Equinor fourth quarter 2018 and year end results
Equinor reports adjusted earnings of USD 4.4 billion and USD 1.5 billion after tax in the fourth quarter of 2018. IFRS net operating income was USD 6.7 billion and the IFRS net income was USD 3.4 billion. The fourth quarter and full year were characterised by:
Solid results and strong cash flow. Net debt ratio reduced to 22.2%
Strong operational performance. Record high fourth quarter and full year production Continued growth in return on average capital employed to 12%
The reserve replacement ratio (RRR) was all time high at 213%
Step-up in quarterly dividend by 13% to USD 0.26 per share, subject to approval by the annual general meeting
“Strong operational performance and high production gave solid results and cash flow in a quarter with significant market volatility. We delivered growing returns for the full year and expect continued earnings growth. Following strong improvements in recent years, the board proposes an increase in quarterly dividend of 13% to USD 0.26 per share,” says Eldar Sætre, President and CEO of Equinor ASA.
Mr Eldar Sætre CEO said that “Our cash flow generation was strong across the business. At an overage oil price of 71 dollars per barrel, we generated an organic free cash flow well above 6 billion dollars for the full year. We have also done several value-enhancing transactions, strengthened our financial position and reduced our net debt ratio from 29 to 22.2 percent.”
Adjusted earnings  were USD 4.4 billion in the fourth quarter, up from USD 4 billion in the same period in 2017. Adjusted earnings after tax  were USD 1.5 billion, up from USD 1.3 billion in the same period last year. High production at higher prices contributed to the increase. Due to sales pricing mechanisms in the market, the significant fall in oil prices led to a negative one-off effect with a higher than normal differential between realised liquids prices and Brent Blend average. In addition, higher exploration activity and lower refinery and products trading margins impacted adjusted earnings negatively. For the full year, adjusted earnings were USD 18 billion, up 42 percent from USD 12.6 billion in 2017.
IFRS net operating income was USD 6.7 billion in the fourth quarter compared to USD 5.2 billion in the same period of 2017. IFRS net income was USD 3.4 billion, up from USD 2.6 billion in the fourth quarter of 2017. For the full year, IFRS net income was USD 7.5 billion, up from USD 4.6 billion in 2017.
Mr Sætre added that “In 2018 we sanctioned seven new projects, which will deliver more than 1 billion barrels of resources to Equinor at an average break-even price of 14 dollars and very low CO2 emissions. In the quarter, we started production at Aasta Hansteen, Oseberg Vestflanken and Big Foot, and at the Apodi solar plant in Brazil. We also had the winning bid in an offshore wind lease round offshore Massachusetts in the US.”
Equinor delivered total equity production of 2,170 mboe per day in the fourth quarter, an increase from 2,134 mboe per day in the same period in 2017. The increase was mainly due to portfolio changes and new wells especially in the US onshore. New fields coming on stream added to the increase. Expected natural decline in addition to reduced gas off-take partially offset the increase. Equinor delivered all-time high production in 2018 with an underlying production growth of more than 2% .
As of year-end 2018, Equinor had completed 24 exploration wells with nine commercial discoveries. Adjusted exploration expenses  in the quarter were USD 417 million, up from USD 274 million in the same quarter of 2017, mainly due to higher seismic and drilling activity.
The reserve replacement ratio (RRR) reached an all-time high of 213% in 2018, mainly driven by sanctioning of new fields, positive revisions and acquisitions. The reserves to production ratio (R/P) increased from 7.6 to 8.7 years.
Cash flows provided by operating activities before tax amounted to USD 27.6 billion in 2018 compared to USD 21.0 billion in 2017. Organic capital expenditure  was USD 9.9 billion for the full year of 2018. At year-end, net debt to capital employed  was reduced to 22.2%.
The board of directors proposes to the annual general meeting to increase the dividend by 13% to USD 0.26 per share for the fourth quarter.
The twelve-month average Serious Incident Frequency (SIF) was 0.5 for 2018, compared to 0.6 in 2017.
Source : Strategic Research Institute