Equinor Earnings: Full-Year Distributions of $17 Billion Intact Despite Falling Earnings

Equinor’s EQNR second-quarter adjusted earnings decreased to $7.5 billion before tax and $1.8 billion after tax, compared with $17.6 billion and $6.8 billion last year, respectively, due to lower oil and natural gas prices.

Operating cash flow, excluding working capital and taxes, was $10.5 billion during the quarter compared with $18.1 billion in 2022. Capital expenditure totaled $2.8 billion and is still expected to be $10 billion-$11 billion for the full year.

During the quarter, Equinor paid its ordinary dividend of $0.30, a special dividend of $0.60, and bought back $1.67 billion of shares. Given the strong financial performance and large cash balance, it will move forward with the next tranche of its $6 billion repurchase plan for 2023 with $1.67 billion in repurchases for the third quarter.

Despite falling earnings, Equinor reiterated its 2023 plan to return $17.0 billion to shareholders. This stands in contrast to some peers that reduced expected payouts for the second quarter given variable distribution targets and weaker balance sheets than Equinor, whose leverage was negative 35.1% at the end of the second quarter. Our fair value estimate and moat rating are unchanged. Equinor is one of the cheaper integrated names in our coverage.

The upstream business saw volumes increase 1% from the prior year largely due to Johan Sverdrup phase 2 volumes with liquid volumes growing 12% while gas production fell by 11%. Higher volumes were offset by lower prices, resulting in upstream adjusted earnings decreasing to $7.0 billion compared with $16.3 billion the year before.

Marketing segment adjusted earnings fell to $665 million from $1.3 billion the prior year, largely because of weaker gas and power trading results. The renewables segment posted an adjusted loss of $84 million compared with a loss of $42 million last year on higher business development costs. Production from renewable energy increased to 335 GWh but fell considerably from 511 GWh the previous quarter.