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
10 February 2021
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 contains a report of the fourth quarter 2020 results of Equinor ASA.
Equinor fourth quarter 2020 2
Equinor fourth quarter 2020
and year end results
Equinor reports adjusted earnings of positive USD 0.76 billion and negative USD 0.55 billion
after tax in the fourth quarter of 2020. IFRS net operating income was negative USD 0.99
billion and the IFRS net income was negative USD 2.41 billion, following net impairments of
USD 1.30 billion and a write down of USD 0.98 billion related to the Tanzania LNG project.
2020 was characterised by:
●
●
●
●
●
●
“Our results are impacted by the market turmoil during the year, but with strong cost improvements and capital discipline we delivered
positive net cash flow for the quarter and the full year. During 2020 we have delivered more than 3.7 billion dollars in savings, well
above our ambition for the action plan we laun ched in March to strengthen financial resilience. We are well position ed for value
creation and strong cash flow in 2021 and the coming years,” says Anders Opedal, President and CEO of Equinor ASA.
“I am impressed by how the organisation has responded, delivering strong operational performance and production growth in a long-
lasting challenging situation during the pandemic. We are increasing production volumes from Johan Sverdrup even further, and we
used our flexibility to have high gas production as gas prices increased in the quarter. In addition , we have started production from
Snorre Expansion ahead of time and well below cost estimates ,” says Opedal.
“Equinor is committed to ensuring long-term competitiveness and creating value as a leader in the energy transition, setting an
ambition to be a net-zero energy company by 2050. During 2020 we delivered significant progress in our renewables portfolio ,
taking the investment decision for Dogger Bank A and B, winning the largest ever offshore wind award in the US, starting construction
at Hywind Tampen and capturing value from transactions. We are also taking action s to optimise within oil and gas, building a more
robust portfolio for the future, but resulting in a write down in Tanzania and an impairment related to an operated US onshore asset in
the quarter,” says Opedal .
Adjusted earnings [5] were USD 0.76 billion in the fourth quarter, down from USD 3.55 billion in the same period in 2019. Adjusted
earnings after tax [5] were negative USD 0.55 billion, down from USD 1.19 billion in the same period last year. Low prices for liquids
impacted the earnings for the quarter.
Equinor launched an action plan of USD 3 billion in March 2020 to strengthen financial resilience, including a reduction in operating
costs of USD 0.70 billion. Delivery on the plan resulted in savings of more than USD 3.7 billion, including a reduction in fixed operating
costs of around USD 1 b illion. Unit production costs are reduced by 5% since 2019, realising the 2021 ambition already in 2020.
In the E&P Norway segment , Equinor realised weaker liquids prices and the production was reduced mainly as a result of turnarounds
moved to fourth quarter due to the ongoing pandemic.
Results in the E&P International segment were impacted by low prices and the impairment of the Tanzania LNG project of
USD 0.98 billion. The E&P USA segment was also impacted by weak prices, partially offset by significant reductions in operating
costs.
The Marketing, midstream and processing segment captured value from strong trading results from gas to Europe, partially offset by
low refinery margins and shutdown of production at Hammerfest LNG plant.
New energy solutions delivered high availability on offshore wind assets. A capital gain of around USD 1 billion is expected to be
booked from the divestment of a 50% non -operated interest of the offshore wind projects Empire Wind and Beacon Wind in the US. A
Equinor fourth quarter 2020 3
capital gain from the farm down of 10% equity interest in Dogger Bank A and B in the UK is expected to be booked in the first quarter
of 2021.
IFRS net operating income was negative USD 0.99 billion in the fourth quarter, down from positive USD 1.52 billion in the same period
in 2019. IFRS net income was negative USD 2.42 billion in the fourth quarter, compared to negative USD 0.23 billion in the fourth
quarter of 2019. Net operating income was negatively impacted by net impairments of USD 1.30 billion, mainly relating to a refinery as
a result of reduced margin assumptions and some increase in cost estimates, and to an operated unconventional onshore asset in
North America due to reclassification as held for sale.
Equinor delivered total equity production of 2,043 mboe per day in the fourth quarter, down from 2,198 mboe per day in the same
period in 2019, with a minor increase in gas share due to high flexible production in gas field s. Adjusting for portfolio transactions the
production growth for 2020 was 2.4%.
In 2020, Equinor completed 34 exploration wells with 16 commercial discoveries and 1 well under evaluation. At year end, 12 wells
were ongoing. Adjusted exploration expenses in the fourth quarter were USD 1.25 billion, compared to USD 0.44 billion in the same
quarter in 2019.
The proved reserves replacement ratio (RRR) was negative 5% in 2020, following capital discipline and the prioritisation of financial
flexibility during market uncertainty, with a three-year average of 95%. With 5.26 billion barrels in proved reserves, Equinor’s reserves
to production ratio (R/P) was 7.4 years.
Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 14.0 billion in 2020,
compared to USD 21.8 billion in 2019. Organic capital expenditure [5] was USD 7.8 billion for 2020. At year end, net debt to capital
employed
to capital employed
(1)
The board of directors proposes to the annual general meeting a cash dividend of USD 0.12 per share for the fourth quarter 2020.
Average CO2-emissions from Equinor’s operated upstream production, on a 100% basis, was 8.0 kg per barrel in 2020.
The twelve-month average Serious Incident Frequency (SIF) for 2020 was 0. 5, down from 0.6 in 2019. The twelve-month average
Recordable Injury Frequency (TRIF) was 2.3 for 2020, compared to 2.5 in 2019.
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million, unless stated otherwise)
2020
2019
Change
(989)
(2,019)
1,516
N/A
Net operating income/(loss)
(3,423)
9,299
N/A
756
780
3,550
(79%)
Adjusted earnings [5]
3,938
13,484
(71%)
(2,416)
(2,124)
(230)
>(100%)
Net income/(loss)
(5,496)
1,851
N/A
(554)
271
1,186
N/A
Adjusted earnings after tax [5]
924
4,925
(81%)
2,043
1,994
2,198
(7%)
Total equity liquids and gas production (mboe per day) [4]
2,070
2,074
(0%)
40.6
38.3
56.5
(28%)
Group average liquids price (USD/bbl) [1]
36.5
56.0
(35%)
1
net debt to capital employed ratio as shown under the Supplementary section in the report.
Equinor fourth quarter 2020 4
GROUP REVIEW
Fourth quarter 2020
Total equity liquids and gas production
mboe per day in the fourth quarter of 2019 mainly due to expected natural decline, turnarounds for several fields especially on the
Norwegian continental shelf (NCS) and the shutdown at the Hammerfest LNG plant . Production halt in Brazil and the divestment of
the Eagle Ford asset in the E&P USA segment in the fourth quarter of 2019 contributed to the decrease. New fields on the NCS,
higher flexible gas off -take and new wells in the US onshore partially offset the decrease.
Total entitlement liquids and gas production
[3] was 1,912 mboe per day in the fourth quarter of 2020, down 7% compared to
2,056 mboe per day in the fourth quarter of 2019 . The production was negatively influenced by the factors mentioned above, partially
offset by lower effects from production sharing agreements (PSA) [4], and lower US royalty volumes. The net effect of PSA and US
royalties was 131 mboe per day in total in the fourth quarter of 2020 compared to 142 mboe per day in the fourth quarter of 2019.
Quarters
Change
Condensed income statement under IFRS
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(unaudited, in USD million)
2020
2019
Change
11,746
11,339
15,169
(23%)
Total revenues and other income
45,818
64,357
(29%)
(5,533)
(5,307)
(6,603)
(16%)
Purchases [net of inventory variation]
(20,986)
(29,532)
(29%)
(2,156)
(2,368)
(2,405)
(10%)
Operating and administrative expenses
(9,537)
(10,469)
(9%)
(3,478)
(4,798)
(4,165)
(17%)
Depreciation, amortisation and net impairment losses
(15,235)
(13,204)
15%
(1,569)
(886)
(480)
>100%
Exploration expenses
(3,483)
(1,854)
88%
(989)
(2,019)
1,516
N/A
Net operating income/(loss)
(3,423)
9,299
N/A
(2,416)
(2,124)
(230)
>(100%)
Net income/(loss)
(5,496)
1,851
N/A
Net operating income
was negative USD 989 million in the fourth quarter of 2020, compared to positive USD 1,516 million in the
fourth quarter of 2019. The decrease was mainly due to lower liquids and gas prices and write down of previously capitalised well
costs of
USD 982 million related to the Tanzania LNG project. Lower production for liquids and gas in addition to weak refinery margins
contributed to the decrease . Lower depreciation expenses and operating expenses partially offset the decrease.
In the fourth quarter of 2020, net operating income was negatively impacted by impairments
2
hedging effects of USD 315 million.
In the fourth quarter of 2019, net operating income was negatively impacted mainly by net impairments of USD 1,425 million which
includes USD 23 million related to associated companies, changes in fair value of derivatives and inventory hedge contracts of
USD 282 million and higher volumes in inventory with unrealised profit written down to production cost of USD 591 million. Net
operating income was positively affected by a net gain from the sale of assets of USD 185 million.
2
Equinor fourth quarter 2020 5
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
11,985
10,909
15,336
(22%)
Adjusted total revenues and other income
45,908
63,335
(28%)
(5,298)
(5,203)
(6,048)
(12%)
Adjusted purchases [6]
(21,154)
(29,024)
(27%)
(2,184)
(2,179)
(2,496)
(13%)
Adjusted operating and administrative expenses
(9,159)
(9,850)
(7%)
(2,495)
(2,445)
(2,806)
(11%)
Adjusted depreciation, amortisation and net impairment
losses
(9,520)
(9,775)
(3%)
(1,252)
(302)
(437)
>100%
Adjusted exploration expenses
(2,138)
(1,203)
78%
756
780
3,550
(79%)
Adjusted earnings [5]
3,938
13,484
(71%)
(554)
271
1,186
N/A
Adjusted earnings after tax [5]
924
4,925
(81%)
For items impacting net operating income/(loss), see Use and reconciliation of non-GAAP financial measures in the Supplementary
disclosures.
Adjusted total revenues and other income
were USD 11,985 million in the fourth quarter of 2020 compared to USD 15,336 million
in the fourth quarter of 2019. The decrease was mainly due to lower average prices for liquids and gas and lower production,
especially for liquids.
Adjusted purchases
2019. The decrease was mainly due to lower average prices for liquids and gas, partially offset by higher third-party volumes for
liquids.
Adjusted operating and administrative expenses
were USD 2,184 million in the fourth quarter of 2020 , compared to USD 2,496
million in the fourth quarter of 2019. The decrease was mainly due to lower transportation costs, especially in the MMP segment,
primarily due to lower freight rates on shipping of liquids in addition to decreased production in the E&P International segment. Lower
operation and maintenance costs due to reduced activity in the E&P International and E&P USA segments, the divestment of the
Eagle Ford asset in the E&P USA segment, and a settlement with COSL in the fourth quarter of 2019 contributed to the decrease.
Increased Gassled removal cost in the E&P Norway segment partially offset the decrease.
Adjusted depreciation, amortisation and net impairment losses
were USD 2,495 million in the fourth quarter of 2020, compared
to USD 2,806 million in the fourth quarter of 2019. The decrease was mainly due to lower production in all segments and higher
proved reserves estimates especially in the E&P International and E&P USA segments. Lower depreciation basis resulting from net
impairments in previous periods contributed to the decrease. Higher investments partially offset the decrease.
Adjusted exploration expenses
were USD 1,252 million in the fourth quarter of 2020, compared to USD 437 million in the fourth
quarter of 2019. The increase was mainly due to write down of previously capitalised well costs of USD 982 million related to the
Tanzania LNG project and a lower portion of exploration expenditures being capitalised. Lower drilling, seismic and field development
costs partially offset the increase. For more information, see the table titled Adjusted exploration expenses in the Supplementary
disclosures.
After total adjustments
3
Adjusted earnings
quarter of 2020, a 79% decrease from USD 3,550 million in the fourth quarter of 2019.
Adjusted earnings after tax
adjusted earnings of 173.2%, compared to 66.6% in the fourth quarter of 2019. The increase in the effective tax rate was mainly due
to decreased adjusted earnings in the fourth quarter of 2020 in entities with lower than average tax rates, and in entities without
recognised taxes, partially offset by the temporary changes to Norway’s petroleum tax system as described in note 8 Impact of
pandemic and oil price decline to the Condensed interim financial statements.
Cash flows provided by operating activities
increased by USD 570 million compared to the fourth quarter of 2019. The increase
was mainly due to decreased tax payments, partially offset by lower liquids and gas prices and a change in working capital.
3
For items impacting net operating income, see Use and reconciliation of non-GAAP financial measures in the Supplementary disclosures.
Equinor fourth quarter 2020 6
Cash flows used in investing activities
increased by USD 577 million compared to the fourth quarter of 2019. The increase was
mainly due to reduced proceeds from sale of assets, increased derivative payments and increased financial investments, partially
offset by lower capital expenditures.
Cash flows provided by financing activities
increased by USD 379 million compared to the fourth quarter of 2019. The increase
was mainly due to decreased dividend paid, increased collateral received and increased short-term debt, partially offset by no new
finance debt in the quarter.
Total cash flows
increased by USD 370 million compared to the fourth quarter of 2019.
Free cash flow
2019. The increase was mainly due to decreased tax payments and decreased dividend paid, partially offset by lower liquids and gas
prices and reduced proceeds from sale of assets.
Full year 2020
Net operating income
was negative USD 3,423 million in 2020 compared to positive USD 9,299 million in 2019. The decrease was
mainly due to lower liquids and gas prices, net impairments
4
5
in addition to negative
reserve updates
and write down of previously capitalised well costs of USD 982 million related to the Tanzania LNG project.
In 2020, net operating income was negatively impacted mainly by net impairments
4
and provisions of
USD 296 million.
In 2019, net operating income was negatively affected mainly by net impairments of USD 4,103 million which includes USD 23 million
related to associated companies, provisions of USD 485 million and a change in accounting policy of USD 123 million and net overlift
effect of USD 134 million. Net operating income was positively impacted by a net gain on the sale of assets of USD 1,184 million and
operational storage effects of USD 121 million in 2019.
Adjusted total revenues and other income
were USD 45,908 million in 2020 compared to USD 63,335 million in 2019. The
decrease was mainly due to lower average prices for liquids and gas.
Adjusted purchases
[6] were USD 21,154 million in 2020 compared to USD 29,024 million in 2019. The decrease was mainly due to
lower average prices for liquids and gas, partially offset by higher volumes for liquids.
Adjusted operating and administrative expenses
were
USD 9,159 million in 2020, a decrease of USD 691 million compared to
2019. The decrease was mainly due to the NOK/USD exchange rate development and the divestment of the Eagle Ford asset in the
E&P USA segment in the fourth quarter of 2019. Lower royalties and production fees driven by lower volumes and prices in addition to
lower activity level contributed to the decrease. Higher transportation cost for liquids mainly due to higher freight rates on shipping in
the MMP segment partially offset the decrease.
Adjusted depreciation, amortisation and net impairment losses
were
USD 9,520 million in 2020 , down USD 255 million c ompared
to 2019. The decrease was mainly due to higher proved reserves estimates for several fields and lower depreciation basis resulting
from net impairments in previous periods. Lower field specific production especially in the E&P International segment contributed to
the decrease. Higher investments mainly in the US in addition to ramp-up of new fields especially on the NCS partially offset the
decrease.
Adjusted exploration expenses
increased by USD 936 million to USD 2,138 million in 2020, primarily due to write down of
previously capitalised well costs of USD 982 million related to the Tanzania LNG project and a lower portion of exploration expenses
being capitalised this year. Lower seismic, drilling, field development and other costs partially offset the increase. For more
information, see table titled Adjusted exploration expenses in the Supplementary disclosures.
After total adjustments
6
Adjusted earnings
71% from USD 13,484 million in 2019.
Adjusted earnings aft er tax
The effective tax rate on adjusted earnings was 76.5% in full year of 2020, compared to an effective tax rate of 63.5% in full year of
2019. The increase in the effective tax rate was mainly due to decreased adjusted earnings in 2020 in entities with lower than average
tax rates, and in entities without recognised taxes, partially offset by the temporary changes to Norway’s petroleum tax system as
4
5
6
Equinor fourth quarter 2020 7
described in note 8 Impact of pandemic and oil price decline to the Condensed interim financial statements, in addition to changes in
provision for best estimates for uncertain tax positions.
Equinor fourth quarter 2020 8
Based on adjusted earnings after tax and average capital employed, calculated
return on average capital employed (ROACE)
was 1.8% for the 12-month period ended 31 December 2020 and 9.0% for the 12-month period ended 31 December 2019.
Organic capital expenditures
USD 8.5 billion. Total capital expenditures were USD 9.8 billion in 2020.
Estimated
Proved reserves
at the end of 2020 were 5.260 billion barrels of oil equivalent (boe), a net decrease of 744 million boe
compared to 6.004 billion boe at the end of 2019.
The decrease was mainly due to negative revisions of net 171 million boe , strongly influenced by the reduction in commodity prices in
2020. Negative revisions totaled 388 million boe, of which 194 million boe was due to the reduction in prices. Positive reserves
revisions and improved oil recovery (IOR) efforts of 217 million boe, extensions and discoveries of 131 million boe and purchases of 6
million boe added to proved reserves in 2020.
The negative effect of the entitlement production was 710 million boe in 2020, compared to 698 million boe in 2019.
The reserve replacement ratio (RRR)
was negative 5 % in 2020 compared to positive 76% in 2019 . The RRR measures the
estimated proved reserves added to the reserve base , including the effects of sales and purchases, relative to the amount of oil and
gas produced. The reduction in RRR from last year was primarily due to negative revisions caused by lower prices and less proved
reserves added from new projects sanctioned. The average three-year replacement ratio (including the effects of sales and
purchases), was 95% at the end of 2020 compared to 147% at the end of 2019.
All numbers are preliminary and including equity accounted entities.
Cash flows provided by operating activities
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 financial investments, reduced proceeds from sale of assets and increased derivative payments , partially offset by lower
cash flow used for business combinations and capital expenditures.
Cash flows provided by financing activities
bond issues, increased short-term debt, decreased dividend paid and increased collateral payments related to derivatives, partially
offset by increased repayment of finance debt and increased payments related to the share buy-back programme.
Total cash flows
Free cash flow
[5] for 2020 was USD 85 million including USD 332 million received from the Lundin divestment included in the line
item (Increase)/decrease in the Consolidated statement of cash flow, compared to negative USD 175 million in
2019. The increase was mainly due to decreased tax payments, lower cash flow used for business combinations, lower capital
expenditures, decreased dividend paid and increased cash flow from derivatives, partially offset by lower liquids and gas
prices, reduced proceeds from sale of assets and increased payments related to the share buy-back programme.
Equinor fourth quarter 2020 9
OUTLOOK
●
Organic capital expenditures
7
●
Equinor intends to continue to mature its attractive portfolio of exploration assets and estimates a total
exploration activity
of around USD 0.9 billion for 2021, excluding signature bonuses, accruals and field development costs
●
Equinor’s ambition is to keep the
unit of production cost
●
For the period 2020 –2026,
production growth
(Compound Annual Growth Rate) based on current forecast
●
Scheduled maintenance activity
●
Production
[7] for 2021 is estimated to be around 2% above 2020 level
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, the ongoing 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.
7
Equinor fourth quarter 2020 10
EXPLORATION & PRODUCTION NORWAY
Fourth quarter 2020 review
Average daily production of liquids and gas
1,346 mboe per day in the fourth quarter of 2019. The decrease was mainly due to turnarounds, natural decline on Equinor operated
assets and shutdown at the Hammerfest LNG plant, partially offset by ramp-up of new fields and increased flexible gas outtake.
Net operating income
2019. The increase was mainly due to lower impairments, partially offset by lower liquids price.
In the fourth quarter of 2020, net operating income was negatively impacted by impairment of goodwill of USD 41 million. In the fourth
quarter of 2019, net operating income was negatively impacted by impairment of assets of USD 1,284 million.
Adjusted operating and administrative expenses decreased mainly due to a settlement with COSL in the fourth quarter of 2019 in
addition to reduced transportation cost in the fourth quarter of 2020 . Adjusted depreciation, amortisation and net impairment losses
decreased mainly due to lower field specific production and lower depreciation basis resulting from net impairments in previous
periods. Ramp-up of new fields and higher investments partially offset the decrease. Adjusted exploration expenses decreased mainly
due to lower drilling and seismic costs. Lower portion of exploration expenditure being capitalised partially offset the decrease.
After total adjustments of USD 38 million to net operating income,
Adjusted
earnings
[5] were USD 1,841 million in the fourth quarter
of 2020, compared to USD 2,738 million in the fourth quarter of 2019.
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
3,891
2,763
4,944
(21%)
Adjusted total revenues and other income
11,962
17,951
(33%)
(770)
(699)
(852)
(10%)
Adjusted operating and administrative expenses
(2,867)
(3,274)
(12%)
(1,187)
(1,126)
(1,210)
(2%)
Adjusted depreciation, amortisation and net impairment
losses
(4,286)
(4,155)
3%
(94)
(165)
(142)
(34%)
Adjusted exploration expenses
(418)
(478)
(12%)
1,841
773
2,738
(33%)
Adjusted earnings/(loss) [5]
4,391
10,043
(56%)
For comparable IFRS figures, see note 2 Segments to the Condensed interim financial statements. For items impacting net operating
income/(loss), see Use and reconciliation of non -GAAP financial measures in the Supplementary disclosures.
Full year 2020
Net operating income
mainly due to lower liquids and gas transfer prices in the full year of 2020. Higher liquids volumes partially offset the decrease.
In 2020, net operating income was negatively impact ed by impairments of USD 1,265 million and underlifted volumes of USD 26
million. In 2019, net operating income was negatively impacted by impairment of assets of USD 1,284 million, a negative impact of
USD 81 million from underlifted volumes in the period and an implementation effect of USD 42 million from a change in accounting
policy for lifting imbalances, partially offset by gain on sale of assets of USD 977 million.
Adjusted operating and administrative expenses decreased mainly due to the NOK/USD exchange rate development, a settlement
Equinor fourth quarter 2020 11
with COSL in the fourth quarter of 2019 in addition to reduced transportation cost including the reduction in Gassled removal costs.
Adjusted depreciation, amortisation and net impairment losses increased mainly due to ramp-up of new fields and higher investments.
The NOK/USD exchange rate development, lower field specific production and lower depreciation basis resulting from net
impairments in previous periods partially offset the increase. Adjusted exploration expenses decreased mainly due to lower drilling,
seismic and other costs. Lower portion of exploration expenditure being capit alised and a higher portion of exploration expenditure
capitalised in earlier years being expensed this period partially offset the decrease.
After total adjustments of USD 1,294 million to net operating income,
Adjusted earnings
[5] were USD 4,391 million in 2020, a
decrease of 56% from USD 10,043 million in 2019.
Equinor fourth quarter 2020 12
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. Prior
segment results have been restated to reflect this change.
Fourth quarter 2020 review
Average daily equity production of liquids and gas
day in the fourth quarter of 2019. The decrease was primarily due to natural decline in mature fields and repairs on Peregrino (Brazil)
resulting in a production halt.
Average daily entitlement production of liquids and gas
was 267 mboe per day in the fourth quarter of 2020 compared to 336
mboe per day in the fourth 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 73 mboe per day in the fourth quarter of 2020 compared to 78
mboe per day in the fourth quarter of 2019.
Net operating income
was negative USD 1,376 million in the fourth quarter of 2020 compared to positive USD 53 million in the fourth
quarter of 2019. The decrease was mainly due to write down of previously capitalised well costs of USD 982 million related to the
Tanzania LNG project and lower liquids and gas prices. Lower entitlement productio n in the fourth quarter of 2020 contributed to the
decrease. Lower depreciation in addition to lower operating and administrative expenses partially offset the decrease.
In the fourth quarter of 2020, net operating income was negatively impacted by impairments of USD 229 million. In the fourth quarter
of 2019, net operating income was negatively impacted by impairments of USD 98 million.
Adjusted operating and administrative expenses decreased mainly due to lower operation, maintenance and transportation expenses
in addition to lower royalties primarily driven by reduced activities and lower production. Adjusted depreciation, amortisation and net
impairment losses decreased mainly due to higher proved reserves estimates, lower production from mature fields in addition to lower
depreciation basis resulting from net impairments in previous periods. Increased production from certain fields partially offset the
decrease. Adjusted exploration expenses increased mainly due to write down of previously capitalised well costs of USD 982 million
related to the Tanzania LNG project and a lower portion of exploration expenditure being capitalised this quarter. Lower drilling and
seismic costs partially offset the increase.
After total adjustments of USD 161 million to net operating income,
Adjusted earnings
fourth quarter of 2020, down from positive USD 192 million in the fourth quarter of 2019.
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
706
820
1,554
(55%)
Adjusted total revenues and other income
3,295
6,130
(46%)
(16)
12
(26)
(39%)
Adjusted purchases
(72)
(34)
>100%
(317)
(306)
(396)
(20%)
Adjusted operating and administrative expenses
(1,313)
(1,623)
(19%)
(516)
(511)
(682)
(24%)
Adjusted depreciation, amortisation and net impairment
losses
(2,045)
(2,233)
(8%)
(1,072)
(119)
(258)
>100%
Adjusted exploration expenses
(1,560)
(625)
>100%
(1,215)
(104)
192
N/A
Adjusted earnings/(loss) [5]
(1,695)
1,616
N/A
Equinor fourth quarter 2020 13
* Restated to reflect change to segment
For comparable IFRS figures, see note 2 Segments to the Condensed interim financial statements. For items impacting net operating
income/(loss), see Use and reconciliation of non -GAAP financial measures in the Supplementary disclosures.
Equinor fourth quarter 2020 14
Full year 2020
Net operating income
for E&P International was negative USD 3,565 million in 2020, compared to positive USD 1,471 million in
2019. The negative development was mainly due to lower liquids and gas prices, higher impairments in 2020 , write down of previously
capitalised well costs of USD 982 million related to the Tanzania LNG project and lower entitlement production in 2020.
In 2020, net operating income was negatively impacted by net impairments of USD 1,933 million. In 2019, net operating income was
negatively impacted by net impairments of USD 38 million and an implementation effect of USD 63 million from a change in
accounting policy for lifting imbalances.
Adjusted operating and administrative expenses decreased mainly due to lower royalties and production fees primarily driven by lower
volumes and prices. Lower operation and maintenance expenses contributed to the decrease. Adjusted depreciation, amortisation
and net impairment losses decreased due to higher proved reserves estimates and lower production from mature fields. New fields on
stream partially offset the decrease. Adjusted exploration expenses increased mainly due to write down of previously capitalised well
costs of USD 982 million related to the Tanzania LNG project and a lower portion of exploration expenditure being capitalised this
period. Lower seismic, drilling and field development costs partially offset the increase.
After total adjustments of USD 1,870 million to net operating income,
Adjusted
earnings
down from positive USD 1,616 million in 2019.
Equinor fourth quarter 2020 15
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.
Fourth quarter 2020 review
Average daily equity production of liquids and gas
day in the fourth quarter of 2019. The decrease was mainly due to the divestment of the Eagle Ford asset in 2019, planned
maintenance and weather shutdowns in the US offshore.
Average daily entitlement production of liquids and gas
decreased slightly to 332 mboe per day in the fourth quarter of 2020
compared to 374 mboe per day in the fourth 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 58
mboe per day in the fourth quarter of 2020 compared to 64 mboe per day in the fourth quarter of 2019.
Net operating income
was negative USD 559 million in the fourth quarter of 2020 compared to positive USD 7 million in the fourth
quarter of 2019. The decrease was mainly due to impairments of assets in the fourth quarter of 2020 in addition to lower production
and lower commodity prices. Lower operating costs due to the divestment of the Eagle Ford asset in the fourth quarter of 2019 in
addition to lower depreciation cost partially offset the decrease.
In the fourth quarter of 2020, net operating income was negatively impacted by net impairments of USD 369 million, with the largest
effect from unconventional US onshore assets. In the fourth quarter of 2019 , net operating income was negatively impacted by loss on
the divestment of unconventional US onshore asset of USD 27 million.
Adjusted operating and administrative expenses decreased mainly due to the divestment of the Eagle Ford asset in the fourth quarter
of 2019. Lower transportation cost due to reduced production volumes in addition to lower production fees driven by lower prices
contributed to the decrease. Adjusted depreciation, amortisation and net impairment losses decreased mainly due to lower
depreciation basis resulting from net impairments in previous periods in addition to higher proved reserves estimates in US offshore.
Adjusted exploration expenses increased mainly due to a lower portion of exploration expenditure being capitalised. Lower field costs
partially offset the increase.
After total adjustments of USD 387 million to net operating income,
Adjusted earnings
fourth quarter of 2020, down from USD 54 million in the fourth quarter of 2019.
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
644
611
1,060
(39%)
Adjusted total revenues and other income
2,615
4,229
(38%)
(287)
(315)
(395)
(27%)
Adjusted operating and administrative expenses
(1,263)
(1,538)
(18%)
(442)
(469)
(575)
(23%)
Adjusted depreciation, amortisation and net impairment
losses
(1,886)
(2,209)
(15%)
(87)
(20)
(37)
>100%
Adjusted exploration expenses
(161)
(101)
60%
(172)
(193)
54
N/A
Adjusted earnings/(loss) [5]
(696)
381
N/A
Equinor fourth quarter 2020 16
* Restated to reflect this segment
For comparable IFRS figures, see note 2 Segments to the Condensed interim financial statements. For items impacting net operating
income/(loss), see Use and reconciliation of non -GAAP financial measures in the Supplementary.
Equinor fourth quarter 2020 17
Full year 2020
Net operating income
for E&P USA was negative USD 3,512 million in 2020 compared to negative USD 2,27 1 million in 2019. The
negative development was mainly due to higher net impairments in 2020 in addition to lower liquids and gas prices. This was partially
offset by lower operating and administrative expenses in addition to lower depreciation expenses.
In 2020, net operating income was negatively impacted by net impairment losses of USD 2,760 million, mainly due to reduced price
assumptions with the largest effect being on an unconventional US onshore asset. In 2019, net operating income was negatively
impacted by net impairments of USD 2,532 million, with the largest effect on unconventional US onshore assets.
Adjusted operating and administrative expenses decreased mainly due to the divestment of the Eagle Ford asset in the fourth quarter
of 2019. Reduced severance taxes due to lower prices contributed to the decrease. Adjusted depreciation, amortisation and net
impairment losses decreased mainly due to lower depreciation basis resulting from net impairments in previous periods in addition to
higher proved reserves estimates in US offshore. Increased investments and acquired interest in the Caesar Tonga field during 2019
partially offset the decrease. Adjusted exploration expenses increased mainly due to higher drilling costs. Lower seismic, field
development and other costs partially offset the increase.
After total adjustments of USD 2,816 million to net operating income.
Adjusted
earnings
down from positive USD 381 million in 2019.
Equinor fourth quarter 2020 18
MARKETING, MIDSTREAM & PROCESSING
Fourth quarter 2020 review
Natural gas sales volumes
amounted to 15.0 billion standard cubic meters (bcm) in the fourth quarter of 2020, decrease of 0.9 bcm
compared to the fourth quarter of 2019. Of the total gas sales in the fourth quarter of 2020, entitlement gas was 13.2 bcm,
down 0.4 bcm from the fourth quarter of 2019. The decrease was mainly due to the absence of equity LNG volumes as a result of the
outage at the Hammerfest LNG plant due to shutdown .
Liquids sales volumes
quarter of 2019 mainly due to increased purchase from third party.
Average invoiced European natural gas sales price
was 5% lower in the fourth quarter of 2020 compared to the fourth quarter of
2019 mainly due to change in gas sales strategy .
Average invoiced North American piped gas sales price
the same period mainly due to weakening prices in the US gas sales areas.
Net operating income
quarter of 2019. The decrease was mainly due to impairments of USD 638 million mostly related to refinery asset in addition to
inventory hedging effects of USD 315 million in the fourth quarter of 2020, compared to inventory hedging effects of USD 180 million
in the fourth quarter of 2019. Negative results from weak refinery margin and the absence of LNG sales due to the outage at the
Hammerfest LNG plant contributed to the decrease of net operating income in the fourth quarter of 2020. Unrealised gain on
derivatives of USD 50 million positively impacted net operating income in the fourth quarter of 2020, compared to a loss on derivatives
of USD 111 million in the fourth quarter of 2019.
Adjusted purchases [6] decreased mainly due to lower prices for all products, partially offset by higher third-party volumes for liquids.
Adjusted operating and administrative expenses decreased mainly due to lower freight rates on shipping of liquids. Adjusted
depreciation, amortisation and net impairment losses slightly increased.
After total adjustments of USD 832 million to net operating income,
Adjusted earnings
of 2020, compared to USD 524 million in the fourth quarter of 2019. The decrease was mainly due to negative results from weak
refinery margins and the absence of LNG sales due to the outage at the Hammerfest LNG plant, partially offset by piped gas activity.
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
11,866
10,704
14,766
(20%)
Adjusted total revenues and other income
45,158
60,989
(26%)
(10,342)
(9,174)
(12,909)
(20%)
Adjusted purchases [6]
(37,944)
(54,574)
(30%)
(1,064)
(1,167)
(1,237)
(14%)
Adjusted operating and administrative expenses
(4,816)
(4,479)
8%
(107)
(102)
(96)
11%
Adjusted depreciation, amortisation and net impairment
losses
(394)
(394)
0%
352
262
524
(33%)
Adjusted earnings [5]
2,004
1,541
30%
For comparable IFRS figures, see note 2 Segments to the Condensed interim financial statements. For items impacting net operating
income/(loss), see Use and reconciliation of non -GAAP financial measures in the Supplementary disclosures.
Full year 2020
Equinor fourth quarter 2020 19
Net operating income
for MMP was positive USD 359 million in 2020 compared to positive USD 1,004 million in 2019. The decrease
was mainly due to impairments of USD 1,060 million mostly related to refinery asset s in 2020, compared to impairments of USD 206
million related to damage to the South Riding Point oil terminal in the Bahamas in 2019. Negative results from weak refinery margin
and the absence of LNG sales due to the outage at the Hammerfest LNG plant contributed to the decrease of net operating income in
2020. Lower provisions of USD 245 million in 2020 compared to USD 418 million in 2019 partially offset the decrease.
Adjusted total revenues and other income and Adjusted purchases [6] decreased mainly due to lower prices for all products, partially
offset by higher volumes for liquids. Adjusted operating and administrative expenses increased mainly due to higher freight rates on
shipping of liquids. Adjusted depreciation, amortisation and net impairment losses were stable.
After total net adjustments of USD 1,645 million,
USD 1,541 million in 2019, mainly due to increased results from piped gas and liquids trading.
Equinor fourth quarter 2020 20
CONDENSED INTERIM FINANCIAL STATEMENTS
Fourth quarter 2020
CONSOLIDATED STATEMENT OF INCOME
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
Note
2020
2019*
11,876
11,250
14,900
Revenues
45,753
62,911
(137)
86
14
Net income/(loss) from equity accounted investments
53
164
7
3
255
Other income
12
1,283
11,746
11,339
15,169
Total revenues and other income
2
45,818
64,357
(5,533)
(5,307)
(6,603)
Purchases [net of inventory variation]
(20,986)
(29,532)
(2,005)
(2,187)
(2,238)
Operating expenses
(8,831)
(9,660)
(151)
(181)
(167)
Selling, general and administrative expenses
(706)
(809)
(3,478)
(4,798)
(4,165)
Depreciation, amortisation and net impairment losses
6
(15,235)
(13,204)
(1,569)
(886)
(480)
Exploration expenses
6
(3,483)
(1,854)
(12,735)
(13,359)
(13,653)
Total operating expenses
2
(49,241)
(55,058)
(989)
(2,019)
1,516
Net operating income/(loss)
2
(3,423)
9,299
(326)
(343)
(421)
Interest expenses and other financial expenses
(1,392)
(1,450)
(84)
142
(74)
Other financial items
556
1,443
(410)
(201)
(495)
Net financial items
4
(836)
(7)
(1,400)
(2,220)
1,020
Income/(loss) before tax
(4,259)
9,292
(1,016)
95
(1,250)
Income tax
5
(1,237)
(7,441)
(2,416)
(2,124)
(230)
Net income/(loss)
(5,496)
1,851
(2,421)
(2,127)
(236)
Attributable to equity holders of the company
(5,510)
1,843
Equinor fourth quarter 2020 21
6
3
6
Attributable to non-controlling interests
14
8
(0.75)
(0.65)
(0.07)
Basic earnings per share (in USD)
(1.69)
0.55
(0.75)
(0.65)
(0.07)
Diluted earnings per share (in USD)
(1.69)
0.55
3,247
3,248
3,313
Weighted average number of ordinary shares outstanding (in millions)
3,269
3,326
3,257
3,257
3,322
Weighted average number of ordinary shares outstanding diluted (in millions)
3,277
3,334
* Audited
Equinor fourth quarter 2020 22
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
2020
2019*
(2,416)
(2,124)
(230)
Net income/(loss)
(5,496)
1,851
(303)
34
63
Actuarial gains/(losses) on defined benefit pension plans
(106)
427
75
(6)
(12)
Income tax effect on income and expenses recognised in OCI
1)
19
(98)
(228)
27
51
Items that will not be reclassified to the Consolidated statement of income
(87)
330
2,798
888
1,203
Currency translation adjustments
1,064
(51)
0
0
0
Share of OCI from equity accounted investments
0
44
2,798
888
1,203
Items that may be subsequently reclassified to the Consolidated statement of
income
1,064
(7)
2,570
915
1,253
Other comprehensive income/(loss)
977
323
154
(1,209)
1,023
Total comprehensive income/(loss)
(4,519)
2,174
149
(1,212)
1,017
Attributable to the equity holders of the company
(4,533)
2,166
6
3
6
Attributable to non-controlling interests
14
8
* Audited
1) Other comprehensive income (OCI).
Equinor fourth quarter 2020 23
CONSOLIDATED BALANCE SHEET
At 31 December
At 30 September
At 31 December
(unaudited, in USD million)
Note
2020
2020
2019*
ASSETS
Property, plant and equipment
6
65,672
62,988
69,953
Intangible assets
6
8,148
9,667
10,738
Equity accounted investments
2,262
1,650
1,442
Deferred tax assets
4,974
4,251
3,881
Pension assets
1,310
1,103
1,093
Derivative financial instruments
2,476
1,964
1,365
Financial investments
4,083
3,437
3,600
Prepayments and financial receivables
861
1,240
1,214
Total non-current assets
89,786
86,300
93,285
Inventories
3,084
2,860
3,363
Trade and other receivables
8,232
6,108
8,233
Derivative financial instruments
886
570
578
Financial investments
11,865
10,563
7,426
Cash and cash equivalents
6,757
7,844
5,177
Total current assets
30,824
27,944
24,778
Assets classified as held for sale
3
1,362
188
0
Total assets
121,972
114,432
118,063
EQUITY AND LIABILITIES
Shareholders' equity
33,873
34,084
41,139
Non-controlling interests
19
24
20
Total equity
33,892
34,108
41,159
Finance debt
4
32,338
32,193
24,945
Equinor fourth quarter 2020 24
Deferred tax liabilities
11,224
9,451
9,410
Pension liabilities
4,292
3,705
3,867
Provisions and other liabilities
7
19,731
19,191
17,951
Derivative financial instruments
676
787
1,173
Total non-current liabilities
68,260
65,328
57,346
Trade, other payables and provisions
10,510
8,118
10,450
Current tax payable
5
1,148
543
3,699
Finance debt
4
5,777
5,277
4,087
Dividends payable
357
292
859
Derivative financial instruments
1,710
765
462
Total current liabilities
19,502
14,996
19,557
Liabilities directly associated with the assets classified as held for sale
3
318
0
0
Total liabilities
88,081
80,324
76,904
Total equity and liabilities
121,972
114,432
118,063
* Audited
Equinor fourth quarter 2020 25
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)
1,843
1,843
8
1,851
Other comprehensive income/(loss)
330
(51)
44
323
323
Total comprehensive income/(loss)
2,174
Dividends
(3,453)
(3,453)
(3,453)
Share buy-back
1)
(500)
(500)
(500)
Other equity transactions
(15)
(29)
(44)
(7)
(52)
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
Net income/(loss)
(5,510)
(5,510)
14
(5,496)
Other comprehensive income/(loss)
(87)
1,064
0
977
977
Total comprehensive income/(loss)
(4,519)
Dividends
(1,833)
(1,833)
(1,833)
Share buy-back
1)
(21)
(869)
(890)
(890)
Other equity transactions
(11)
0
(11)
(15)
(25)
At 31 December 2020
1,164
6,852
30,050
(4,194)
0
33,873
19
33,892
* 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 buy-back 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.
Equinor fourth quarter 2020 26
CONSOLIDATED STATEMENT OF CASH FLOWS
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
Note
2020
2019*
(1,400)
(2,220)
1,020
Income/(loss) before tax
(4,259)
9,292
3,478
4,798
4,165
Depreciation, amortisation and net impairment losses
6
15,235
13,204
1,284
662
104
Exploration expenditures written off
2,506
777
491
131
(23)
(Gains)/losses on foreign currency transactions and balances
4
646
(224)
20
(1)
(193)
(Gains)/losses on sale of assets and businesses
3
18
(1,187)
168
258
(143)
(Increase)/decrease in other items related to operating activities
918
1,016
(5)
(182)
393
(Increase)/decrease in net derivative financial instruments
(451)
(595)
12
41
49
Interest received
162
215
(204)
(146)
(197)
Interest paid
(730)
(723)
3,843
3,342
5,175
Cash flows provided by operating activities before taxes paid and working
capital items
14,045
21,776
(393)
(110)
(2,651)
Taxes paid
(3,134)
(8,286)
(1,107)
(600)
(751)
(Increase)/decrease in working capital
(524)
259
2,343
2,632
1,774
Cash flows provided by operating activities
10,386
13,749
0
0
(0)
Cash used in business combinations
1)
3
0
(2,274)
(2,504)
(1,723)
(2,700)
Capital expenditures and investments
(8,476)
(10,204)
(538)
(1,034)
(212)
(Increase)/decrease in financial investments
2)
(3,703)
(1,012)
(288)
(261)
3
(Increase)/decrease in derivatives financial instruments
(620)
298
218
(18)
(18)
(Increase)/decrease in other interest- bearing items
202
(10)
490
14
882
Proceeds from sale of assets and businesses
3
505
2,608
(2,623)
(3,023)
(2,045)
Cash flows used in investing activities
(12,092)
(10,594)
0
0
984
New finance debt
8,347
984
(1,066)
(1,642)
(1,029)
Repayment of finance debt
(3,332)
(2,419)
Equinor fourth quarter 2020 27
(292)
(287)
(850)
Dividends paid
(2,330)
(3,342)
(0)
(1,001)
(351)
Share buy-back
3)
(1,059)
(442)
254
1,308
(237)
Net current finance debt and other financing activities
1,365
(277)
(1,104)
(1,623)
(1,483)
Cash flows provided by/(used in) financing activities
2,991
(5,496)
(1,383)
(2,014)
(1,755)
Net increase/(decrease) in cash and cash equivalents
1,285
(2,341)
296
158
115
Effect of exchange rate changes on cash and cash equivalents
294
(38)
7,844
9,700
6,816
Cash and cash equivalents at the beginning of the period (net of overdraft)
5,177
7,556
6,757
7,844
5,177
Cash and cash equivalents at the end of the period (net of overdraft)
4)
6,757
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 31 December 2020 and at 31 December 2019 cash and cash equivalents net overdraft were zero.
Equinor fourth quarter 2020 28
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 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 obliga tions 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 fourth quarte r of 2020 were authorised for issue by the board of directors on
9 February 2021.
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 differences 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 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 rounding.
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 significant effects it has had on the oil
price during 2020, in addition to the increasing momentum towards a transition into a low carbon future, create additional estimation
uncertainties and impact key assumptions applied by Equinor in the valuation of our asse ts and the measurement of our liabilities, and
related sensitivities. Reference is made to n ote 8 Impact of the Covid -19 pandemic and oil price decline for further information.
Equinor fourth quarter 2020 29
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 revenue growth, net operating income, 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 new structure has been reflected retrospectively with restated comparable figures.
Inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products, are eliminated in the Eliminiations
column below. Inter-segment revenues are based upon estimated market prices.
Segment data for the fourth quarter of 2020 and 2019 is presented below. The reported measure of segment profit is net operating
income/(loss)
.
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.
Fourth 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
58
143
83
11,519
80
0
11,883
Revenues inter-segment
3,819
771
561
77
1
(5,229)
0
Net income/(loss) from equity accounted investments
0
(168)
0
5
26
0
(137)
Total revenues and other income
3,877
747
644
11,601
107
(5,229)
11,746
Purchases [net of inventory variation]
(0)
(16)
(0)
(10,273)
0
4,756
(5,533)
Operating, selling, general and administrative
expenses
(753)
(288)
(305)
(1,062)
83
170
(2,156)
Depreciation, amortisation and net impairment losses
(1,227)
(588)
(653)
(745)
(264)
0
(3,478)
Exploration expenses
(94)
(1,231)
(244)
0
0
0
(1,569)
Equinor fourth quarter 2020 30
Total operating expenses
(2,074)
(2,123)
(1,202)
(12,081)
(181)
4,926
(12,735)
Net operating income/(loss)
1,803
(1,376)
(559)
(480)
(75)
(303)
(989)
Additions to PP&E, intangibles and equity accounted
investments
1,340
1,026
123
47
277
0
2,813
Equinor fourth quarter 2020 31
Fourth 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
22
375
122
14,342
293
0
15,154
Revenues inter-segment
4,934
1,105
938
127
1
(7,104)
0
Net income/(loss) from equity accounted investments
0
(3)
1
5
11
0
14
Total revenues and other income
4,956
1,477
1,060
14,474
305
(7,104)
15,169
Purchases [net of inventory variation]
(2)
(26)
1
(12,873)
(0)
6,297
(6,603)
Operating, selling, general and administrative
expenses
(842)
(360)
(442)
(1,145)
169
215
(2,405)
Depreciation, amortisation and net impairment losses
(2,494)
(737)
(575)
(96)
(262)
0
(4,165)
Exploration expenses
(142)
(301)
(37)
0
0
0
(480)
Total operating expenses
(3,480)
(1,424)
(1,053)
(14,114)
(93)
6,511
(13,653)
Net operating income/(loss)
1,476
53
7
360
211
(593)
1,516
Additions to PP&E, intangibles and equity accounted
investments
1,455
561
518
114
227
0
2,875
Full year 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
91
452
368
44,605
249
0
45,765
Revenues inter-segment
11,804
3,183
2,247
309
4
(17,547)
0
Net income/(loss) from equity accounted investments
0
(146)
0
31
168
0
53
Total revenues and other income
11,895
3,489
2,615
44,945
421
(17,547)
45,818
Purchases [net of inventory variation]
(0)
(72)
0
(38,072)
1
17,157
(20,986)
Operating, selling, general and administrative
expenses
(2,829)
(1,440)
(1,313)
(5,060)
419
685
(9,537)
Depreciation, amortisation and net impairment losses
(5,546)
(3,471)
(3,824)
(1,453)
(940)
0
(15,235)
Exploration expenses
(423)
(2,071)
(990)
0
1
0
(3,483)
Total operating expenses
(8,798)
(7,054)
(6,127)
(44,586)
(519)
17,842
(49,241)
Equinor fourth quarter 2020 32
Net operating income/(loss)
3,097
(3,565)
(3,512)
359
(98)
296
(3,423)
Additions to PP&E, intangibles and equity accounted
investments
4,851
2,608
1,068
190
1,044
0
9,761
Balance sheet information
Equity accounted investments
3
1,125
0
92
1,042
0
2,262
Non-current segment assets
35,833
17,329
12,376
4,147
4,135
0
73,820
Non-current assets not allocated to segments
13,704
Total non-current assets
89,786
Equinor fourth quarter 2020 33
Full year 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
1,048
1,685
441
60,491
527
0
64,194
Revenues inter-segment
17,769
4,376
3,792
439
4
(26,379)
0
Net income/(loss) from equity accounted investments
15
24
6
25
93
0
164
Total revenues and other income
18,832
6,085
4,239
60,955
624
(26,379)
64,357
Purchases [net of inventory variation]
(1)
(34)
0
(54,454)
(1)
24,958
(29,532)
Operating, selling, general and administrative
expenses
(3,284)
(1,684)
(1,668)
(4,897)
272
793
(10,469)
Depreciation, amortisation and net impairment losses
(5,439)
(2,228)
(4,133)
(600)
(804)
0
(13,204)
Exploration expenses
(478)
(668)
(709)
0
0
0
(1,854)
Total operating expenses
(9,201)
(4,614)
(6,510)
(59,951)
(533)
25,750
(55,058)
Net operating income/(loss)
9,631
1,471
(2,271)
1,004
92
(629)
9,299
Additions to PP&E, intangibles and equity accounted
investments
7,316
2,851
3,004
788
823
0
14,782
Balance sheet information
Equity accounted investments
3
321
0
90
1,028
0
1,442
Non-current segment assets
33,795
20,784
16,774
5,124
4,214
0
80,691
Non-current assets not allocated to segments
11,152
Total non-current assets
93,285
In the fourth quarter of 2020, Equinor recognised net impairment of USD 1,302 million of which USD 315 million was acquisition cost
and signature bonuses classified as exploration expenses. The line item Exploration expenses in the Consolidated statement of
income also includes impairment of capitali sed exploration well cost . For information regarding impairment of capitalised exploration
cost, see note 6 Property, plant and equipment and intangible assets.
In the E&P International segment the impairments were USD 229 million of which USD 157 million was classified as exploration
expenses and related to an exploration asset in South America. The impairment of other assets was mainly caused by reduced
reserve estimates in the Europe and Asia area.
In the E&P USA segment the impairments were USD 369 million of which USD 158 million was classified as exploration expenses.
The impairment was mainly related to an Equinor-operated North America unconventional asset measured at fair value less cost of
disposal in connection with reclassification to held for sale.
In the E&P Norway segment the impairment was USD 41 million and related to goodwill.
Equinor fourth quarter 2020 34
In the MMP segment the impairments were USD 638 million, mainly related to a refinery caused by reduced margin assumptions and
increased cost estimates.
Most of the renewable 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 21 million in
the fourth quarter of 2020 and USD 163 million in the full year 2020, which compares to USD 13 million in the fourth quarter of 2019
and
USD 95 million in the full year 2019.
For information regarding acquisition and disposal of interests, see note 3 Acquisitions and disposals.
See also note 8 Impact of the Covid-19 pandemic and oil price decline.
Equinor fourth quarter 2020 35
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 fourth quarter of 2020, Norway constitutes 79% and USA constitutes 13 % of such revenues. For the fourth quarter of
2019, Norway and USA constituted 78% and 15% of such revenues, respectively.
For the full year of 2020, Norway constitutes 80% and USA constitutes 1 4% of such revenues. For the full year of 2019, Norway and
USA constituted 75 % and 18% of such revenues, respectively.
Non-current assets by country
At 31 December
At 30 September
At 31 December
(in USD million)
2020
2020
2019
Norway
41,054
37,327
40,292
USA
13,172
14,858
17,776
Brazil
9,341
8,752
8,724
UK
4,398
4,175
5,657
Azerbaijan
1,683
1,684
1,598
Canada
1,527
1,468
1,672
Russia
973
429
447
Denmark
953
911
984
Algeria
808
845
915
Angola
725
1,270
1,564
Other countries
1,447
2,587
2,504
Total non-current assets
1)
76,082
74,305
82,133
1) Excluding deferred tax assets, pension assets and non-current financial assets.
Revenues from contracts with customers and other revenues
Quarters
Full Year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
6,015
6,635
7,837
Crude oil
24,509
33,505
2,503
1,351
2,642
Natural gas
7,213
11,281
2,100
1,048
2,154
5,839
9,366
295
229
354
1,010
1,359
108
74
134
363
556
1,687
1,560
2,879
Refined products
6,534
10,652
1,499
1,282
1,548
Natural gas liquids
5,069
5,807
172
295
295
Transportation
1,083
967
365
91
27
Other sales
681
445
12,242
11,215
15,229
Revenues from contracts with customers
45,088
62,657
28
27
73
Taxes paid in-kind
93
344
(27)
(16)
(110)
Physically settled commodity derivatives
209
(1,086)
(442)
(44)
(354)
Gain/(loss) on commodity derivatives
108
732
74
70
62
Other revenues
256
265
(367)
36
(329)
Total other revenues
665
254
11,876
11,250
14,900
Revenues
45,753
62,911
Equinor fourth quarter 2020 36
3 Acquisitions and disposals
Acquisition onshore Russia
On 11 December 2020 Equinor closed a transaction with Rosneft to acquire a 49% interest in the limited liability company LLC
KrasGeoNaC (KGN) which holds twelve conventional onshore exploration and production licences in Eastern Siberia. The cash
consideration at closing, including interim period adjustment, was around USD 384 million. In addition to the cash consideration
Equinor recognised a contingent consideration of USD 145 million related to future exploration expenses. The total consideration for
the acquisition of USD 529 million has been accounted using equity method in the line item Equity accounted investment and reported
in the E&P International segment.
As part of this agreement, Equinor extinguished its exploration commitments offshore in the Sea of Okhotsk and as such has no
outstanding obligations in that area. The previous commitment in the Sea of Okhotsk has been charged to profit and loss at estimat ed
fair value of USD 166 million. The charge has been accounted as Net income/(loss) from equity accounted investments in the E&P
International segment.
Divestment of 10% of Dogger Bank Farm A and B
On 4 December 2020 Equinor entered into an agreement with Eni to sell a 10% equity interest in the Dogger Bank Wind Farm A and
B assets in the UK for a total consideration of around GBP 202.5 million (USD 273 million). The carrying amount of the interests to be
disposed of is insignificant and is classified as held for sale. Once the transaction s are closed, the new overall shareholding in Dogger
Bank A and Dogger Bank B will be – SSE (40%), Equinor (40%) and Eni (20%). Upon transaction closing, the gain will be presented
in the line item Other income in the Consolidated statement of income in the operating segment NES included in the Other segment.
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% of the non-operated interests in the Empire Wind and
Beacon Wind assets for a total consideration before adjustments of USD 1.1 billion whereas USD 500 million has been prepaid at the
end of December 2020, presented in the line items Cash and cash equivalents and Trade, other payables and provisions in the
Consolidated balance sheet. Through this transaction, the two companies have establis hed 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% interest
share has been reclassified as held for sale. After the transaction Equinor will account for the assets as a joint venture using equity
accounting. The transaction was closed 29 January 2021 where the gain related to the disposed interests was recognised. For further
information see note 9 Subsequent events. Upon transaction closing, the gain will be presented in the line item Other income in the
Consolidated statement of income in the operating segment NES included in the Other segment.
North America unconventional onshore assets
In addition to the Empire Wind and Beacon Wind assets and the Dogger Bank Farm A and B a disposal group of assets has been
classified as held for sale. The disposal group consists of an Equinor -operated North America unconventional onshore asset included
in the reporting segment E&P USA. Equinor has together with a deal advisor actively marketed the disposal group. Equinor is
expecting a divestment during 2021. Equinor has impaired the asset to estimated fair value see note 2 Segments.
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 in the line item 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 is accounted for as a joint venture using the equity method
and reported in the E&P International segment.
Equinor fourth quarter 2020 37
4 Financial items
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(491)
(131)
23
Gains/(losses) on net foreign exchange
(646)
224
379
235
210
Interest income and other financial items
754
746
27
39
(308)
Gains/(losses) on derivative financial instruments
448
473
(326)
(343)
(421)
Interest and other finance expenses
(1,392)
(1,450)
(410)
(201)
(495)
Net financial items
(836)
(7)
Gains/(losses) on derivative financial instruments is a gain of USD 448 million in 2020
compared to a gain of USD 473 million in 2019,
mainly due to decreased interest rates.
Equinor has a US Commercial paper programme available with a limit of USD 5 billion of which USD 903 million has been utilised as
of
31 December 2020.
During 2020, Equinor recorded total lease payments of USD 1,405 million, of which USD 128 million were payment of interests and
USD 1,277 million were payment of lease liabilities. Lease liabilities as at 31 December 2020 were USD 4,406 million, presented in
the Consolidated balance sheet within the line items Current and Non-current finance debt with USD 1,186 million and USD 3,220
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
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(1,400)
(2,220)
1,020
Income/(loss) before tax
(4,259)
9,292
(1,016)
95
(1,250)
Income tax
(1,237)
(7,441)
(72.6%)
4.3%
>100%
Effective tax rate
(29.0%)
80.1%
The tax rate for the fourth quarter of 2020 and for the full year 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 and changes in best estimates for uncertain tax positions. See also note 8
Impact of the Covid -19 pandemic and oil price decline.
The tax rate for the fourth quarter of 2019 and 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 the tax exempted gains on
divestments. The tax rate for the fourth quarter of 2019 was also influenced by currency effects in entities that are taxable in other
currencies than the functional currency.
Equinor fourth quarter 2020 38
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
10,339
491
Transfers
89
(89)
Disposals and reclassifications
(17)
(14)
Transferred to assets classified as held for sale
(810)
(516)
Expensed exploration expenditures and net impairment losses
-
(2,506)
Depreciation, amortisation and net impairment losses
(15,158)
(77)
Effect of foreign currency translation adjustments
1,276
120
Balance at 31 December 2020
65,672
8,148
Right-of-use (RoU) assets are included within property, plant and equipment with a net book value of USD 4,119 million per
31 December 2020. Additions to RoU assets amount to USD 1,326 million. Gross depreciation and impairment of RoU assets amount
to USD 1,254 million for the full year 2020, of which depreciation costs of USD 359 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.
In the fourth quarter of 2020 it was decided to impair capitalised well costs of USD 982 related to Equinor’s Block 2 exploration licen ce
in Tanzania, included in intangible assets, because overall project economics have not yet improved sufficiently to justify keeping it on
the balance sheet. The impairment is presented in the line item Exploration expenses in the Consolidated statement of income.
Impairments and impairment reversals
For information on impairment losses and reversals per reporting segment, see note 2 Segments.
For the quarter
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2020
2019
2020
2019
2020
2019
Producing and development assets
938
1,199
91
0
1,030
1,199
Goodwill
-
-
41
164
41
164
Other intangible assets
-
-
8
0
8
0
Acquisition costs related to oil and gas prospects
-
-
224
43
224
43
Total net impairment loss/(reversal) recognised
938
1,199
363
208
1,302
1,407
Full year
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2020
2019
2020
2019
2020
2019
Producing and development assets
5,671
3,230
680
608
6,351
3,838
Goodwill
-
-
42
164
42
164
Other intangible assets
-
-
8
41
8
41
Acquisition costs related to oil and gas prospects
-
-
657
49
657
49
Total net impairment loss/(reversal) recognised
5,671
3,230
1,386
863
7,057
4,093
Equinor fourth quarter 2020 39
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 fourth quarter of 2020 were mainly discounted cash flows based on value in use, except for one held
for sale assessment as described in Note 2 Segment note.
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.
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 Equinor operates. 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.
The management’s analysis of the expected development in drivers for the different commodity markets and exchange rates resulted
in changes in the long-term price assumptions as from the third quarter of 2020. The following price assumptions have been the basis
for the impairment calculations .
All commodity prices are on a real 2020 basis, and comparables as per fourth quarter 2019 and up to the third quarter of 2020 are
given in brackets .
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.
For natural gas in the UK (NBP), we expect some volatility, where the trend is a gradual 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. In the third quarter of 2020, Equinor 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).
During 2020, risk-free interest rates continued to drop for the first three quarters, and long-term risk-free interest rates (10 years)
decreased by approximately 1.3 percentage points in the period from year -end 2019 to 30 September 2020. The stock market
recovery after the in itial 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, even though interest rates have rebounded somewhat during the fourth quarter , Equinor has
adjusted the Weighted Average Cost of Capital (WACC) for accounting purposes, real post-tax, down from 6% to 5% with effect from
the third quarter of 2020.
Please refer to note 8 Impact of the Covid-19 pandemic and oil price.
Equinor fourth quarter 2020 40
Sensitivities
Commodity prices have historically been volatile. Significant downward adjustments 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 offsetti ng 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 prolon ged 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
Contingent consideration
In the fourth quarter of 2020 Equinor recognised a contingent consideration of USD 145 million related to the acquisition of 49%
interest in the limited liability company LLC KrasGeoNac (KGN). For further information see note 3 Acquisition and disposals.
Asset retirement obligation
Equinor’s estimated asset retirement obligations (ARO) have increased by USD 2,572 million to USD 17,292 million compared to
year-end 2019, mainly due to the decrease in discount rates which are reflected within Property, plant and equipment and Provisions
and other liabilities 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 the fourth quarter the provision has increased to USD 166 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 year -end 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 Government 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 Court 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 statements.
KKD Oil Sands Partnership
Equinor fourth quarter 2020 41
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 396 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 Equinor’s
Interim financial statements.
Deviation notices from Norwegian tax authorities
In respect of the previously disclosed tax 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
220 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 seek annulment of Petrobras' sale of the interest and operatorship in BM-S-8 to Equinor, a
transaction which 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 settlement
of the remaining VoRs 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
During 2020, the Covid-19 pandemic has slowed economic growth and had dramatic consequences for energy demand, particularly
mobility fuels. The collapse in commodity prices seen in the first half of 2020, though followed by a partial rebound in the second half,
significantly impacted the energy industry and Equinor by an unprecedented decrease in short term demand and increased
uncertainty with regards to the phase of recovery and future oil and gas demand. The increasing momentum and commitment towards
a transition into a low carbon future aided by technological advances and decreasing cost of renewable energy has also increased the
uncertainty in estimating the future development in supply and demand. According to the International Energy Agency (IEA), Global
energy demand in 2020 was estimated to drop by 5 -6%. The OPEC+ agreement to continue production cuts of some 7 mmboe per
day into in the first quarter of 2021 to clear surpluses built up over the pandemic has supported prices to levels not seen since
January 2020. But second and third-wave Covid -19 lockdowns which continue to dampen demand are likely to put a cap on prices in
the short-term. The successful development of vaccines and the ongoing widespread vaccination effort is expected to increase
demand as countries become able to reduce measures implemented to eliminate the spread of the virus, for which we have observed
new waves of outbreak of more contagious mutant versions late in 2020 and the first quarter of 2021.
The negative impact of the global pandemic with the resulting decline in commodity prices and a renewed view on effects expected
from the energy transition resulted in updates to Equinor’s view on key financial assumptions in the third quarter of 2020, including the
related key sources of estimation uncertainty, impacting the financial statements. These assumptions continue to apply for the fourth
quarter of 2020. The decline in the updated future commodity price estimates made in the third quarter of 2020, and particularly with
regards to oil, negatively impacted the estimated recoverable amount of several assets in our portfolio, and impairments were
recognised for assets for which the book value no longer could be supported. The negative impact was reduced by the USD 3 billion
action plan implemented in the spring of 2020 to strengthen the financial resilience of the company. More details on the impairments
recognised and an overview of Equinor’s price assumptions have been provided in note 6 Property, plant and equipment and
intangible assets.
Equinor fourth quarter 2020 42
Equinor has also evaluated the reasonable possible changes in certain assumptions as of 31 December 2020. The reasonable
possible change in prices is deemed to be -30%/+30% for short-term contracts, and -30%/+30% for the long-term derivatives, based
on their duration. 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)
- 30%
+ 30%
- 30%
+ 30%
Crude oil and refined products net gain/(losses)
1,025
(1,025)
569
(563)
Natural gas and electricity net gains/(losses)
184
(94)
(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.
Apart from the financial impact, Equinor has only experienced immaterial effects on production from assets in operation, due to
actions taken to maintain and secure safe production during the pandemic. Minor virus outbreaks at some of our facilities have
occurred, but effective measures such as isolat ion and quarantines combined with social distancing and increased sanitation
requirements have prevented production shutdown, and operations have not been significantly impacted. For projects under
development, the Covid-19 pandemic has impacted progress due to personnel limitations on offshore and onshore facilities / yards
due to infection control measures and associated travel restrictions for migrant workforce. The situation is still unpredictable and may
have additional consequences for the progress and costs of our projects.
Actions taken to mitigate the impact of the pandemic and commodity price decline, including the USD 3 billion action plan
implemented in the spring of 2020, have had consequences on investment level and activity level in general. Capital expenditure has
been reduced during 2020, representing both final reductions (stopped projects i.e. based on updated future price estimates and
break-even levels) and changes with regards to scope and timing. As a result, some value creation has been cut or delayed. Part of
cost improvements and cost cuts identified and implemented during 2020 as part of the action plan are expected to be of a
sustainable nature and impact future cost levels. Cost related to activities postponed from 2020 due to the pandemic will impact cost
when these activities are carried out.
Equinor complies with the revised production permits issued by the authorities and the unilateral oil production cuts portioned out to
relevant fields via their production licenses, however these cuts did not have significant impact on the total production. 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 9 February 202 1, the board of directors proposed to declare a dividend for the fourth quarter of 2020 of USD 0.12 per share
(subject to annual general meeting approval). The Equinor share will trade ex-dividend 12 May 2021 on the Oslo Børs and for ADR
holders on the New York Stock Exchange. Record date will be 14 May 2021 and payment date will be 27 May 2021.
On 16 November 2020, Equinor communicated a new organisational corporate structure, which will come into effect on 1 June 2021.
The main change is that the operating segment Development & Production Brazil will be merged into the operating segment
Exploration & Production International. In addition, the operating segments Exploration will be divided and merged into Exploration &
Production Norway and Exploration & Production International. Global Strategy & Business development will be divided and merged
into the functions for Chief Financial Officer and Safety, Security and Sustainability. The operating segment Technology, Projects &
Drilling will be split into Technology, Digital & Innovation and Projects, Drilling & Procurement. The current organisational structure will
remain in place until the planned implementation takes effect. The new organisational corporate structure will not imply any changes
in the reportable segments.
From the first quarter of 2021, Equinor will start reporting Renewables (previously New Energy Solutions) as a separate reportable
segment due to the strategic importance of the operating segment.
Equinor fourth quarter 2020 43
On 8 January 2021, The Norwegian Government announced a new climate action plan. One proposed measure to reduce CO2
emissions is to increase the CO2 tax on offshore oil and gas production gradually and with full effect from 2030. The plan also
proposes increased offshore methane tax. Compared to Equinor’s estimates at 31 December 2020, it is expected that the cost
increase for Equinor for the year 2030 will be approximately USD 0 .4 billion pre-tax. This is not expected to significantly impact
impairment assessments in E&P Norway as of the first quarter of 2021. The climate action plan is expected to be approved by the
Parliament in the spring of 2021.
On 29 January 2021 , Equinor closed the agreement with BP to sell a 50% non -operated interest in the Empire Wind and Beacon Wind
assets for a total preliminary consideration USD 1.2 billion, including USD 0.1 billion in interim period adjustments , with remaining
cash consideration after the prepayment in 2020 paid at closing.
On 9 February 2021, Equinor has agreed to divest its interests in the Bakken field in the US states of North Dakota and Montana to
Grayson Mill Energy, backed by EnCap Investments, for a total consideration of around USD 900 million. The effective date of the
transaction is 1 January 2021. Closing is subject to the satisfaction of customary conditio ns, including authority approvals.
Equinor fourth quarter 2020 44
Supplementary disclosures
Operational data
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
Operational data
2020
2019
Change
Prices
44.2
43.0
63.3
(30%)
Average Brent oil price (USD/bbl)
41.7
64.3
(35%)
42.1
39.6
59.3
(29%)
E&P Norway average liquids price (USD/bbl)
37.4
57.4
(35%)
41.3
39.1
56.1
(26%)
E&P International average liquids price (USD/bbl)
38.1
59.1
(35%)
34.5
32.2
48.0
(28%)
E&P USA average liquids price (USD/bbl)
31.3
48.4
(35%)
40.6
38.3
56.5
(28%)
Group average liquids price (USD/bbl) [1]
36.5
56.0
(35%)
367
349
516
(29%)
Group average liquids price (NOK/bbl) [1]
343
493
(30%)
3.88
1.45
3.88
0%
E&P Norway average internal gas price (USD/mmbtu) [9]
2.26
4.46
(49%)
1.34
1.13
1.82
(26%)
E&P USA average internal gas price (USD/mmbtu) [9]
1.32
2.34
(44%)
5.04
2.72
5.31
(5%)
Average invoiced gas prices - Europe (USD/mmbtu) [8]
3.58
5.79
(38%)
1.99
1.53
2.23
(11%)
Average invoiced gas prices - North America (USD/mmbtu) [8]
1.72
2.43
(29%)
0.4
(0.1)
3.0
(87%)
Refining reference margin (USD/bbl) [2]
1.5
4.1
(64%)
Entitlement production (mboe per day)
616
619
619
(0%)
E&P Norway entitlement liquids production
630
535
18%
222
220
273
(19%)
E&P International entitlement liquids production
236
267
(12%)
145
151
185
(22%)
E&P USA entitlement liquids production
163
181
(10%)
983
991
1,077
(9%)
Group entitlement liquids production
1,029
983
5%
698
654
727
(4%)
E&P Norway entitlement gas production
685
700
(2%)
45
35
64
(30%)
E&P International entitlement gas production
42
50
(17%)
187
185
188
(1%)
E&P USA entitlement gas production
181
178
2%
930
874
979
(5%)
Group entitlement gas production
908
928
(2%)
1,912
1,865
2,056
(7%)
Total entitlement liquids and gas production [3]
1,938
1,911
1%
Equity production (mboe per day)
616
619
619
(0%)
E&P Norway equity liquids production
630
535
18%
286
283
350
(18%)
E&P International equity liquids production
303
354
(14%)
166
173
214
(22%)
E&P USA equity liquids production
187
210
(11%)
1,068
1,076
1,182
(10%)
Group equity liquids production
1,120
1,099
2%
698
654
727
(4%)
E&P Norway equity gas production
685
700
(2%)
Equinor fourth quarter 2020 45
53
40
65
(18%)
E&P International equity gas production
49
62
(21%)
224
224
223
0%
E&P USA equity gas production
216
213
1%
975
918
1,015
(4%)
Group equity gas production
950
975
(3%)
2,043
1,994
2,198
(7%)
Total equity liquids and gas production [4]
2,070
2,074
(0%)
NES power production
480
319
476
1%
Power generation (GWh)
1,662
1,754
(5%)
Exchange rates
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
Exchange rates
2020
2019
Change
0.1108
0.1095
0.1097
1%
NOK/USD average daily exchange rate
0.1064
0.1136
(6%)
0.1172
0.1055
0.1139
3%
NOK/USD period-end exchange rate
0.1172
0.1139
3%
9.0279
9.1321
9.1177
(1%)
USD/NOK average daily exchange rate
9.4006
8.8037
7%
8.5326
9.4814
8.7803
(3%)
USD/NOK period-end exchange rate
8.5326
8.7803
(3%)
1.1920
1.1685
1.1071
8%
EUR/USD average daily exchange rate
1.1405
1.1192
2%
1.2271
1.1708
1.1234
9%
EUR/USD period-end exchange rate
1.2271
1.1234
9%
Equinor fourth quarter 2020 46
Health, safety and the environment
Full year
Full year
Health, safety and the environment
2020
2019
Injury/incident frequency
Total recordable injury frequency (TRIF)
2.3
2.5
Serious Incident Frequency (SIF)
0.5
0.6
Oil spills
Accidental oil spills (number of)
135
219
Accidental oil spills (cubic metres)
162
8,983
Full year
Full year
Climate
2020
2019
Upstream CO2 intensity (kg CO2/boe)
1)
8.0
9.5
1) Total scope 1 emissions of CO2 (kg CO2) from exploration and production, divided by total production (boe).
Equinor fourth quarter 2020 47
Reconciliation of net operating income/(loss) to adjusted earnings
The table specifies the adjustments made to each of the profit and loss line item included in the net operating income/(loss) subtotal.
Items impacting net operating income/(loss) in the fourth
quarter of 2020
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
(989)
1,803
(1,376)
(559)
(480)
(378)
Total revenues and other income
240
15
(41)
-
265
1
Changes in fair value of derivatives
(50)
-
-
-
(50)
-
Periodisation of inventory hedging effect
315
-
-
-
315
-
Impairment from associated companies
1
-
-
-
-
1
Over-/underlift
(24)
17
(41)
-
-
-
Gain/loss on sale of assets
(3)
(3)
-
-
-
-
Purchases [net of inventory variation]
234
-
-
-
(69)
303
Operational storage effects
(69)
-
-
-
(69)
-
Eliminations
303
-
-
-
-
303
Operating and administrative expenses
(28)
(18)
(29)
18
(2)
3
Over-/underlift
(53)
(18)
(35)
-
-
-
Other adjustments
1
-
1
(0)
-
-
Gain/loss on sale of assets
21
-
-
18
-
3
Provisions
3
-
5
-
(2)
0
Depreciation, amortisation and net impairment losses
983
41
72
211
638
22
Impairment
983
41
72
211
638
22
Exploration expenses
317
-
160
158
-
-
Impairment
315
-
157
158
-
-
Provisions
3
-
3
-
-
-
Sum of adjustments to net operating income/(loss)
1,746
38
161
387
832
329
Adjusted earnings/(loss) [5]
756
1,841
(1,215)
(172)
352
(49)
Tax on adjusted earnings
(1,310)
(1,133)
38
(0)
(215)
1
Adjusted earnings/(loss) after tax [5]
(554)
707
(1,178)
(172)
137
(48)
Equinor fourth quarter 2020 48
Items impacting net operating income/(loss) in the fourth
quarter of 2019
Equinor
group
Exploration &
Production
Norway
Exploration &
Production
International*
Exploration
& Production
USA*
Marketing,
Midstream &
Processing
Other
(in USD million)
Net operating income/(loss)
1,516
1,476
53
7
360
(382)
Total revenues and other income
168
(12)
77
(0)
291
(189)
Changes in fair value of derivatives
102
(9)
-
-
111
-
Periodisation of inventory hedging effect
180
-
-
-
180
-
Impairment
23
-
-
-
-
23
Over-/underlift
74
(3)
77
(0)
-
-
Gain/loss on sale of assets
(212)
-
-
-
-
(212)
Purchases [net of inventory variation]
556
-
-
-
(36)
591
Operational storage effects
(36)
-
-
-
(36)
-
Eliminations
591
-
-
-
-
591
Operating and administrative expenses
(91)
(10)
(36)
47
(92)
-
Over-/underlift
(46)
(10)
(36)
(0)
-
-
Gain/loss on sale of assets
27
-
-
27
-
-
Provisions
(72)
-
-
20
(92)
-
Depreciation, amortisation and net impairment losses
1,359
1,284
55
-
-
20
Impairment
1,359
1,284
55
-
-
20
Exploration expenses
43
-
43
-
-
-
Impairment
43
-
43
-
-
-
Sum of adjustments to net operating income/(loss)
2,034
1,262
140
47
164
422
Adjusted earnings/(loss) [5]
3,550
2,738
192
54
524
41
Tax on adjusted earnings
(2,364)
(1,979)
(112)
(0)
(233)
(41)
Adjusted earnings/(loss) after tax [5]
1,186
759
79
55
291
1
* Restated to reflect change to segment
Equinor fourth quarter 2020 49
Items impacting net operating income/(loss) in the full year
of 2020
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
(3,423)
3,097
(3,565)
(3,512)
359
198
Total revenues and other income
90
68
(194)
-
213
3
Changes in fair value of derivatives
2
6
-
-
(5)
-
Periodisation of inventory hedging effect
224
-
-
-
224
-
Impairment from associated companies
3
-
-
-
-
3
Over-/underlift
(130)
64
(194)
-
-
-
Gain/loss on sale of assets
(9)
(3)
-
-
(6)
-
Purchases [net of inventory variation]
(168)
-
-
-
127
(296)
Operational storage effects
127
-
-
-
127
-
Eliminations
(296)
-
-
-
-
(296)
Operating and administrative expenses
378
(39)
127
50
245
(4)
Over-/underlift
70
(39)
108
-
-
-
Other adjustments
1
-
1
(0)
-
-
Gain/loss on sale of assets
23
-
-
20
-
3
Provisions
285
-
17
30
245
(7)
Depreciation, amortisation and net impairment losses
5,715
1,260
1,426
1,938
1,060
32
Impairment
5,934
1,260
1,473
2,109
1,060
32
Reversal of impairment
(218)
-
(47)
(171)
-
-
Exploration expenses
1,345
5
511
829
-
-
Impairment
1,397
5
508
885
-
-
Reversal of impairment
(63)
-
-
(63)
-
-
Provisions
11
-
4
7
-
-
Sum of adjustments to net operating income/(loss)
7,361
1,294
1,870
2,816
1,645
(265)
Adjusted earnings/(loss) [5]
3,938
4,391
(1,695)
(696)
2,004
(67)
Tax on adjusted earnings
(3,014)
(2,397)
347
(0)
(1,187)
223
Adjusted earnings/(loss) after tax [5]
924
1,994
(1,348)
(696)
817
156
Equinor fourth quarter 2020 50
Items impacting net operating income/(loss) in the full year
of 2019
Equinor
group
Exploration
&
Production
Norway
Exploration
& Production
International*
Exploration
&
Production
USA*
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
9,299
9,631
1,471
(2,271)
1,004
(537)
Total revenues and other income
(1,022)
(881)
45
(10)
33
(209)
Changes in fair value of derivatives
(291)
(18)
-
-
(273)
-
Periodisation of inventory hedging effect
306
-
-
-
306
-
Impairment
23
-
-
-
-
23
Over-/underlift
166
114
62
(10)
-
-
Gain/loss on sale of assets
(1,227)
(977)
(17)
-
-
(232)
Purchases [net of inventory variation]
508
-
-
-
(121)
628
Operational storage effects
(121)
-
-
-
(121)
-
Eliminations
628
-
-
-
-
628
Operating and administrative expenses
619
9
62
130
418
-
Over-/underlift
(32)
(33)
(2)
3
-
-
Change in accounting policy
1)
123
42
63
18
-
-
Gain/loss on sale of assets
43
-
-
43
-
-
Provisions
485
-
-
66
418
-
Depreciation, amortisation and net impairment losses
3,429
1,284
(5)
1,924
206
20
Impairment
3,549
1,284
115
1,924
206
20
Reversal of impairment
(120)
-
(120)
-
-
-
Exploration expenses
651
-
43
608
-
-
Impairment
651
-
43
608
-
-
Sum of adjustments to net operating income/(loss)
4,185
412
145
2,652
537
439
Adjusted earnings/(loss) [5]
13,484
10,043
1,616
381
1,541
(98)
Tax on adjusted earnings
(8,559)
(7,200)
(633)
(0)
(729)
2
Adjusted earnings/(loss) after tax [5]
4,925
2,844
982
382
813
(96)
* Restated to reflect change to segment
1) Change in accounting policy for lifting imbalances.
Equinor fourth quarter 2020 51
Items impacting net operating income/(loss) in the third
quarter of 2020
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
(2,019)
431
(1,328)
(1,606)
551
(67)
Total revenues and other income
(431)
(59)
(20)
-
(352)
0
Changes in fair value of derivatives
(37)
-
-
-
(37)
-
Periodisation of inventory hedging effect
(315)
-
-
-
(315)
-
Over-/underlift
(79)
(59)
(20)
-
-
-
Purchases [net of inventory variation]
104
-
-
-
(2)
107
Operational storage effects
(2)
-
-
-
(2)
-
Eliminations
107
-
-
-
-
107
Operating and administrative expenses
189
36
67
29
64
(7)
Over-/underlift
90
36
54
-
-
-
Gain/loss on sale of assets
(1)
-
-
(1)
-
-
Provisions
100
-
12
30
64
(7)
Depreciation, amortisation and net impairment losses
2,353
360
992
990
-
10
Impairment
2,524
360
992
1,162
-
10
Reversal of Impairment
(171)
-
(0)
(171)
-
-
Exploration expenses
583
5
185
393
-
-
Impairment
638
5
183
449
-
-
Reversal of Impairment
(63)
-
-
(63)
-
-
Provisions
8
-
2
7
-
-
Sum of adjustments to net operating income/(loss)
2,799
342
1,224
1,413
(289)
110
Adjusted earnings/(loss) [5]
780
773
(104)
(193)
262
43
Tax on adjusted earnings
(509)
(358)
87
0
(240)
2
Adjusted earnings/(loss) after tax [5]
271
414
(17)
(193)
22
45
Equinor fourth quarter 2020 52
Adjusted earnings after tax by reporting segment
Quarters
Q4 2020
Q3 2020
Q4 2019*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
1,841
(1,133)
707
773
(358)
414
2,738
(1,979)
759
E&P International
(1,215)
38
(1,178)
(104)
87
(17)
192
(112)
79
E&P USA
(172)
(0)
(172)
(193)
0
(193)
54
(0)
55
MMP
352
(215)
137
262
(240)
22
524
(233)
291
Other
(49)
1
(48)
43
2
45
41
(40)
1
Total Equinor consolidation
756
(1,310)
(554)
780
(509)
271
3,550
(2,364)
1,186
Effective tax rates on adjusted
earnings
173.2%
65.3%
66.6%
* E&P International and E&P USA have been restated to reflect change to segments
Full year
2020
2019*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
4,391
(2,397)
1,994
10,043
(7,200)
2,844
E&P International
(1,695)
347
(1,348)
1,616
(633)
982
E&P USA
(696)
(0)
(696)
381
(0)
382
MMP
2,004
(1,187)
817
1,541
(729)
813
Other
(67)
223
156
(98)
2
(96)
Total Equinor consolidation
3,938
(3,014)
924
13,484
(8,559)
4,925
Effective tax rates on adjusted earnings
76.5%
63.5%
* E&P International and E&P USA have been restated to reflect change to segment
Equinor fourth quarter 2020 53
Reconciliation of adjusted earnings after tax to net income
Quarters
Reconciliation of adjusted earnings after tax to net income
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(989)
(2,019)
1,516
Net operating income/(loss)
A
(3,423)
9,299
844
(72)
1,258
Income tax less tax on net financial items
B
1,552
7,611
(1,834)
(1,947)
257
Net operating income after tax
C = A-B
(4,975)
1,688
1,746
2,799
2,034
Items impacting net operating income
1)
D
7,361
4,185
466
582
1,106
Tax on items impacting net operating income
E
1,462
948
(554)
271
1,186
Adjusted earnings after tax [5]
F = C+D-E
924
4,925
(410)
(201)
(495)
Net financial items
G
(836)
(7)
(171)
23
8
Tax on net financial items
H
315
170
(2,416)
(2,124)
(230)
Net income/(loss)
I = C+G+H
(5,496)
1,851
1) Represents the total adjustments to net operating income made to arrive at adjusted earnings (i.e. adjusted purchases, adjusted operating
and administrative expenses, adjusted depreciation, amortisation and impairment expenses and adjusted exploration expenses, each of which
are presented and reconciled to the relevant related IFRS figure for the periods presented in this report).
Adjusted earnings Marketing, Midstream & Processing (MMP) break down
Quarters
Change
Adjusted earnings break down
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
226
292
262
(14%)
Natural Gas Europe
1,199
801
50%
22
7
35
(39%)
Natural Gas US
10
(27)
N/A
107
38
96
12%
Liquids
891
538
66%
(3)
(75)
131
N/A
Other
(96)
229
N/A
352
262
524
(33%)
Adjusted earnings MMP
2,004
1,541
30%
Equinor fourth quarter 2020 54
Adjusted exploration expenses
Quarters
Change
Adjusted exploration expenses
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
101
142
180
(44%)
E&P Norway exploration expenditures
470
617
(24%)
94
143
242
(61%)
E&P International exploration expenditures
692
821
(16%)
25
65
57
(56%)
E&P USA exploration expenditures
211
147
43%
220
349
479
(54%)
1)
Group exploration expenditures
1,371
1,584
(13%)
2)
969
87
61
>100%
Expensed, previously capitalised exploration expenditures
1,169
120
>100%
65
(125)
(103)
N/A
Capitalised share of current period's exploration activity
(394)
(507)
(22%)
315
575
43
>100%
Impairment (reversal of impairment)
1,337
657
>100%
1,569
886
480
>100%
Exploration expenses according to IFRS
3,483
1,854
88%
(317)
(583)
(43)
>100%
Items impacting net operating income/(loss)
3)
(1,345)
(651)
>100%
1,252
302
437
>100%
Adjusted exploration expenses
2,138
1,203
78%
* E&P International and E&P USA have been restated to reflect change to segments
1) 20 wells with activity with 8 completed in the fourth quarter of 2020 compared to 26 wells with 10 completed in the fourth quarter of 2019.
2) 46 wells with activity with 34 completed in 2020 compared to 58 wells with 42 completed in 2019.
3) For items impacting net operating income/(loss), see Reconciliation of net operating income/(loss) to adjusted earnings in the
Supplementary disclosures.
Calculated ROACE
Calculated ROACE based on Adjusted earnings after tax and capital employed [5]
31 December
(in USD million, except percentages)
2020
2019
Adjusted earnings after tax (A)
924
4,925
Average capital employed (B)
51,823
54,637
Calculated ROACE based on Adjusted earnings after tax and capital employed (A/B)
1.8%
9.0%
Equinor fourth quarter 2020 55
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 31
December
At 30
September
At 31
December
(in USD million)
2020
2020
2019
Shareholders' equity
33,873
34,084
41,139
Non-controlling interests
19
24
20
Total equity
A
33,892
34,108
41,159
Current finance debt
5,777
5,277
4,087
Non-current finance debt
32,338
32,193
24,945
Gross interest-bearing debt
B
38,115
37,471
29,032
Cash and cash equivalents
6,757
7,844
5,177
Current financial investments
11,865
10,563
7,426
Cash and cash equivalents and financial investment
C
18,621
18,407
12,604
Net interest-bearing debt [10]
B1 = B-C
19,493
19,064
16,429
Other interest-bearing elements
627
669
791
Normalisation for cash-build up before tax payment (50% of Tax Payment)
-
259
-
Net interest-bearing debt adjusted normalised for tax payment, including lease liabilities
[5]
B2
20,121
19,992
17,219
Lease liabilities
4,405
4,218
4,339
Net interest-bearing debt adjusted [5]
B3
15,716
15,774
12,880
Calculation of capital employed [5]
Capital employed
A+B1
53,385
53,172
57,588
Equinor fourth quarter 2020 56
Capital employed adjusted, including lease liabilities
A+B2
54,012
54,100
58,378
Capital employed adjusted
A+B3
49,608
49,883
54,039
Calculated net debt to capital employed [5]
Net debt to capital employed
(B1)/(A+B1)
36.5%
35.9%
28.5%
Net debt to capital employed adjusted, including lease liabilities
(B2)/(A+B2)
37.3%
37.0%
29.5%
Net debt to capital employed adjusted
(B3)/(A+B3)
31.7%
31.6%
23.8%
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 h ave a more even allocation of tax payments between the four
quarters and hence a more representative net interest-bearing debt.
Equinor fourth quarter 2020 57
Net adjusted financial items 2020
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instrument
s
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the fourth quarter of 2020
(in USD million)
Financial items according to IFRS
379
(491)
27
(326)
(410)
(171)
(581)
Foreign exchange (FX) impacts (incl. derivatives)
19
491
0
0
510
2
0
Interest rate (IR) derivatives
0
0
(27)
0
(27)
0
0
Fair value adjustment financial investments and other
(272)
0
0
0
(272)
0
0
Subtotal
(253)
491
(27)
0
211
2
212
Adjusted financial items
126
0
0
(326)
(200)
(170)
(369)
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instruments
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the full year of 2020
(in USD million)
Financial items according to IFRS
754
(646)
448
(1,392)
(836)
315
(521)
Foreign exchange (FX) impacts (incl. derivatives)
(10)
646
-
-
636
-
-
Interest rate (IR) derivatives
-
-
(448)
-
(448)
-
-
Fair value adjustment financial investment and other
(282)
-
-
-
(282)
-
-
Subtotal
(292)
646
(448)
-
(93)
-
(93)
Adjusted financial items
462
-
-
(1,392)
(929)
315
(614)
Net adjusted financial items 2019
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instrument
s
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the fourth quarter of 2019
(in USD million)
Financial items according to IFRS
210
23
(308)
(421)
(495)
8
(487)
Foreign exchange (FX) impacts (incl. derivatives)
1
(23)
0
0
(22)
0
0
Interest rate (IR) derivatives
0
0
308
0
308
0
0
Fair value adjustment financial investment
(44)
0
0
0
(44)
0
0
Adjusted financial items excluding FX and IR derivatives
167
0
0
(421)
(254)
8
(246)
Equinor fourth quarter 2020 58
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 comparison s between periods.
The following financia l measures may be considered non-GAAP financial measures:
●
Adjusted earnings
order to separate out effects that management considers may not be well correlated to Equinor’s underlying operational
performance in the individual reporting period. Management considers adjusted earnings to be a supplemental measure to
Equinor’s IFRS measures, which provides an indication of Equinor’s underlying operational performance in the peri od and
facilitates an alternative understanding of operational trends between the periods. Adjusted earnings include adjusted revenues
and other income, adjusted purchases, adjusted operating expenses and selling, general and administrative expenses, adjusted
depreciation expenses and adjusted exploration expenses
●
Adjusted earnings after tax
to operating income taking the applicable marginal tax into consideration. Adjusted earnings after tax excludes net financial items
and the associated tax effects on net financial items. It is based on adjusted earnings less the tax effects on all elements included
in adjusted earnings (or calculated tax on operating income and on each of the adjusting items using an estimated marginal tax
rate). In addition, tax effect related to tax exposure items not related to the individual reporting period is excluded from adjusted
earnings after tax. Management considers adjusted earnings after tax, which reflects a normalised tax charge associated with its
operational performance excluding the impact of financing, to be a supplemental measure to Equinor’s net income. Certain net
USD denominated financial positions are held by group companies that have a USD functional curr ency that is different from the
currency in which the taxable income is measured. As currency exchange rates change between periods, the basis for measuring
net financial items for IFRS will change disproportionally with taxable income which includes exchange gains and losses from
translating the net USD denominated financial positions into the currency of the applicable tax return. Therefore, the effective tax
rate may be significantly higher or lower than the statutory tax rate for any given period. Adjusted taxes included in adjusted
earnings after tax should not be considered indicative of the amount of cu rrent or total tax expense (or taxes payable) for the
period
Adjusted earnings and adjusted earnings after tax should be considered additional measures rather than substitutes for net operating
income/(loss) and net income/(loss), which are the most directly comparable IFRS measures. There are material limitations
associated with the use of adjusted earnings and adjusted earnings after tax compared with the IFRS measures as such non-GAAP
measures do not include all the items of revenues/gains or expenses/losses of Equinor that are needed to evaluate its profitability on
an overall basis. Adjusted earnings and adjusted earnings after tax are only intended to be indicative of the underlying developments
in trends of our on-going operations for the production, manufacturing and marketing of our products and exclude pre-and post-tax
impacts of net financial items. Equinor reflects such underlying development in our operations by eliminating the effects of certain
items that may not be directly associated with the period's operations or financing. However, for that reason, adjusted earnings and
adjusted earnings after tax are not complete measures of profitability. These measures should therefore not be used in isolation.
●
Return on average capital employed after tax (ROACE)
investors about performance during the period under evaluation. Equinor uses ROACE to measure the return on capital employed,
regardless of whether the financing is through equity or debt. The use of ROACE should not be viewed as an alternative to income
before financial items, income taxes and minority interest, or to net income, which are measures calculated in accordance with
GAAP or ratios based on these figures. For a reconciliation for adjusted earnings after tax, see Reconciliation of net operating
income/(loss) to adjusted earnings as presented earlier in this report
●
Capital employed adjusted –
this measure is defined as Equinor's total equity (including non-controlling interests) and net
interest-bearing debt adjusted
●
Net interest-bearing debt adjusted
equivalents and current financial investments, adjusted for collateral deposits and balances held by Equinor's captive insurance
company and balances related to the SDFI
●
Net debt to capital employed
,
Net debt to capital employed adjusted, including lease liabilities
and
employed ratio adjusted
– Following implementation of IFRS 16 Equinor present s a “net debt to capital employed 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 capita l employed ratio in the report include Finance lease according to IAS17, adjusted for
marketing instruction agreement
●
Organic capital expenditures
– Capital expenditures, defined as Additions to PP&E, intangibles and equity accounted
investments in note 2 Segments to the Condensed financial interim statements , amounted to USD 2.8 billion in the fourth 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 fourth quarter of 2020, a total of USD 0.9 billion are excluded
in the organic capital expenditures. Forward -looking organic capital expenditures included in this report are not reconcilable to its
Equinor fourth quarter 2020 59
most directly comparable IFRS measure without unreasonable effo rts, because the amounts excluded from such IFRS measure to
determine organic capital expenditures cannot be predicted with reasonable certainty
●
Free cash flow for the fourth quarter 2020
flows provided by operating activities before taxes paid and working capital items (USD 3.8 billion), taxes paid (negative USD 0.4
billion), cash used in business combinations (USD 0.0 billion), capital expenditures and investments (negative USD 2.5 billion),
(increase)/decrease in other items interest-bearing (USD 0.2 billion), proceeds from sale of assets and businesses (USD 0.5
billion), dividend paid (negative USD 0.3 billion) and share buy -back (USD 0.0 billion), resulting in a free cash flow of USD 1.4
billion in the fourth quarter of 2020
●
Free cash flow for the full year of 2020
provided by operating activities before taxes paid and working capital items (USD 14.0 billion), taxes paid (negative USD 3.1
billion), cash used in business combinations (USD 0.0 billion), capital expend itures and investments (negative USD 8.5 billion),
(increase)/decrease in other items interest-bearing (USD 0.2 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 0.8 billion), dividend
paid (negative USD 2.3 billion) and share buy -back (negative USD 1.1 billion), resulting in a free cash flow of USD 0 .1 billion in the
full year of 2020
Adjusted earnings
adjust for the following items:
●
Changes in fair value of derivatives:
embedded derivatives, required to be carried at fair value. Also, certain transactions related to historical divestments include
contingent consideration, are carried at fair value. The accounting impacts of changes in fair value of the aforementioned are
excluded from adjusted earnings. In addition, adjustments are also made for changes in the unrealised fair value of derivatives
related to some natural gas trading contracts. Due to the nature of these gas sales contracts, these are classified as financial
derivatives to be measured at fair value at the balance sheet date. Unrealised gains and losses on these contracts reflect the
value of the difference between current market gas prices and the actual prices to be realised under the gas sales contracts. Only
realised gains and losses on these contracts are reflected in adjusted earnings. This presentati on best reflects the underlying
performance of the business as it replaces the effect of temporary timing differences associated with the re-measurements of the
derivatives to fair value at the balance sheet date with actual realised gains and losses for the period
●
Periodisation of inventory hedging effect:
Commercial storage is hedged in the paper market and is accounted for using the
lower of cost or market price. If market prices increase above cost price, the inventory will not reflect this increase in value. There
will be a loss on the derivative hedging the inventory since the derivatives always reflect changes in the market price. An
adjustment is made to reflect the unrealised market increase of the commercial storage. As a result, loss on derivatives is
matched by a similar adjustment for the exposure being managed. If market prices decrease below cost price, the write-down of
the inventory and the derivative effect in the IFRS income statement will offset each other and no adjustment is made
●
Over/underlift
: Over/underlift is accounted for using the sales method and therefore revenues were reflected in the period the
product was sold rather than in the period it was produced. The over/underlift position depended on a number of factors related to
our lifting programme and the way it corresponded to our entitlement share of production. The effect on income for the period is
therefore adjusted, to show estimated revenues and associated costs based upon the production for the period to reflect
operational perform ance and comparability with peers. Following the first quarter of 2019, Equinor changed the accounting policy
for lifting imbalances. Adjusted earnings now include the over/underlift adjustment
●
The
operational storage
is not hedged and is not part of the trading portfolio. Cost of goods sold is measured based on the
FIFO (first-in, first-out) method, and includes realised gains or losses that arise due to changes in market prices. These gains or
losses will fluctuate from one period to another and are not considered part of the underlying operation s for the period
●
Impairment and reversal of impairment
are excluded from adjusted earnings since they affect the economics of an asset for
the lifetime of that asset, not only the period in which it is impaired or the impairment is reversed. Impairment and reversal of
impairment can impact both the exploration expenses and the depreciation, amortisation and impairment line items
●
Gain or loss from sales of assets
is eliminated from the me asure since the gain or loss does not give an indication of future
performance or periodic performance; such a gain or loss is related to the cumulative value creation from the time the asset is
acquired until it is sold
●
Eliminations (Internal unrealised profit on inventories)
:
Volumes derived from equity oil inventory will vary depending on
several factors and inventory strategies, i.e. level of crude oil in inventory, equity oil used in the refining process and level of in-
transit cargoes. Internal profit related to volumes sold between entities within the group, and still in inventory at period end, is
eliminated according to IFRS (write down to production cost). The proportion of realised versus unrealised gain will fluctuate from
one period to another due to inventory strategies and consequently impact net operating income /(loss). Write-down to production
cost is not assessed to be a part of the underlying operational performance, and elimination of internal profit related to equity
volumes is excluded in adjusted earnings
●
Other items of income and expense
are adjusted when the impacts on income in the period are not reflective of Equinor’s
underlying operational performance in the reporting period. Such items may be unusual or infrequent transactions but they may
also include transactions that are significant which would not necessarily qualify as either unusual or infrequent. Other items are
carefully assessed and can include transactions such as provisions related to reorganisation, early retirement, etc.
●
Change in accounting policy
reflective of Equinor’s underlying operational performance in the reporting period
For more information on our use of non-GAAP financial measures, see section 5.2 Use and reconciliation of non-GAAP financial
measures in Equinor's 2019 Annual Report and Form 20-F.
Equinor fourth quarter 2020 60
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”, 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, includi ng with respect to the Covid -19 pandemic including its impacts, consequences and risks; Equinor’s response to
the Covid-19 pandemic, including measures to protect people, operations and value creation, operating costs and assumptions; the
commitment to dev elop as a broad energy company; the ambition to be a net-zero energy company by 2050; future financial
performance, including cash flow and liquidity; accounting policies; production cuts, including their impact on the level and timing of
Equinor’s production; plans to develop fields; the climate action plan announced by the Norwegian government; market outlook and
future economic projections and assumptions, including commodity price assumptions; organic capital expenditures through 2022;
intention to optimis e and 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 eve nts 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; security
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 object ives; 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 oil-producing countries; non-complianc e 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 elsewhere
��
other factors discussedin 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.
Equinor fourth quarter 2020 61
END NOTES
1.
The group's
average liquids price
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
4.
Equity volumes
production sharing agreement (PSA)
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 cumulative 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.
ROACE, see table Calculated ROACE in the Supplementary disclosures for more details.
6.
Transactions with the
Norwegian State.
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 sells 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.
7.
The production guidance reflects our estimates of
proved reserves
Commission (SEC) guidelines and additional production from other reserves not included in proved reserves 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
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: 10 February, 2021
By: ___/s/ Svein Skeie
Name: Svein Skeie
Title: Chief Financial Officer