Equinor first quarter 2023
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certainty. Organic capital expenditure is a measure which Equinor believes gives relevant information about Equinor’s investments
in maintenance and development of the company’s assets.
●
Gross investments/capex
– Capital expenditures, defined as Additions to PP&E, intangibles and equity accounted investments
in the financial statements, including Equinor’s proportionate share of capital expenditures in
equity accounted investments not
included in additions to equity accounted investments. Forward-looking gross capital expenditures
included in this report are not
reconcilable to its most directly comparable IFRS measure without unreasonable efforts, because the amounts excluded
from
such IFRS measure to determine gross capital expenditures cannot be predicted with reasonable
certainty.
●
Cashflow from operations after taxes paid (CFFO after taxes paid)
represents, and is used by management, to evaluate cash
generated from operating activities after taxes paid, available for investing activities, for debt servicing and distribution
to
shareholders. However, cashflow from operations after taxes paid is not a measure of our liquidity under IFRS and should not be
considered in isolation or as a substitute for an analysis of our results as reported in this report.
Our definition of Cashflow from
operations after taxes paid is limited and does not represent residual cash flows available for
discretionary expenditures. CFFO
after taxes paid for the first quarter of 2023 and the first and fourth quarter of 2022 includes the following
line items in the
Consolidated statement of cash flows: Cash flows provided by operating activities before taxes paid and working
capital items
(2023: USD 15.3 billion | Q1 2022: USD 20.1 billion | Q4 2022: USD 21.0 billion) and taxes paid (2023:
negative USD 5.6 billion |
Q1 2022: negative USD 4.3 billion | Q4 2022:
negative USD 14.2 billion), resulting in a cashflow from operations after taxes paid
of USD 9,716 million in the first quarter of 2023 (Q1 2022: USD 15,748 million | Q4 2022: USD
6,800 million).
●
Net cash flow (previously named free cash flow) for the first quarter of 2023 and the first and
fourth quarter 2022
the following line items in the Consolidated statement of cash flows: Cash flows
provided by operating activities before taxes paid
and working capital items (2023: USD 15.3 billion | Q1 2022: USD 20.1 billion | Q4 2022:
USD 21.0 billion), taxes paid (2023:
negative USD 5.6 billion | Q1 2022: negative USD 4.3 billion | Q4 2022: negative USD 14.2 billion),
cash used/received in
business combinations (2023: USD 0.0 billion | Q1 2022: USD 0.0 billion | Q4 2022: USD
0.0 billion), capital expenditures and
investments (2023: negative USD 2.3 billion | Q1 2022: negative USD 2.6 billion | Q4 2022: negative USD
2.4 billion),
increase/decrease in other items interest-bearing (2023: USD 0.1 billion | Q1 2022: USD
0.0 billion | Q4 2022: USD 0.0 billion),
proceeds from sale of assets and businesses (2023: USD 0.0 billion | Q1 2022: USD 0.6 billion
| Q4 2022: USD 0.0 billion),
dividend paid (2023: negative USD 2.9 billion | Q1 2022: negative USD 0.6 billion | Q4
2022: negative USD 2.2 billion) and share
buy-back (2023: negative USD 0.5 billion | Q1 2022: negative USD 0.4 billion | Q4
2022: negative USD 0.6 billion), resulting in a
net cash flow of 4.2 billion in the first quarter of 2023 (Q1 2022: 12.7 billion | Q4
2022: 1.7 billion). Net cash flow represents, and is
used by management to evaluate, cash generated from operational and investing activities available
for debt servicing and
distribution to shareholders. The name of the measure was updated in the first quarter
of 2023, but no changes have been made
Adjusted earnings
adjust for the following items:
●
Changes in fair value of derivatives
: In the ordinary course of business, Equinor enters into commodity derivative
contracts to
manage the price risk exposure relating to future sale and purchase contracts. These commodity derivatives
are measured at fair
value at each reporting date, with the movements in fair value recognised in the income
statement. By contrast, the sale and
purchase contracts are not recognised until the transaction occurs resulting in timing differences. Therefore,
with effect from the
first quarter of 2023, the unrealised movements in the fair value of these commodity derivative
contracts are excluded from
adjusted earnings and deferred until the time of the physical delivery to minimise the effect of these timing differences. Further,
embedded derivatives within certain gas contracts and contingent consideration related to historical divestments
are required to
be carried at fair value. Any accounting impacts resulting from such changes in fair value are also
excluded from adjusted
earnings, as these fluctuations are not indicative of the underlying performance of the business.
●
Periodisation of inventory hedging effect
: Equinor enters into derivative contracts to manage price risk exposure relating to its
commercial storage. These derivative contracts are carried at fair value while the inventories are accounted
for at the lower of
cost or market price. Therefore, measurement differences occur in relation to the recognition of gains and losses. An
adjustment
is made to align the valuation principles of inventories with related derivative contracts. With
effect from the first quarter of 2023,
the adjusted valuation of inventories is based on the forward price at the expected realisation
date. This is so that the valuation
principles between commercial storages and derivative contracts are better aligned.
●
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 several 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 performance and comparability with peers.
●
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 operations
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 measure 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.