Equinor fourth quarter 2023
8
Solid production growth combined with high realised prices drove strong revenue and results
for the fourth quarter and full year 2023.
Realised commodity prices, particularly gas, were markedly reduced from the elevated levels
in 2022, and as such more than offset
the production increase, resulting in a decline in revenue relative to the prior year. The Marketing, Midstream and Processing segment
supported the total group results through a sound delivery within Gas and Power trading and optimisation.
However, reduced refinery
margins and absence of favourable arbitrage opportunities captured in prior quarters resulted in
a lower contribution to group results.
Throughout the year Equinor has increased production capacity leading to an increase in
operating and maintenance costs in the
quarter and for the full year of 2023. The reduction in energy prices from the
highs experienced in 2022 has reduced transportation
tariffs partially offsetting the increase.
The prevailing inflationary pressures and a number of one-off costs have also impacted the upward movement
in operating expenses
in the fourth quarter of 2023. The USD remains strong against the NOK thereby limiting
the visibility of these increases in the reported
Adjusted depreciation,
amortisation and net impairments*
increased in the quarter and for the full year compared to 2022 primarily due
to investments in producing fields,
and strong production from Peregrino in Brazil, partially offset by a reduced rate of depreciation in
E&P Norway resulting from prior quarter impairments.
Successful near-field exploration activity on the NCS has balanced limited commercial
discoveries internationally during 2023. During
the fourth quarter of 2023 exploration expenses included costs related to unsuccessful exploration
wells in the Gulf of Mexico.
The
prior year fourth quarter included the expense of previously capitalised well costs for
the E&P International segment.
In the fourth quarter of 2023 net operating income was negatively impacted by impairments of USD
328 million, primarily relating to
the planned exit from Azerbaijan. In comparison, net impairment reversals totalling USD 1,094 million
impacted the results in the
fourth quarter of 2022. In the full year of 2023 net impairments of USD 1,320 million were
recognised in contrast to net impairment
reversals of USD 2,429 million in the full year 2022, contributing to the relative decrease in net
operating income for 2023.
Taxes
The reported effective tax rate was 72.1% for the fourth quarter of 2023 (45.4% for the fourth quarter of 2022) and 68.6% for
the full
year 2023 (63.4% for the full year 2022). The change in reported tax rates for the fourth quarter
and full year has been influenced by
recognition of previously unrecognised deferred tax assets in the US in the fourth quarter
of 2022.
The effective tax rate on adjusted earnings of 78.4% for the fourth quarter of 2023 and 71.4% for the full year increased
compared to
72.3% and 70.5% in 2022 due to higher prior period adjustments in 2023 compared with 2022 and by the
recognition of the US
deferred tax assets in the fourth quarter of 2022.
Cash flow, net debt and capital distribution
Strong financial results from the business during the fourth quarter of 2023, driven by a strong
operational performance, generated
cash flow provided by operating activities before taxes paid and working capital items of
USD 10,890 million. The downward
movement in commodity prices drove this decrease of USD 10,098 million from the
prior year.
Taxes paid of USD 8,103 million in the fourth quarter have reduced from the
prior year outflow of USD 14,188 million. The payment
primarily consists of two Norwegian corporation tax instalments in addition
to an extra payment of USD 930 million (NOK 10,000
million) resulting from updated results when compared to previous estimates.
The reduction in payment compared to the same period
in the prior year reflects the relatively lower pricing environment of 2023.
NCS tax instalments totalling NOK 111 billion are expected
to be paid in the first half of 2024.
A working capital increase of USD 51 million negatively
impacted the cash flow in the fourth quarter 2023,
compared to an increase of
USD 2,532 million in the fourth quarter of 2022.
Net cash flow* decreased by USD 4,741 million from the prior quarter to an outflow of USD 3,262
million primarily reflecting the
increased NCS tax instalments. Full year cash flow from operations after taxes paid* concluded
at USD 19,741 million inflow, with net
cash outflow* of USD 8,340 million demonstrating a significant increase in shareholder distribution.
A decrease in liquid assets in the quarter with stable equity caused a slight increase in the net
debt to capital employed adjusted ratio*
at the end of 2023 from negative 22.9% at the end of September 2023 to
negative 21.6%.
The board of directors proposes to the annual general meeting on 14 May 2024
an ordinary cash dividend of USD 0.35 per share for
the fourth quarter 2023, an increase of USD 0.05 per share from the third quarter of 2023, and sets
an ambition to grow the quarterly
cash dividend by 2 cents per year. Based on the strong earnings in 2023 and the robust financial position of the company, the board
of directors further proposes an extraordinary cash dividend of USD 0.35 per share for the fourth
quarter of 2023. Equinor share will
trade ex-dividend on Oslo Børs and New York Stock Exchange from and including 15 May 2024.