Equinor Earnings: Steady Payouts to Shareholders Continue

Equinor’s EQNR third-quarter adjusted earnings decreased to $8.0 billion before tax and $2.7 billion after tax, compared with $24.5 billion and $7.2 billion last year, respectively, because of oil and natural gas prices falling from extraordinary levels in 2022. Operating cash flow, excluding working capital and taxes, was $11.3 billion during the quarter compared with $24.5 billion in 2022. Capital expenditure totaled $2.6 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 fourth and final tranche of its $6 billion repurchase plan for 2023 with $1.67 billion in repurchases for the fourth quarter.

Despite falling earnings, Equinor reiterated its 2023 plan to return $17.0 billion to shareholders. While oil and gas prices have fallen, prices are still above recent past levels. In addition, Equinor has been able to continue its payouts given its third-quarter leverage of negative 22.9%, while many peers have reduced expected payouts because of variable distribution targets and weaker balance sheets. Our fair value estimate and moat rating are unchanged. Equinor, one of the cheaper integrated names in our coverage last quarter, is now fairly valued.

The upstream business saw volumes decrease 1% from the prior year largely because of unplanned extended turnarounds on the Troll A platform and the third-party lowering gas volumes. Upstream adjusted earnings decreased to $7.2 billion compared with $22.9 billion the year before.

Marketing segment adjusted earnings fell to $876 million from $1.6 billion the prior year, largely because of reduced gas market volatility and diminished geographical spreads that allowed for strong gas and power results in 2022.