Covid-19 impact: Equinor unveils $3bn action plan to strengthen financial resilience in 2020

Published: 29 March 2020 - 4 a.m.
By: Martin Menachery
Equinor presented updated outlook for 2020 and an around $3bn action plan to strengthen the financial resilience in a market impacted by the Covid-19 and low commodity prices.

Equinor can be organic cash flow neutral before capital distribution in 2020 with an average oil price around $25 per barrel for the remaining part of the year.

The main elements of the action plan are: (i) reducing organic capex for 2020 from $10-11bn to around $8.5bn, a reduction of around 20%; (ii) reducing exploration activity for 2020 from around $1.4bn to around $1bn; (iii) reducing operating costs for 2020 by around $700mn compared to original estimates.

Reductions in organic capex are driven by a strict process of prioritisation where flexibility of cost and schedule for sanctioned and non-sanctioned projects has been reviewed. Within US onshore activities, drilling and completion activities are being halted to produce the volumes at a later period, reducing investments significantly for 2020.

These cost reductions come in addition to the already announced suspension of buy-back under the share buy-back programme until further notice. The second tranche of around $675mn, including the Norwegian State share, intended to be launched from around 18 May to 28 October 2020, will not be executed as previously planned.

"Equinor is in a strong financial position to handle market volatility and uncertainty. Our strategy remains firm, and we are now taking actions to further strengthen our resilience in this situation with the spread of the coronavirus and low commodity prices," says president and CEO of Equinor ASA, Eldar Sætre.

"We have implemented measures to reduce the risk of spreading the coronavirus and have so far been able to maintain production at all our fields. Safe operations remain our first priority in this situation," says Sætre.

Equinor has over the past years realised significant improvements and is today a stronger and more robust company. In 2014, Equinor needed an average oil price of around $100 per barrel to be organic cash flow neutral before capital distribution. With the measures now being implemented, Equinor can be organic cash flow neutral before capital distribution in 2020 with an average oil price around $25 per barrel for the remaining part of the year.

Equinor has assumed an USD/NOK exchange rate of 11 for the remaining part of the year in its updated outlook.

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