk-free interest rates. Long-term risk-free interest rates (10 years) have
decreased by approximately 1.3 percentage points in the period from year -end 2019 to 30 September 2020. The stock market
recovery after the initial Covid-19 impact in March, and despite lower expectations of future cash flows, is indicating a lower market
risk premium. The low interest rates combined with lack of good alternative investment opportunities, channels more funds towards
the equity market resulting in investors accepting lower returns on investments, and we see a downward shift in the estimated equity
risk premium. Taking this into account, Equinor has adjusted the Weighted Average Cost of Capital (WACC) for accounting purposes,
real post-tax, down from 6% to 5% with effe ct as of the third quarter of 2020.
Please refer to note 8 Impact of the Covid-19 pandemic and oil price.
Sensitivities
Commodity prices have historically been volatile. Significant downward adjust ments of Equinor’s commodity price assumptions would
result in impairment losses on certain producing and development assets in Equinor’s portfolio, while an opposite adjustment could
lead to impairment -reversals. If a decline in commodity price forecasts over the lifetime of the assets were 30%, considered to
represent a reasonably possible change, the impairment amount to be recognised could illustratively be in the region of USD 12 billion
before tax effects. This illustrative impairment sensitivity, based on a simplified method, assumes no changes to input factors other
than prices; however, a price reduction of 30% is likely to result in changes in business plans as well as other factors used when
estimating an asset’s recoverable amount. These associated changes reduce the stand-alone impact on commodity price sensitivity.
Changes in such input factors would likely include a reduction in the cost level in the oil and gas industry as well as offsetting currency
effects, both of which have historically occurred following significant changes in commodity prices. The illustrative sensitivity is
therefore not considered to represent a best estimate of an expected impairment impact, nor an estimated impact on revenues or
operating income in such a scenario. In comparison, following the amended assumptions and the decline in commodity prices
presently disclosed for this quarter, the impairment impact recognised is considerably lower. A significant and prolonged reduction in
oil and gas prices would also result in mitigating actions by Equinor and its licence partners, as a reduction of oil and gas prices would
impact drilling plans and production profiles for new and existing assets. Quantifying such impacts is considered impracticable, as it
requires detailed technical, geological and economical evaluations based on hypothetical scenarios and not based on existing
business or development plans.
7 Provisions, commitments, contingent liabilities and contingent assets
Asset retirement obligation
Equinor’s estimated asset retirement obligations (ARO) have increased by USD 928 million compared to year-end 2019, mainly due to
the decrease in discount rate. Changes in ARO are reflected within property, plant and equipment and provisions in the Consolidated
balance sheet.
Onerous contract
Due to significant ly reduced expected use of a transportation agreement , Equinor provided in the second quarter USD 154 million as
an onerous contract. In third quarter the provision has increased to USD 162 million. The provision is recognised in the MMP segment
as an operating expense in the Consolidated statement of income and has been included in the line item Provisions and other
liabilities in the Consolidated balance sheet.
Price review arbitration
Some long-term gas sales agreements contain price review clauses, which in certain cases lead to claims subject to arbitration.
The exposure related to price reviews has been reduced by approximately USD 1.3 billion due to settlements in the second quarter.
The remaining exposure for gas delivered prior to 30 September is immaterial. Price review related changes in the second quarter
represent an income of approximately USD 150 million before tax and USD 30 million after tax . The amounts have been reflected in
the Consolidated statement of income as revenues and income tax, respectively.
A dispute between the Federal Government of Nigeria and the Governments of Rivers, Bayelsa and Akwa Ibom States in
Nigera
In October 2018, the Supreme Court of Nigeria rendered a judgement in a dispute between the Federal Gover nment of Nigeria and
the Governments of Rivers, Bayelsa and Akwa Ibom States in favour of the latter. The Supreme Court judgement provides for
potential retroactive adjustment of certain production sharing contracts in favour of the Federal Government, including OML 128
(Agbami). This case has been withdrawn by the plaintiff in the second quarter of 2020 with no impact on Equinor’s Interim financial
statements.
Dispute with Brazilian tax authorities
Brazilian tax authorities issued an updated tax assessment for 2011 for Equinor’s Brazilian subsidiary which was party to Equinor’s
divestment of 40% of the Peregrino field to Sinochem at that time. The assessment disputed Equinor’s allocation of the sale proceeds
between entities and assets involved, resulting in a significantly higher assessed taxable gain and related taxes payable in Brazil.
Equinor disagreed with the assessment and had the case brought forward to the second instance of the Administrative Cour t in Brazil
which decided the case in Equinor’s favour. Equinor has received confirmation that the decision is considered final and non-
appealable. The final ruling did not have any impact on Equinor’s Interim Financial statement.
KKD Oil Sands Partnership
Canadian tax authorities have issued a proposal of re-assessment for 2014 for Equinor’s Canadian subsidiary which was party to
Equinor’s divestment of 40% of the KKD Oil Sands partnership at that time. The proposal disputes the partners allocation between
entities and assets involved. Maximum exposure is estimated to be approximately USD 360 million. The ongoing process of formal
communication with the Canadian tax authorities, as well as any subsequent litigation that may become necessary, may take several
years. No taxes will become payable until the matter has been finally settled. Equinor is of the view that all applicable tax regulations
have been applied in the case and that Equinor has a strong position. No amounts have consequently been provided for in the
accounts.
Deviation notices from Norwegian tax authorities
With reference to the previously disclosed dispute in Norway regarding the level of Research & Development cost to be allocated to
the offshore tax regime, a Norwegian supreme court ruling announced in second quarter and Equinor’s subsequent correspondence
with the Norwegian tax authorities in third quarter has resulted in a reduced maximum exposure in this matter to approximately USD
250 million. Equinor provides for its best estimate in the matter.
Suit for an annulment of Petrobras' sale of the interest in BM-S-8 to Equinor
In March 2017, the Union of Workers of Oil Tankers of Sergipe (Sindipetro) filed a class action suit against Petrobras, Equinor and
ANP - the Brazilian Regulatory Agency - to see k annulment of Petrobras' sale of the interest and operatorship in BM-S-8 to Equinor, a
transaction which was closed in November 2016. There was also an injunction request aiming to suspend the assignment, which first
was granted in April 2017 by a federal judge, but subsequently lifted by the federal court. The injunction request has now been finally
dismissed by the courts.
Claim from Petrofac regarding multiple variation order requests performed in Algeria (In Salah)
Petrofac International (UAE) LLC (PIUL) was awarded the EPC Contract to execute the ISSF Project (the In Salah Southern
Fields Project which has finalised the development of four gas fields in central Algeria). Following suspension of activity after the
terrorist attack at another field in Algeria (In Amenas) in 2013, PIUL issued multiple Variation Order Requests (VoRs ) related to the
costs incurred for stand -by and remobilisation costs after the evacuation of expatriates. Several VoRs have been paid, but the
settlement of the remaining has been unsuccessful. PIUL initiated arbitration on 7 August 2020 claiming an estimated amount of USD
533 million, of which Equinor In Salah AS holds a 31,85% share. Equinor's maximum exposure amounts to USD 170 million. Equinor
provides for its best estimate in the matter.
During the normal course of its business Equinor is involved in legal and other proceedings, and several claims are unresolved and
currently outstanding. The ultimate liability or asset, respectively, in respect of such litigation and claims cannot be determined now.
Equinor has provided in its Condensed interim financial statements for probable liabilities related to litigation and claims based on the
company's best judgement. Equinor does not expect that its financial position, results of operations or cash flows will be materially
affected by the resolution of these legal proceedings.
8 Impact of the Covid-19 pandemic and oil price decline
The COVID-19 pandemic with global lockdowns has slowed, and in many countries, contracted economic growth and has had
dramatic consequences for energy demand. As a result, commodity prices collapsed in the first half of 2020 before a partial re-bounce
in the second half, impacting the energy industry and Equinor. The full extent, duration and consequences of the Covid-19 pandemic
and the resulting operational and economic impact for Equinor cannot be ascertained at this time. However, resulting changes in
market risk and economic circumstances impact Equinor’s assumptions about the future and related sources of estimation uncertainty.
Updates of certain information previously provided in Equinor’s Annual financial statement s for 2019, as well as other relevant
information, are consequently included below.
The mitigation effects from COVID-19 have had a massive impact on oil demand, particularly mobility fuels. According to the
International Energy Agency (IEA), Global energy demand in 2020 is estimated to drop by 5-6%, with the largest uncertainty being
around the shake of a second wave of lockdowns in the last quarter this year. Significant Opec+ supply cuts and shut -in production
around the world following the announcement at 1 May 2020, have so far prevented another price collapse and storages running full.
In Norway, where Equinor has production on the NCS, the Norwegian Government announced unilateral oil production cuts portioned
out to relevant fields via their production licenses. Equinor complies with the revised production permits issued by the authorities, but
for the third quarter of 2020 the production cuts in Norway and internationally did not have significant impact on the total production.
An updated overview of Equinor’s price assumptions as of 30 September 2020 has been provided in note 6 Property, plant and
equipment and intangible assets. Equinor has evaluated the reasonable possible changes in certain assumptions as of 30 September
2020. For interest rate and currency risk, the reasonable possible change remains unchanged from 31 December 2019.
As of 30 September 2020, the reasonable possible change in prices is deemed to be -50%/+50% for short-term contracts, and -
30%/+30% for the long -term derivatives, based on their duration. The short -term price contracts are considered more volatile
compared to year-end 2019.
The table below contains the price risk sensitivities of Equinor's commodity-based derivatives contracts. Equinor enters into
commodity-based derivative contracts mainly to manage short-term commodity risk. However, since none of the derivative financial
instruments included in the table below are part of formal hedging relationships, any changes in their fair values would be recognised
in the Consolidated statement of income.
Commodity price sensitivity
31 December 2019
(in USD million)
- 50%
+ 50%
- 30%
+ 30%
Crude oil and refined products net gain/(losses)
1,092
(1,092)
569
(563)
Natural gas and electricity net gains/(losses)
333
283
(33)
49
Due to market developments and related consequences, certain Equinor suppliers and customers have indicated that contractual
clauses such as those involving force majeure are being explored. The potential impact for Equinor, if any, is currently uncertain.
As a measure to maintain activity in the oil and gas related industry, the Norwegian Government on 19 June 2020 enacted temporary
targeted changes to Norway’s petroleum tax system for investments incurred in 2020 and 2021 and for new projects with final
investment decisions submitted by end of 2022. The changes are effective from 1 January 2020 and provide companies with a direct
tax deduction in the special petroleum tax (56% tax rate) instead of tax depreciation over 6 years. One of the changes is that the tax
uplift benefit, which has increased from 20.8%. to 24% will be recognised over one year instead of four years. Tax depreciation
towards the ordinary corporate tax (22% tax rate) will continue with a six-year depreciation profile. The totality of the petroleum tax
changes will increase the profitability for investments and strengthen Equinor’s’ liquidity.
9 Subsequent events
On 28 October 2020, the board of directors resolved to declare a dividend for the third quarter of 2020 of USD 0.11 per share. The
Equinor shares will trade ex-dividend 11 February 2021 on the Oslo Børs and for ADR holders on the New York Stock Exchange.
Record date will be 12 February 2021 and payment date will be 26 February 2021.
Supplementary disclosures
Operational data
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
Operational data
2020
2019
Change
Prices
43.0
29.2
61.9
(31%)
Average Brent oil price (USD/bbl)
40.8
64.7
(37%)
39.6
23.5
52.6
(25%)
E&P Norway average liquids price (USD/bbl)
35.9
56.6
(37%)
39.1
24.4
58.1
(33%)
E&P International average liquids price (USD/bbl)
37.3
60.3
(38%)
32.2
19.0
45.9
(30%)
E&P USA average liquids price (USD/bbl)
30.3
48.6
(38%)
38.3
22.9
52.5
(27%)
Group average liquids price (USD/bbl) [1]
35.2
55.8
(37%)
349
229
465
(25%)
Group average liquids price (NOK/bbl) [1]
335
486
(31%)
1.45
0.91
3.96
(63%)
E&P Norway average internal gas price (USD/mmbtu) [9]
1.70
4.66
(64%)
1.13
1.26
1.74
(35%)
E&P USA average internal gas price (USD/mmbtu) [9]
1.31
2.29
(43%)
2.72
2.24
5.19
(48%)
Average invoiced gas prices - Europe (USD/mmbtu) [8]
3.06
5.95
(49%)
1.53
1.47
1.99
(23%)
Average invoiced gas prices - North America (USD/mmbtu) [8]
1.63
2.51
(35%)
(0.1)
3.9
5.9
>(100%)
Refining reference margin (USD/bbl) [2]
1.8
4.4
(58%)
Entitlement production (mboe per day)
619
637
497
25%
E&P Norway entitlement liquids production
635
507
25%
220
235
266
(17%)
E&P International entitlement liquids production
240
272
(12%)
151
172
182
(17%)
E&P USA entitlement liquids production
170
172
(2%)
991
1,044
946
5%
Group entitlement liquids production
1,045
951
10%
654
644
570
15%
E&P Norway entitlement gas production
681
691
(1%)
35
31
47
(25%)
E&P International entitlement gas production
41
39
4%
185
179
183
1%
E&P USA entitlement gas production
179
181
(1%)
874
854
799
9%
Group entitlement gas production
901
911
(1%)
1,865
1,897
1,745
7%
Total entitlement liquids and gas production [3]
1,946
1,862
5%
Equity production (mboe per day)
619
637
497
25%
E&P Norway equity liquids production
635
507
25%
283
291
352
(20%)
E&P International equity liquids production
309
355
(13%)
173
195
212
(18%)
E&P USA equity liquids production
194
209
(7%)
1,076
1,123
1,061
1%
Group equity liquids production
1,138
1,071
6%
654
644
570
15%
E&P Norway equity gas production
681
691
(1%)
40
34
58
(31%)
E&P International equity gas production
47
61
(22%)
224
210
220
2%
E&P USA equity gas production
213
210
2%
918
888
848
8%
Group equity gas production
941
961
(2%)
1,994
2,011
1,909
4%
Total equity liquids and gas production [4]
2,079
2,032
2%
NES power production
319
305
342
(7%)
Power generation (GWh)
1,181
1,278
(8%)
Exchange rates
Quarters
Change
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
Exchange rates
2020
2019
Change
0.1095
0.1000
0.1129
(3%)
NOK/USD average daily exchange rate
0.1050
0.1150
(9%)
0.1055
0.1026
0.1100
(4%)
NOK/USD period-end exchange rate
0.1055
0.1100
(4%)
9.1321
10.0023
8.8573
3%
USD/NOK average daily exchange rate
9.5266
8.6979
10%
9.4814
9.7446
9.0874
4%
USD/NOK period-end exchange rate
9.4814
9.0874
4%
1.1685
1.1008
1.1118
5%
EUR/USD average daily exchange rate
1.1239
1.1234
0%
1.1708
1.1198
1.0889
8%
EUR/USD period-end exchange rate
1.1708
1.0889
8%
Health, safety and the environment
Twelve months average per
First nine months
First nine months
Q3 2020
Q3 2019
Health, safety and the environment
2020
2019
Injury/incident frequency
2.3
2.5
Total recordable injury frequency (TRIF)
2.3
2.5
0.6
0.6
Serious Incident Frequency (SIF)
0.5
0.6
Oil spills
165
226
Accidental oil spills (number of)
116
170
317
8,850
Accidental oil spills (cubic metres)
158
8,824
First nine months
Full year
Climate
2020
2019
Upstream CO2 intensity (kg CO2/boe)
1)
8.1
9.5
1) Total scope 1 emissions of CO2 (kg CO2) from exploration and production, divided by total production (boe).
Exploration expenses
Quarters
Change
Exploration expenses
First nine months
Q3 2020
Q2 2020
Q3 2019
Q3 on Q3
(in USD million)
2020
2019
Change
142
97
179
(21%)
E&P Norway exploration expenditures
369
437
(16%)
143
234
219
(35%)
E&P International exploration expenditures
598
578
3%
65
76
24
>100%
E&P USA exploration expenditures
186
90
>100%
349
407
422
(17%)
1)
Group exploration expenditures
1,151
1,106
4%
2)
87
14
39
>100%
Expensed, previously capitalised exploration expenditures
200
59
>100%
(125)
(140)
(201)
(38%)
Capitalised share of current period's exploration activity
(459)
(405)
14%
575
111
611
(6%)
Impairment (reversal of impairment)
1,022
614
67%
886
393
871
2%
Exploration expenses according to IFRS
1,914
1,374
39%
1) 27 wells with activity with 11 completed in the third quarter of 2020 compared to 21 wells with 11 completed in the third quarter of 2019.
2) 42 wells with activity with 26 completed the first nine months of 2020 compared to 42 wells with 32 completed in the first nine months of
2019.
Calculation of capital employed and net debt to capital employed ratio
The table below reconciles the net interest-bearing debt adjusted, the capital employed, the net debt to capital employed ratio
adjusted including lease liabilities and the net debt to capital employed adjusted ratio with the most directly comparable financial
measure or measures calculated in accordance with IFRS.
Calculation of capital employed and net debt to capital employed ratio
At 30
September
At 30 June
At 31
December
At 30
September
(in USD million)
2020
2020
2019
2019
Shareholders' equity
34,084
35,587
41,139
40,983
Non-controlling interests
24
23
20
16
Total equity
A
34,108
35,610
41,159
40,999
Current finance debt
5,277
5,463
4,087
4,375
Non-current finance debt
32,193
31,647
24,945
24,401
Gross interest-bearing debt
B
37,471
37,110
29,032
28,776
Cash and cash equivalents
7,844
9,700
5,177
6,838
Current financial investments
10,563
9,319
7,426
7,203
Cash and cash equivalents and financial investment
C
18,407
19,020
12,604
14,041
Net interest-bearing debt [10]
B1 = B-C
19,064
18,091
16,429
14,735
Other interest-bearing elements
669
832
791
878
Normalisation for cash-build up before tax payment (50% of Tax Payment)
259
-
-
670
Net interest-bearing debt adjusted normalised for tax payment, including
lease liabilities [5]
B2
19,992
18,923
17,219
16,283
Lease liabilities
4,218
4,154
4,339
4,383
Net interest-bearing debt adjusted [5]
B3
15,774
14,768
12,880
11,899
Calculation of capital employed [5]
Capital employed
A+B1
53,172
53,700
57,588
55,734
Capital employed adjusted, including lease liabilities
A+B2
54,100
54,532
58,378
57,282
Capital employed adjusted
A+B3
49,883
50,378
54,039
52,898
Calculated net debt to capital employed [5]
Net debt to capital employed
(B1)/(A+B1)
35.9%
33.7%
28.5%
26.4%
Net debt to capital employed adjusted, including lease liabilities
(B2)/(A+B2)
37.0%
34.7%
29.5%
28.4%
Net debt to capital employed adjusted
(B3)/(A+B3)
31.6%
29.3%
23.8%
22.5%
1) Cash and cash equivalents adjustments regarding collateral deposits classified as cash and cash equivalents in the Consolidated
balance sheet but considered as non-cash in the non -GAAP calculations as well as financial investments in Equinor Insurance
AS classified as current financial investments.
2) Adjustment to net interest-bearing debt for cash build-up in the first quarter and the third quarter before tax payment on 1 April
and 1 October. This is to exclude 50% of the cash build-up to have a more even allocation of tax payments between the four
quarters and hence a more representative net interest-bearing debt.
USE AND RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Non-GAAP financial measures are defined as numerical measures that either exclude or include amounts or certain accounting items
that are not excluded or included in the comparable measures calculated and presented in accordance with GAAP (i.e. IFRS).
Management considers adjusted earnings and adjusted earnings after tax together with other non-GAAP financial measures as
defined below, to provide a better indication of the underlying operational and financial performance in the period (excluding
financing), and therefore better facilitate comparisons between periods.
The following financial measures may be considered non-GAAP financial measures:
●
Net debt to capital employed, Net debt to capital employed adjusted,
Net debt to capital
employed ratio adjusted
excluding lease liabilities from the gross interest -bearing debt. Comparable numbers are presented in the table Calculation of
capital employed and net debt to capital employed ratio in the report include Finance lease according to IAS17, adjusted for
marketing instruction agreement
●
Organic capital expenditures
investments in note 2 Segments to the Condensed financial interim statements, amounted to USD 2.0 billion in the third quarter
of 2020. Organic capital expenditures are capital expenditures excluding acquisitions, recognised lease assets (RoU assets) and
other investments with significant different cash flow pattern. In the third quarter of 2020, a total of USD 0.3 billion are excluded in
the organic capital expenditures. Forward-looking organic capital expenditures included in this report are not reconcilable to its
most directly comparable IFRS measure without unreasonable efforts, because the amounts excluded from such IFRS measure
to determine organic capital expenditures cannot be predicted with reasonable certainty.
●
Free cash flow for the third quarter 2020
flows provided by operating activities before taxes paid and working capital items (USD 3.3 billion), taxes paid (negative USD 0.1
billion), cash used in business combinations (USD 0.0 billion), capital expenditures and investments (negative USD 1.7 billion),
(increase) decrease in other items interest bearing (USD 0.0 billion), proceeds from sale of assets and businesses (USD 0.0
billion), dividend paid (negative USD 0.3 billion) and share buy-back (negative USD 1.0 billion), resulting in a free cash flow of
USD 0.2 billion in the third quarter of 2020.
●
Free cash flow for the first nine months of 2020
Cash flows provided by operating activities before taxes paid and working capital items (USD 10.2 billion), taxes paid (negative
USD 2.7 billion), cash used in business combinations (USD 0.0 billion), capital expenditures and investments (negative USD 6.0
billion), (increase) decrease in other items interest bearing (USD 0.0 billion), proceeds from sale of assets and businesses,
including USD 0.3 billion received from the Lundin divestment included in (increase)/decrease in financial investments (USD 0.3
billion), dividend paid (negative USD 2.0 billion) and share buy-back (negative USD 1.1 billion), resulting in a free cash flow of
negative USD 1.3 billion in the first nine months of 2020.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as
"ambition", "continue", "could", "estimate", “intend”, "expect", "believe", "likely", "may", "outlook", "plan", "strategy", "will", "guidance",
“targets”, “in line with”, “on track”, “consistent” and similar expressions to identify forward-looking statements. Forward -looking
statements include all statements other than statements of historical fact, including, among others, statements regarding Equinor’s
plans, intentions, aims, ambitions and expectations with respect to the Covid -19 pandemic including its impacts, consequences and
risks; Equinor’s USD 3 billion action plan for 2020 to strengthen financial resilience; Equinor’s response to the Covid-19 pandemic,
including anticipated measures to protect people, operations and value creation, operating costs and assumptions; the commitment to
develop as a broad energy company; future financial performance, including cash flow and liquidity; the share buy-back programme,
including its suspension; accounting policies; production cuts, including their impact on the level and timing of Equinor’s production;
plans to develop fields; changes to Norway’s petroleum tax system; market outlook and future economic projections and assumptions,
including commodity price assumptions; organic capital expenditures through 2023; intention to mature its portfolio; estimates
regarding exploration activity levels; ambition to keep unit of production cost in the top quartile of its peer group; scheduled
maintenance activity and the effects on equity production thereof; completion and results of acquisitions and disposals; expected
amount and timing of dividend payments; and provisions and contingent liabilities.
You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those
anticipated in the forward-looking statements for many reasons.
These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and
uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors
that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking
statements, including levels of industry product supply, demand and pricing, in particular in light of recent significant oil price volatility
triggered, among other things, by the changing dynamic among OPEC+ members and the uncertainty regarding demand created by
the Covid-19 pandemic; the impact of Covid-19; levels and calculations of reserves and material differences from reserves estimates;
unsuccessful drilling; operational problems; health, safety and environmental risks; natural disasters, adverse weather conditions,
climate change, and other changes to business conditions; the effects of climate change; regulations on hydraulic fracturing; securit y
breaches, including breaches of our digital infrastructure (cybersecurity); ineffectiveness of crisis management systems; the actions of
counterparties and competitors; the development and use of new technology, particularly in the renewable energy sector; inability to
meet strategic objectives; the difficulties involving transportation infrastructure; political and social stability and economic growth in
relevant areas of the world; an inability to attract and retain personnel; inadequate insurance coverage; changes or uncertainty in or
non-compliance with laws and governmental regulations; the actions of the Norwegian state as majority shareholder; failure to meet
our ethical and social standards; the political and economic policies of Norway and other o il-producing countries; non -compliance with
international trade sanctions; the actions of field partners; adverse changes in tax regimes; exchange rate and interest rate
fluctuations; factors relating to trading, supply and financial risk; general economic conditions; and other factors discussed elsewhere
in this report. Additional information, including information on factors that may affect Equinor’s business, is contained in Equinor’s
Annual Report on Form 20-F for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission
(including section 2.11 Risk review - Risk factors thereof). Equinor’s 2019 Annual Report and Form 20-F is available at Equinor’s
website www.equinor.com. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we
cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover,
neither we nor any other person assume responsibility for the accuracy and completeness of these forward-looking statements. Any
forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we
undertake no obligation to update any of these statements after the date of this report, whether to make them either conform to actual
results or changes in our expectations or otherwise.
We use certain terms in this document, such as “resource” and “resources” that the SEC’s rules prohibit us from including in our filings
with the SEC. U.S. investors are urged to closely consider the disclosures in our Form 20 -F, SEC File No. 1-15200. This form is
available on our website or by calling 1-800-SEC-0330 or logging on to
www.sec.gov
.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our
future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking statements. Unless we are required by law to update
these statements, we will not necessarily update any of these statements after the date of this report, either to make them conform to
actual results or changes in our expectations.
END NOTES
1. The group's average liquids price is a volume-weighted average of the segment prices of crude oil, condensate and natural gas
liquids (NGL).
2. The refining reference margin is a typical average gross margin of our two refineries, Mongstad and Kalundborg. The reference
margin will differ from the actual margin, due to variations in type of crude and other feedstock, throughput, product yields, freight
cost, inventory, etc.
3. Liquids volumes include oil, condensate and NGL, exclusive of royalty oil.
4. Equity volumes represent produced volumes under a production sharing agreement (PSA) that correspond to Equinor's ownership
share in a field. Entitlement volumes, on the other hand, represent Equinor's share of the volumes distributed to the partners in the
field, which are subject to deductions for, among other things, royalty and the host government's share of profit oil. Under the
terms of a PSA, the amount of profit oil deducted from equity volumes will normally increase with the cumu lative return on
investment to the partners and/or production from the licence. Consequently, the gap between entitlement and equity volumes will
likely increase in times of high liquids prices. The distinction between equity and entitlement is relevant to most PSA regimes,
whereas it is not applicable in most concessionary regimes such as those in Norway, the UK, the US, Canada and Brazil.
5. These are non-GAAP figures. See Use and reconciliation of non-GAAP financial measures in the Supplementary disclosures for
more details.
6. Transactions with the Norwegian State. The Norwegian State, represented by the Ministry of Petroleum and Energy (MPE), is the
majority shareholder of Equinor and it also holds major investments in other entities. This ownership structure means that Equinor
participates in transactions with many parties that are under a common ownership structure and therefore meet the definition of a
related party. Equinor purchases liquids and natural gas from the Norwegian State, represented by SDFI (the State's Direct
Financial Interest). In addition, Equinor sell s the State's natural gas production in its own name, but for the Norwegian State's
account and risk as well as related expenditures are refunded by the State. All transactions are considered priced on an arm’s-
length basis.
7. The production guidance reflects our estimates of proved reserves calculated in accordance with US Securities and Exchange
Commission (SEC) guidelines and additional production from other reserves not included in proved reser ves estimates. The
growth percentage is based on historical production numbers, adjusted for portfolio measures .
8. The group's average invoiced gas prices include volumes sold by the MMP segment.
9. The internal transfer price paid from the MMP segment to the E&P Norway and E&P USA segments.
10. Since different legal entities in the group lend to projects and others borrow from banks, project financing through external bank or
similar institutions is not netted in the balance sheet and results in over -reporting of the debt stated in the balance sheet compared
to the underlying exposure in the group. Similarly, certain net interest-bearing debt incurred from activities pursuant to the
Marketing Instruction of the Norwegian government are off-set against receivables on the SDFI. Some interest-bearing elements
are classified together with non-interest bearing elements, and are therefore included when calculating the net interest-bearing
debt.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authoris ed.
EQUINOR ASA
(Registrant)
Dated: 29 October, 2020
By: ___/s/ Lars Christian Bacher
Name: Lars Christian Bacher
Title: Chief Financial Officer