Today, Equinor ASA (OSE:EQNR, NYSE:EQNR) presents its
strategy to accelerate the company’s transition while growing cash
flow and returns.
Key highlights from the strategy update:
- Accelerating the transition and setting an ambition to reach a
40% reduction in net carbon intensity by 2035, on the way towards
net zero by 2050.
- Stepping up investments in renewables and low carbon solutions
to more than 50% of gross annual(1) investments by 2030.
- Growing cash flow and returns, expecting a free cash flow(2) of
around USD 35 billion(3) before capital distribution in 2021 – 2026
and around 12%(3) return on average capital employed(2) in 2021 –
2030.
- Increasing the quarterly cash dividend to 18 cents per share
and introducing new share buy-back programme.
“Our strategy is backed up by clear actions to accelerate our
transition while growing cash flow and returns. We are optimising
our oil and gas portfolio to deliver even stronger cash flow and
returns with reduced emissions from production, and we expect
significant profitable growth within renewables and low carbon
solutions. This is a strategy to create value as a leader in the
energy transition”, says Anders Opedal, president and CEO of
Equinor.
Equinor has set a clear ambition to become a net zero energy
company by 2050, including emissions from production and final
consumption. Today, Equinor also sets interim ambitions, aiming to
reduce net carbon intensity with 20% by 2030 and 40% by 2035.
“This is a business strategy to ensure long-term competitiveness
during a period with profound changes in the energy systems, as
society moves towards net zero. We are building on our position as
a global leader within carbon efficient production of oil and gas.
We will continue to cut emissions, and in the longer term, Equinor
expects to produce less oil and gas than today recognising reducing
demand. Significant growth within renewables and low carbon
solutions will increase the pace of change towards 2030 and 2035,”
says Opedal.
Optimised oil and gas portfolio
Equinor’s oil and gas portfolio can deliver a free cashflow
after tax and investments(2) of USD 45 billion(3) from 2021 to
2026. New projects coming on stream by 2030 have an average break
even below 35 USD/bbl and a short payback time of less than 2.5
years(3).
On the Norwegian continental shelf, Equinor is optimising its
operations to deliver strong value creation and an average annual
free cash flow of around USD 4.5 billion(3) in 2021 – 2030. Further
improvements at the world class Johan Sverdrup field reduces the
break-even price for the full field with 25% to 15 USD/bbl.
Internationally, Equinor is focusing its portfolio, exiting
operated positions in unconventionals, prioritizing offshore
operations where the company can utilize its core competence. The
international portfolio is set to deliver strong cash flow, become
more robust towards lower prices, and shows a significant upside at
higher prices.
High value growth within renewables
Equinor expects gross investments(1) in renewables of around USD
23 billion from 2021 to 2026, and to increase the share of gross
capex for renewables and low carbon solutions from around 4% in
2020 to more than 50% by 2030. Based on early low-cost access at
scale, Equinor expects to reach a installed capacity of 12 – 16 GW
(Equinor share) by 2030. Reflecting current markets levels, Equinor
is adjusting expected project base real returns to 4 – 8% and
remains determined to capturing higher equity returns through
project financing and farm downs. Early access followed by targeted
farm down is an integrated part of the value creation proposition.
So far, Equinor has divested assets for 2.3 billion USD, booked a
capital gain of USD 1.7 billion and expects to deliver nominal
equity returns in the range of 12 – 16% from the offshore wind
projects with offtake contracts in the UK and US.
New market opportunities in low carbon
solutions
The energy transition represents an opportunity for Equinor to
leverage its leading position within carbon management and
hydrogen, and to develop and grow new value chains and markets. By
2035, Equinor’s ambition is to develop the capacity to store 15 -30
million tonnes CO2 per year and to provide clean hydrogen in 3-5
industrial clusters.
Competitive capital distribution
The Board of Directors of Equinor has decided on a quarterly
cash dividend of 18 cents per share for second quarter 2021, an
increase of 3 cents from first quarter. The second quarter 2021
cash dividend will formally be declared and announced in connection
with the announcement of the second quarter results, including key
information relating to the dividend.
The Board has also decided to introduce a new annual share
buy-back programme of around USD 1.2 billion starting from 2022. In
addition, Equinor expects to execute two tranches of share
buy-backs in 2021, with a first tranche of USD 300 million to be
launched after announcement of second quarter results, and an
indicative second tranche of USD 300 million to be launched after
announcement of third quarter results.
The new share buy-back programme is expected to be executed when
Brent oil prices are in or above the range of 50-60 USD/bbl and
Equinor’s net debt ratio(1) stays within the communicated ambition
of 15-30% and this is supported by commodity prices.
The USD 5 billion share buy-back programme launched on 5
September 2019, and suspended as of 22 March 2020, is
cancelled.
All share buyback amounts include shares to be redeemed by the
Norwegian State.
The purpose of the share buy-back programme is to reduce the
issued share capital of the company. All shares repurchased as part
of the programme will be cancelled. According to an agreement
between Equinor and the Norwegian State, the Norwegian State will
participate in share buy-backs on a proportionate basis. Execution
of share buy-backs after the 2022 annual general meeting is subject
to a renewed authorization, including renewal of the agreement with
the Norwegian State. Share buy backs will be executed within
applicable safe harbour provisions. Key information related to the
first tranche of the share buy-back programme will be announced and
executed following announcement of the second quarter 2021
financial report.
Outlook:
- Organic capital expenditures(2) are estimated at an annual
average of USD 9-10 billion for 2021-2022 and at around USD 12
billion for 2023 – 2024(4).
- Production growth(5) from 2020 to 2021 is estimated to be
around 2 %.
See Forward Looking Statements on our webpages:
https://www.equinor.com/en/investors/quarterly-results/cmu2021-forward-looking-statement.html
Footnotes:1: Gross capex defined as capital
expenditures before project financing2: Non GAPP measure3: Based on
60 USD per bbl4: Annual average organic capital expenditures based
on USD/NOK of 95: The growth percentage is based on historical
production numbers, adjusted for portfolio measures
Further information from:
Investor relationsPeter Hutton, senior vice
president Investor Relations,+44 7881 918 792 (mobile)
PressSissel Rinde, vice president Media
Relations,+ 47 412 60 584 (mobile)
This information is subject to the disclosure requirements
pursuant to Section 5-12 the Norwegian Securities Trading Act
- CEO and CFO presentations Capital Markets Day 2021
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