6-K 1 eqnr2q18b-mda_6k.htm EQUINOR SECOND QUARTER 2018 REPORT  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

26 July, 2018

Commission File Number 1-15200

Equinor ASA

(Translation of registrant’s name into English)

 

FORUSBEEN 50, N-4035, STAVANGER, NORWAY

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F X        Form 40-F

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_____

 

This report on Form 6-K is being filed for the purposes of incorporation by reference in the Registration Statements on Form F-3 (File No. 333-221130) and Form S-8 (File No. 333-168426). This report shall be deemed filed and incorporated by reference in such Registration Statements and shall be deemed to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

 

This document includes portions from the previously published results announcement of Equinor ASA as of, and for the six months ended 30 June 2018, as revised to comply with the requirements of Item 10(e) of Regulation S-K regarding non-GAAP financial information promulgated by the U.S. Securities and Exchange Commission. This document does not update or otherwise supplement the information contained in the previously published results announcement.

 

 

 

Equinor second quarter 2018 and first half results


Equinor, in its first financial report since the change of name to Equinor, reports net operating income of USD 3.8 billion and net income of USD 1.2 billion.

The second quarter was characterised by:

·        Solid results and cash flow from operations

·        Record high international production

·        Value enhancing transactions and high project activity

“We capture value from higher prices and deliver solid results and cash flow from operations. This quarter we deliver very strong results from our international operations, while new fields, increased maintenance and some quarter specific items contribute to somewhat higher costs at the NCS. This underlines the importance of continued cost focus across the organisation. We are on track to deliver on our guiding to the capital market,” says Eldar Sætre, President and CEO of Equinor ASA.

“We continue to build on our industrial strengths and develop our portfolio. In the quarter we have closed the Roncador and Carcara transactions in Brazil and the North Platte transaction in the US, and we have secured new and attractive exploration acreage in Brazil, the UK and Norway. We have started field installation at Johan Sverdrup and have high project activity with several projects in execution. In July, we delivered the development plan for the Troll Phase 3 project for approval,” says Sætre.  

Net operating income was USD 3.8 billion in the second quarter compared to USD 3.2 billion in the same period of 2017. Higher prices for both liquids and gas, coupled with high production, contributed to the increase. Due to increased maintenance and some quarter and field specific items, underlying operating costs and administrative expenses per barrel are slightly up compared to same quarter last year, adjusted for new fields in production.  In the quarter, Equinor had a net impairment reversal of USD 0.3 billion and a negative effect from changes in the unrealised fair value of derivatives of USD 0.5 billion. Net income was USD 1.2 billion, down from USD 1.4 billion in the second quarter of 2017, which included a reversal of a provision in Angola of USD 0.7 billion.

Equinor delivered equity production of 2,028 mboe per day in the second quarter, an increase from 1,996 mboe per day in the same period in 2017. The increase was primarily due to higher production in the US. The production growth [7] was 2% compared to the second quarter of 2017.

As of second quarter 2018, Equinor had completed 10 exploration wells with four commercial discoveries. Exploration expenses in the quarter were USD 475 million, up from USD 312 million in the same quarter of 2017, mainly due to higher impairment of assets and higher drilling activity.

Cash flows provided by operating activities before taxes paid and changes in working capital amounted to USD 13.2 billion for the first half of 2018 compared to USD 10.5 billion same period 2017.

The board of directors has decided to maintain a dividend of USD 0.23 per share for the second quarter.

The twelve-month average Serious Incident Frequency (SIF) was 0.5 for the twelve months ended 30 June 2018, compared to 0.7 in the same period a year ago.

  

 

Quarters

Change

 

 

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(in USD million, unless stated otherwise)

 

2018

2017

Change

 

 

 

 

 

 

 

 

 

3,835

4,960

3,244

18%

 

Net operating income (USD million)

8,795

7,494

17%

1,220

1,285

1,436

(15%)

 

Net income (USD million)

2,506

2,500

0%

2,028

2,180

1,996

2%

 

Total equity liquids and gas production (mboe per day) [4]

2,104

2,071

2%

65.8

60.2

44.5

48%

 

Group average liquids price (USD/bbl) [1]

63.0

46.7

35%

 

 

 

 

GROUP REVIEW

Second quarter 2018

Total equity liquids and gas production [4] was 2,028 mboe per day in the second quarter of 2018, up 2% compared to 1,996 mboe per day in the second quarter of 2017 mainly due to start-up of new fields and additional wells coming on stream, especially in the US onshore business. Expected natural decline partially offset the increase.

 

Total entitlement liquids and gas production [3] was slightly up 1% to 1,851 mboe per day in the second quarter of 2018 compared to 1,836 mboe per day in the second quarter of 2017. Increased production as described above, was partially offset by negative effects from production sharing agreements (PSA) [4] and US royalties [4] due to higher prices in the second quarter of 2018. The effects from PSA and US royalties were 178 mboe per day in total in the second quarter of 2018 compared to 160 mboe per day in the second quarter of 2017.

 

Quarters

Change

 

Condensed income statement under IFRS

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(unaudited, in USD million)

2018

2017

Change

 

 

 

 

 

 

 

 

 

18,135

19,884

14,935

21%

 

Total revenues and other income

38,019

30,463

25%

 

 

 

 

 

 

 

 

 

(9,415)

(9,794)

(6,857)

37%

 

Purchases [net of inventory variation]

(19,209)

(13,323)

44%

(2,579)

(2,514)

(2,210)

17%

 

Operating and administrative expenses

(5,093)

(4,852)

5%

(1,830)

(2,368)

(2,312)

(21%)

 

Depreciation, amortisation and net impairment losses

(4,198)

(4,255)

(1%)

(475)

(249)

(312)

52%

 

Exploration expenses

(724)

(539)

34%

 

 

 

 

 

 

 

 

 

3,835

4,960

3,244

18%

 

Net operating income

8,795

7,494

17%

 

 

 

 

 

 

 

 

 

(317)

(420)

44

N/A

 

Net financial items

(737)

(162)

>(100%)

 

 

 

 

 

 

 

 

 

3,518

4,540

3,288

7%

 

Income before tax

8,059

7,332

10%

 

 

 

 

 

 

 

 

 

(2,298)

(3,255)

(1,852)

24%

 

Income tax

(5,553)

(4,832)

15%

 

 

 

 

 

 

 

 

 

1,220

1,285

1,436

(15%)

 

Net income

2,506

2,500

0%

 

Net operating income was USD 3,835 million in the second quarter of 2018, compared to USD 3,244 million in the second quarter of 2017. The 18% increase was primarily due to higher liquids and gas prices, increased gas volumes, and a net reversal of impairments compared to a net impairment charge in the same period in 2017. The increase was partially offset by reduced value of derivatives and increased operating and administrative expenses. In addition, the second quarter of 2017 results were positively impacted by a reversal of provisions of USD 754 million related to our operations in Angola

In the second quarter of 2018, net operating income was negatively affected by changes in unrealised fair value of derivatives and inventory hedge contracts of USD 553 million and positively affected by net reversal of impairments of USD 273 million. In the second quarter of 2017, net operating income was positively impacted by increased revenues due to the reversal of provisions of USD 754 million in Angola, and by changes in fair value of derivatives and inventory hedge contracts of USD 198 million.

Operating and administrative expenses were USD 2,579 million in the second quarter of 2018, an increase of USD 369 million compared to the second quarter of 2017. The increase was mainly driven by higher activity from start-up of new fields and additional wells coming on stream in the US onshore business, higher maintenance activity and increased transportation costs because of higher gas volumes. The NOK/USD exchange rate development and increased royalty expenses due to higher prices, added to the cost increase.

Depreciation, amortisation and net impairment losses  were USD 1,830 million in the second quarter of 2018, compared to USD 2,312 million in the second quarter of 2017. The 21% decrease was mainly related to a net reversal of impairments of USD 515 million and higher reserves estimates. The reduction was partially offset by higher depreciation costs due to increased production from new fields on stream and the development in the NOK/USD exchange rate.

Exploration expenses were USD 475 million in the second quarter of 2018, an increase of USD 163 million compared to the second quarter of 2017, mainly due to higher impairment of assets and higher drilling costs. The increase was partially offset by lower seismic activity and a higher capitalisation rate.

For more information about net impairment reversals, see note 2 Segments to the Condensed interim financial statements.

 

 

Net financial items amounted to a loss of USD 317 million in the second quarter of 2018, compared to a gain of USD 44 million in the the second quarter of 2017. The negative change of USD 361 million is mainly related to the reversal of a provision in Angola of USD 319 million in the second quarter of 2017, and increased net foreign exchange losses mainly due to the USD strengthening towards NOK and EUR.

Income taxes were USD 2,298 million in the second quarter of 2018. The effective tax rate was 65.3% In the second quarter of 2017, income taxes were USD 1,852 million and the effective tax rate was 56.3%

Please see note 5  Income tax to the Condensed interim financial statements for information related to income taxes.

Net income in the second  quarter of 2018 was USD 1,220 million, down from USD 1,436 million in the second  quarter of 2017. The decrease was mainly due to higher income taxes and the decrease in net financial items, partially offset by the increase in net operating income as discussed above.

 

Total cash flows decreased by USD 14 million compared to the second quarter of 2017.

Cash flows provided by operating activities decreased by USD 1,050 million compared to the second quarter of 2017. The decrease was mainly due to a change in working capital, increased tax payments and a reduction in derivative effects, partially offset by increased liquids and gas prices.

Cash flows used in investing activities decreased by USD 1,931 million compared to the second quarter of 2017. The decrease was mainly due to reduced financial investments and increased proceeds from sale of assets, partially offset by additions through business combinations.

Cash flows used in financing activities increased by USD 894 million compared to the second quarter of 2017. The increase was mainly due to repayment of loans.

 

First half 2018

 

Net operating income was USD 8,795 million in the first half of 2018 compared to USD 7,494 million in the first half of 2017. The 17% increase was primarily driven by higher liquids and gas prices and increased gas volumes in the first half of 2018 compared to the same period of 2017. Reduced value of derivatives, lower volumes of liquids sold and a reversal of a provision that positively affected revenues in the first half of 2017, partially offset the increase.

In addition to the positive effect from net impairment reversals of USD 264 million and an implementation effect of USD 287 million related to a change in accounting policy for lifting imbalances, net operating income was negatively impacted by changes in unrealised fair value of derivatives and inventory hedge contracts of USD 367 million in the first half of 2018.

In the first half of 2017, net operating income was positively impacted by changes in unrealised fair value of derivatives and inventory hedge contracts of USD 1,029 million, a reversal of the provision related to our Angola operations of USD 754 million and net reversal of impairments of USD 321 million. Losses from sale of assets of USD 388 million negatively impacted net operating income in the first half of 2017.

Operating and administrative expenses were USD 5,093 million in the first half of 2018, an increase of USD 241 million compared to the first half of 2017. The increase was mainly driven by higher activity from start-up and ramp-up on various fields, higher maintenance activity and increased transportation costs. The NOK/USD exchange rate development and higher royalty expenses due to higher prices, added to the increase, partially offset by losses on sale of assets of USD 388 million in the first half of 2017.

Depreciation, amortisation and net impairment losses were USD 4,198 million in the first half of 2018, a 1% decrease of USD 57 million compared to the first half of 2017, mainly due to higher proved reserves estimates on several fields and increased reversal of impairments. Start-up and ramp-up of new fields, changed depreciation basis for one of the fields on the NCS and the NOK/USD exchange rate development had an offsetting effect.

Exploration expenses increased by USD 185 million to USD 724 million in the first half of 2018, primarily due to higher drilling cost because of increased impairment of exploration assets and more expensive wells being drilled compared to the first half of 2017. The increase was partially offset by a higher capitalisation rate and a reduction in seismic expenditures.

 

 

Net financial items amounted to a loss of USD 737 million in the first half of 2018, compared to a loss of USD 162 million in the first half of 2017. The negative change of USD 575 million is mainly due to the reversal of the provision related to our operations in Angola in the second quarter of 2017, and increased net foreign exchange losses mainly due to the USD strengthening towards NOK and EUR.

Income taxes were USD 5,553 million in first half of 2018, and the effective tax rate was 68.9%. Income taxes in the first half of 2017 were USD 4,832 million, and the effective tax rate was 65,9%. Please see note 5 Income tax to the Condensed interim financial statements for information related to income taxes

Net income in first half of 2018 was USD 2,506 million compared to USD 2,500 million in the first half of 2017. The increase was mainly due to the increase in net operating income previously discussed, partially offset by the higher income taxes and the negative change in net financial items.

 

Total cash flows increased by USD 2,328 million compared to the first half of 2017.

Cash flows provided by operating activities increased by USD 308 million compared to the first half of 2017. The increase was mainly due to increased liquids and gas prices, partially offset by increased tax payments, a reduction in derivative effects and a change in working capital.

Cash flows used in investing activities  decreased by USD 4,054 million compared to the first half of 2017. The decrease was mainly due to reduced financial investments and increased proceeds from sale of assets, partially offset by additions through business combinations.

Cash flows used in financing activities increased by USD 2,034 million compared to the first half of 2017. The increase was mainly due to repayment of loans and dividend paid.

 

 

OUTLOOK

 

·        Equinor intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.5 billion for 2018, excluding signature bonuses

·        Equinor’s ambition is to keep the unit of production cost in the top quartile of its peer group

·        For the period 2017 – 2020, production growth [7] is expected to come from new projects resulting in around 3-4% CAGR (Compound Annual Growth Rate)

·        Production [7] for 2018 is estimated to be 1-2% above the 2017 level

·        Scheduled maintenance activity is estimated to reduce quarterly production by approximately 80 mboe per day in the third quarter of 2018. In total, maintenance is estimated to reduce equity production by around 35 mboe per day for the full year of 2018


These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Deferral of production to create future value, gas off-take, timing of new capacity coming on stream, operational regularity, activity level in the US onshore, as well as uncertainty around the closing of the announced transactions represent the most significant risks related to the foregoing production guidance. For further information, see section Forward-Looking Statements. 

 

 

 

EXPLORATION & PRODUCTION NORWAY

 

Second quarter 2018 review

 

Average daily production of liquids and gas reduced by 3% to 1,219 mboe per day in the second quarter of 2018, compared to
1,253 mboe per day in the second quarter of 2017. The reduction is due to expected natural decline, partially offset by positive contribution from new fields and new wells.

Net operating income  was USD 3,692 million in the second quarter of 2018 compared to USD 1,973 million in the second quarter of 2017. The increase was mainly due to increased liquids prices, increased gas transfer prices and net impairment reversals of USD 600 million.

 

Total revenues and other income increased in the second quarter of 2018 compared to the second quarter of 2017, primarily driven by the increase in liquids prices and gas prices and volume.

 

Operating and administrative expenses  increased due to higher maintenance costs mainly driven by new fields on stream and higher turnaround activity. The NOK/USD exchange rate development and higher transportation tariffs added to the increase.

 

Depreciation, amortisation and net impairment losses decreased mainly due to net impairment reversals in the second quarter of 2018. This was partially offset by new fields on stream and the NOK/USD exchange rate development.

Exploration expenses  decreased due to lower purchase of seismic.

Quarters

Change

 

Income statement under IFRS

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(in USD million)

2018

2017

Change

 

 

 

 

 

 

 

 

 

5,200

5,773

3,861

35%

 

Total revenues and other income

10,974

8,556

28%

 

 

 

 

 

 

 

 

 

(843)

(793)

(701)

20%

 

Operating and administrative expenses

(1,636)

(1,427)

15%

(606)

(1,296)

(1,090)

(44%)

 

Depreciation, amortisation and net impairment losses

(1,902)

(1,749)

9%

(61)

(99)

(97)

(38%)

 

Exploration expenses

(160)

(167)

(4%)

 

 

 

 

 

 

 

 

 

3,692

3,585

1,973

87%

 

Net operating income

7,277

5,214

40%

 

First half 2018

Net operating income for Exploration & Production Norway was USD 7,277 million in the first half of 2018 compared to USD 5,214 million in the first half of 2017. The increase was primarily driven by higher liquids prices and gas transfer price, partially offset by reduced volume.

In the first half of 2018 net operating income was positively impacted by net impairment reversals of USD 596 million and the implementation effect of USD 216 million from a change of accounting policy for lifting imbalances.  In the first half of 2017 net impairments reversal of USD 433 million positively impacted net operating income.

Total revenues and other income increased in the first half of 2018 compared to the first half of 2017, primarily driven by the increase in liquids prices and gas prices and volume.

Operating and administrative expenses  increased mainly due to the NOK/USD exchange rate development, transportation tariffs and new fields on stream.

Depreciation, amortisation and net impairment losses increased mainly due to new fields coming on stream, the NOK/USD exchange rate development and a change in the depreciation basis for one of the fields.

Exploration expenses  decreased due to lower purchase of seismic, partially offset by higher expensed well cost.

 

 

EXPLORATION & PRODUCTION INTERNATIONAL

 

Second quarter 2018 review


Average equity production of liquids and gas increased by 9% to 809 mboe per day in the second quarter of 2018 compared to
743 mboe per day in the second quarter of 2017. The increase was primarily driven by new wells in the US onshore and new fields in offshore North America and Brazil. This was partially offset by expected natural decline, and reclassification of our interest in the heavy oil company Petrocedeño to a financial investment in 2017.

Average daily entitlement production of liquids and gas  increased by 8% to 631 mboe per day in the second quarter of 2018 compared to 583 mboe per day in the second quarter of 2017. Increased equity production as described above was partially offset by negative effects of production sharing agreements (PSA) [4] and US royalties [4] primarily due to higher prices in the second quarter of 2018. The effects from PSA and US royalties were 178 mboe per day in the second quarter of 2018 compared to 160 mboe per day in the second quarter of 2017. 

 

Net operating income for Exploration & Production International (E&P International) was USD 561 million in the second quarter of 2018 compared to USD 764 million in the second quarter of 2017. The decrease was primarily caused by net impairments in the second quarter of 2018. In addition, the second quarter of 2017 results were positively impacted by a reversal of provisions of USD 754 million related to our operations in Angola. Higher operating and administrative expenses and exploration expenses in the second quarter of 2018 added to the decrease. This was partially offset by increased revenue due to higher realised liquids and gas prices and lower depreciation.

 

In the second quarter of 2018, net operating income was negatively impacted by net impairments of USD 481 million, mainly related to impairments of North American unconventional assets of USD 762 million, partially offset by impairment reversals. In the second quarter of 2017 net operating income was negatively impacted by net impairments of USD 88 million.

 

Operating and administrative expenses increased, due to higher operation and maintenance costs, transportation, and royalty expenses driven by volume growth and higher prices. Expenses related to new fields also contributed to the increase.

 

Depreciation, amortisation and net impairment losses increased in the second quarter of 2018 mainly due to net impairments, and higher depreciation due to increased production, partially offset by the effects of higher reserves estimates.  

 

Exploration expenses increased mainly due to net impairments of acquisition costs, more expensive wells and slightly higher seismic activity this quarter, partially offset by lower field development cost.

 

  

Quarters

Change

 

Income statement under IFRS

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(in USD million)

2018

2017

Change

 

 

 

 

 

 

 

 

 

2,947

2,523

2,744

7%

 

Total revenues and other income

5,471

4,911

11%

 

 

 

 

 

 

 

 

 

2

(5)

(1)

N/A

 

Purchases [net of inventory variation]

(3)

(5)

(31%)

(703)

(700)

(638)

10%

 

Operating and administrative expenses

(1,402)

(1,620)

(13%)

(1,272)

(962)

(1,126)

13%

 

Depreciation, amortisation and net impairment losses

(2,234)

(2,310)

(3%)

(414)

(149)

(215)

93%

 

Exploration expenses

(564)

(372)

51%

 

 

 

 

 

 

 

 

 

561

706

764

(27%)

 

Net operating income

1,267

604

>100%

 

First half 2018

Net operating income for E&P International was USD 1,267 million in the first half of 2018 compared to USD 604 million in the first half of 2017. The increase was driven by higher liquids and gas prices and lower depreciation. This was partially offset by a reversal of provisions of USD 754 million in the first half of 2017 related to our operations in Angola. In addition, losses from the sale of assets impacted net operating income negatively in the first half of 2017. Higher net impairments, operating and administrative expenses, and exploration expenses further contributed to offset the increase.

 

In the first half of 2018, net operating income was negatively impacted by net impairments of USD 488 million, mainly related to

 

 

impairments of North American unconventional assets, partially offset by impairment reversals. In the first half of 2017, net operating income was negatively impacted by losses on sale of assets of USD 388 million and net impairments of USD 113 million.

 

Total revenues and other income increased mainly due to higher realised liquids and gas prices, partially offset by a reversal of provisions of USD 754 million in the first half of 2017 related to our operations in Angola.

Operating and administrative expenses  decreased mainly due to losses from sale of assets in the first half of 2017, partially offset by higher operation and maintenance cost, royalty expenses and negative change effects from future asset retirement costs in 2017.  


Depreciation, amortisation and net impairment losses decreased mainly due to lower depreciation driven by higher reserves estimates. This was partially offset by net impairments and the effect of increased production.

 

Exploration expenses  increased mainly due to net impairments of acquisition costs and more expensive wells being drilled this year.

                                                                                                                           

 

 

 

MARKETING, MIDSTREAM & PROCESSING

 

Second quarter 2018 review


Natural gas sales volumes amounted to 13.4 billion standard cubic meters (bcm) in the second quarter of 2018. An increase of 0.1 bcm compared to second quarter of 2017. Of the total gas sales in second quarter of 2018, entitlement gas was 12.4 bcm, slightly up from second quarter of 2017.

Average invoiced European natural gas sales price [8] increased by 28% in the second quarter of 2018 compared to the second quarter of 2017 mainly due to higher crude prices and tight supply due to offshore and infrastructure maintenance.  Average invoiced North American piped gas sales price [8] decreased by 12% in the same period mainly due to a decrease in the Henry Hub price.

Net operating income was negative USD 179 million in the second quarter of 2018 compared to positive USD 443 million in the second quarter of 2017. The decrease was mainly related to unrealised derivatives loss and periodisation of inventory hedging effect totalling a negative effect of USD 607 million in second quarter of 2018, compared to a gain of USD 205 million in second quarter of 2017. An impairment reversal related to a refinery asset in second quarter of 2018 of USD 155 million partially offset the decrease.

Purchases [net of inventory variation] increased due to higher prices for both liquids globally and gas from the NCS.

Operating and administrative expenses increased compared to second quarter of 2017, mainly due to onerous contract provision in second quarter of 2018 in addition to increased transportation and processing cost in the US due to higher equity production and higher operational and maintenance cost. A new asset compared to second quarter 2017 added to the decrease.

Depreciation, amortisation and net impairment charges decreased due to an impairment reversal related to a refinery asset in the second quarter of 2018.

 

Quarters

Change

 

Income statement under IFRS

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(in USD million)

2018

2017

Change

 

 

 

 

 

 

 

 

 

17,586

19,170

13,801

27%

 

Total revenues and other income

36,756

28,863

27%

 

 

 

 

 

 

 

 

 

(16,685)

(17,365)

(12,371)

35%

 

Purchases [net of inventory variation] [6]

(34,050)

(25,117)

36%

(1,144)

(1,042)

(918)

25%

 

Operating and administrative expenses

(2,186)

(1,880)

16%

65

(91)

(70)

N/A

 

Depreciation, amortisation and net impairment losses

(26)

(143)

(82%)

 

 

 

 

 

 

 

 

 

(179)

673

443

N/A

 

Net operating income

494

1,722

(71%)

 

First half 2018

Net operating income for MMP was USD 494 million in the first half of 2018 compared to USD 1,722 million in the first half of 2017. The decrease was mainly due to unrealised derivatives loss and periodisation of inventory hedging effect in the first half of 2018 totalling negative USD 423 million, compared to positive USD 993 million in the first half of 2017. Operational storage effects in the first half of 2018 of positive USD 102 million compared to a negative USD 90 million in first half of 2017 partially offset the decrease.

Total revenues and other income increased primarily driven by the increased prices for liquids products and for gas from the NCS. Negative impacts from changes in fair value of derivates partially offset the increase. Total revenues in the first half of 2017 was positively impacted by changes in fair value of derivatives.

Purchases [net of inventory variation] increased primarily due to higher prices for liquids products and for gas from the NCS. 

Operating and administrative expenses  increased mainly due to onerous contract provision, development in the NOK/USD exchange rate and increased transportation and processing cost on US equity gas production in the first half of 2018.  

Depreciation, amortisation and net impairment losses decreased mainly due to reversal of impairment related to a refinery asset in the first half of 2018 partially offset by the depreciation of a new asset

 

 

 

CONDENSED INTERIM FINANCIAL STATEMENTS


Second quarter 2018

CONSOLIDATED STATEMENT OF INCOME

Quarters

 

 

First half

Full year

Q2 2018

Q1 2018

Q2 2017

 

(unaudited, in USD million)

2018

2017

2017

 

 

 

 

 

 

 

 

18,069

19,776

14,862

 

Revenues

37,845

30,331

60,971

13

101

66

 

Net income/(loss) from equity accounted investments

114

123

188

54

7

7

 

Other income

61

9

27

 

 

 

 

 

 

 

 

18,135

19,884

14,935

 

Total revenues and other income

38,019

30,463

61,187

 

 

 

 

 

 

 

 

(9,415)

(9,794)

(6,857)

 

Purchases [net of inventory variation]

(19,209)

(13,323)

(28,212)

(2,397)

(2,316)

(2,046)

 

Operating expenses

(4,712)

(4,465)

(8,763)

(182)

(198)

(163)

 

Selling, general and administrative expenses

(380)

(387)

(738)

(1,830)

(2,368)

(2,312)

 

Depreciation, amortisation and net impairment losses

(4,198)

(4,255)

(8,644)

(475)

(249)

(312)

 

Exploration expenses

(724)

(539)

(1,059)

 

 

 

 

 

 

 

 

3,835

4,960

3,244

 

Net operating income/(loss)

8,795

7,494

13,771

 

 

 

 

 

 

 

 

(317)

(420)

44

 

Net financial items

(737)

(162)

(351)

 

 

 

 

 

 

 

 

3,518

4,540

3,288

 

Income/(loss) before tax

8,059

7,332

13,420

 

 

 

 

 

 

 

 

(2,298)

(3,255)

(1,852)

 

Income tax

(5,553)

(4,832)

(8,822)

 

 

 

 

 

 

 

 

1,220

1,285

1,436

 

Net income/(loss)

2,506

2,500

4,598

 

 

 

 

 

 

 

 

1,219

1,285

1,433

 

Attributable to equity holders of the company

2,504

2,495

4,590

1

0

3

 

Attributable to non-controlling interests

2

5

8

 

 

 

 

 

 

 

 

0.37

0.39

0.44

 

Basic earnings per share (in USD)

0.75

0.77

1.40

0.37

0.39

0.44

 

Diluted earnings per share (in USD)

0.75

0.77

1.40

3,330

3,316

3,238

 

Weighted average number of ordinary shares outstanding (in millions)

3,323

3,237

3,268

 

 

 

 

 

 

 

 

 

See note 9 Changes in accounting policies.

  

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Quarters

 

 

First half

Full year

Q2 2018

Q1 2018

Q2 2017

 

(unaudited, in USD million)

2018

2017

2017

 

 

 

 

 

 

 

 

1,220

1,285

1,436

 

Net income/(loss)

2,506

2,500

4,598

 

 

 

 

 

 

 

 

194

(225)

(38)

 

Actuarial gains/(losses) on defined benefit pension plans

(32)

39

172

(48)

57

11

 

Income tax effect on income and expenses recognised in OCI1)

9

(8)

(38)

146

(168)

(27)

 

Items that will not be reclassified to the Consolidated statement of income

(22)

31

134

 

 

 

 

 

 

 

 

(1,396)

1,220

667

 

Currency translation adjustments

(176)

1,104

1,710

0

64

(39)

 

Net gains/(losses) from available for sale financial assets

64

(48)

(64)

(1)

(5)

(9)

 

Share of OCI from equity accounted investments

(6)

(9)

(40)

(1,398)

1,278

619

 

Items that may be subsequently reclassified to the Consolidated statement of income

(119)

1,047

1,607

 

 

 

 

 

 

 

 

(1,252)

1,110

592

 

Other comprehensive income/(loss)

(142)

1,077

1,741

 

 

 

 

 

 

 

 

(31)

2,396

2,028

 

Total comprehensive income/(loss)

2,364

3,577

6,339

 

 

 

 

 

 

 

 

(33)

2,395

2,025

 

Attributable to the equity holders of the company

2,362

3,573

6,331

1

0

3

 

Attributable to non-controlling interests

2

5

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1) OCI = Other comprehensive income

 

 

 

 

CONSOLIDATED BALANCE SHEET

 

At 30 June

At 31 March

At 31 December

At 30 June

(unaudited, in USD million)

2018

2018

2017

2017

 

 

 

 

 

ASSETS

 

 

 

 

Property, plant and equipment

67,498

66,052

63,637

61,616

Intangible assets

9,798

9,379

8,621

9,271

Equity accounted investments

2,670

2,640

2,551

2,230

Deferred tax assets

2,655

2,428

2,441

2,245

Pension assets

1,177

1,246

1,306

921

Derivative financial instruments

1,112

1,511

1,603

1,829

Financial investments

2,679

2,959

2,841

2,768

Prepayments and financial receivables

1,328

968

912

890

   

 

 

 

 

Total non-current assets

88,918

87,183

83,911

81,769

   

 

 

 

 

Inventories

3,426

2,832

3,398

2,882

Trade and other receivables

9,566

8,937

9,425

6,991

Derivative financial instruments

366

175

159

271

Financial investments

6,024

6,006

8,448

13,500

Cash and cash equivalents

6,078

8,932

4,390

5,083

   

 

 

 

 

Total current assets

25,460

26,881

25,820

28,727

   

 

 

 

 

Assets classified as held for sale

0

1,385

1,369

0

   

 

 

 

 

Total assets

114,378

115,449

111,100

110,496

   

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

Shareholders' equity

41,019

42,590

39,861

37,882

Non-controlling interests

25

26

24

29

   

 

 

 

 

Total equity

41,043

42,616

39,885

37,911

   

 

 

 

 

Finance debt

23,852

24,607

24,183

26,669

Deferred tax liabilities

8,393

8,579

7,654

7,619

Pension liabilities

3,984

4,137

3,904

3,526

Provisions

16,500

15,456

15,557

14,295

Derivative financial instruments

1,023

757

900

1,114

   

 

 

 

 

Total non-current liabilities

53,752

53,536

52,198

53,224

   

 

 

 

 

Trade, other payables and provisions

9,883

9,814

9,736

8,442

Current tax payable

5,519

5,881

4,057

4,253

Finance debt

2,611

3,224

4,091

5,508

Dividends payable

766

(0)

729

721

Derivative financial instruments

805

378

403

436

   

 

 

 

 

Total current liabilities

19,583

19,297

19,016

19,361

   

 

 

 

 

Total liabilities

73,335

72,833

71,213

72,585

   

 

 

 

 

Total equity and liabilities

114,378

115,449

111,100

110,496

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited, in USD million)

Share capital

Additional paid-in capital

Retained earnings

Currency translation adjustments

Available for sale financial assets

OCI from equity accounted investments

Shareholders' equity

Non-controlling interests

Total equity

 

 

 

 

 

 

 

 

 

 

At 31 December 2016

1,156

6,607

32,573

(5,264)

(0)

0

35,072

27

35,099

Net income/(loss)

 

 

2,495

 

 

 

2,495

5

2,500

Other comprehensive income/(loss)

 

 

31

1,104

(48)

(9)

1,077

 

1,077

Total comprehensive income/(loss)

 

 

 

 

 

 

 

 

3,577

Dividends

12

666

(1,438)

 

 

 

(761)

 

(761)

Other equity transactions

 

(3)

(0)

 

 

 

(3)

(2)

(5)

 

 

 

 

 

 

 

 

 

 

At 30 June 2017

1,168

7,270

33,661

(4,160)

(48)

(9)

37,881

29

37,910

 

 

 

 

 

 

 

 

 

 

At 31 December 2017

1,180

7,933

34,406

(3,554)

(64)

(40)

39,861

24

39,885

Net income/(loss)

 

 

2,504

 

 

 

2,504

2

2,506

Other comprehensive income/(loss)

 

 

(22)

(176)

 64 2)

(6)

(142)

 

(142)

Total comprehensive income/(loss)

 

 

 

 

 

 

 

 

2,364

Dividends1)

5

333

(1,532)

 

 

 

(1,194)

 

(1,194)

Other equity transactions

 

(10)

(0)

 

 

 

(10)

(2)

(12)

 

 

 

 

 

 

 

 

 

 

At 30 June 2018

1,185

8,256

35,355

(3,731)

(0)

(46)

41,019

25

41,043

 

 

 

 

 

 

 

 

 

 

1)     For more information, see note 7 Dividends.

2)     For more information, see note 9 Changes in accounting policies.

 

  

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

Quarters

 

 

First half

Full year

Q2 2018

Q1 2018

Q2 2017

 

 

2018

2017

2017

 

 

(restated*)

 

(unaudited, in USD million)

 

(restated*)

(restated*)

 

 

 

 

 

 

 

 

3,518

4,540

3,288

 

Income/(loss) before tax

8,059

7,332

13,420

 

 

 

 

 

 

 

 

1,830

2,368

2,312

 

Depreciation, amortisation and net impairment losses

4,198

4,255

8,644

252

28

94

 

Exploration expenditures written off

280

132

(8)

138

19

22

 

(Gains) losses on foreign currency transactions and balances

157

(65)

(127)

1

(3)

13

 

(Gains) losses on sales of assets and businesses

(2)

396

395

(112)

(117)

(917)

 

(Increase) decrease in other items related to operating activities2)

(229)

(1,054)

(884)

518

389

(49)

 

(Increase) decrease in net derivative financial instruments

907

(282)

19

40

36

38

 

Interest received

77

80

148

(93)

(131)

(139)

 

Interest paid

(224)

(273)

(622)

 

 

 

 

 

 

 

 

6,093

7,131

4,661

 

Cash flows provided by operating activities before taxes paid and working capital items

13,223

10,521

20,985

 

 

 

 

 

 

 

 

(2,324)

(1,118)

(1,119)

 

Taxes paid

(3,442)

(1,727)

(5,766)

 

 

 

 

 

 

 

 

(767)

1,062

509

 

(Increase) decrease in working capital

295

975

(417)

 

 

 

 

 

 

 

 

3,002

7,075

4,051

 

Cash flows provided by operating activities

10,077

9,769

14,802

 

 

 

 

 

 

 

 

(1,996)

(1,561)

0

 

Additions through business combinations**

(3,557)

0

0

(2,774)

(2,529)

(2,346)

 

Capital expenditures and investments

(5,303)

(4,724)

(10,755)

192

2,578

(3,005)

 

(Increase) decrease in financial investments

2,770

(4,851)

592

95

(40)

(89)

 

(Increase) decrease in derivatives financial instruments

55

162

(439)

51

6

19

 

(Increase) decrease in other items interest bearing

57

20

79

1,016

2

74

 

Proceeds from sale of assets and businesses

1,018

377

406

 

 

 

 

 

 

 

 

(3,417)

(1,545)

(5,347)

 

Cash flows used in investing activities

(4,961)

(9,015)

(10,117)

 

 

 

 

 

 

 

 

(1,260)

(851)

(5)

 

Repayment of finance debt

(2,111)

(11)

(4,775)

(744)

(402)

(728)

 

Dividend paid

(1,147)

(728)

(1,491)

150

75

(226)

 

Net current finance debt and other

224

(260)

444

 

 

 

 

 

 

 

 

(1,854)

(1,179)

(960)

 

Cash flows provided by (used in) financing activities

(3,033)

(999)

(5,822)

 

 

 

 

 

 

 

 

(2,269)

4,352

(2,256)

 

Net increase (decrease) in cash and cash equivalents

2,083

(245)

(1,137)

 

 

 

 

 

 

 

 

(650)

184

211

 

Effect of exchange rate changes on cash and cash equivalents

(466)

239

436

8,925

4,390

7,128

 

Cash and cash equivalents at the beginning of the period (net of overdraft)

4,390

5,090

5,090

 

 

 

 

 

 

 

 

6,006

8,925

5,083

 

Cash and cash equivalents at the end of the period (net of overdraft)1)

6,006

5,083

4,390

 

 

 

 

 

 

 

 

*       Related to a change in accounting policies, see note 9 Changes in accounting policies for more information.

**     Related to capital expenditures on the acquisition of interests in the Roncador field in Brazil, and the Martin Linge field and  Garantiana discovery on the NCS, see note 3 Acquisitions and disposals for further information.

1)      At 30 June 2018 cash and cash equivalents included a net overdraft of USD 72 million. At 30 June 2017 and 31 December 2017 net overdraft was zero.

2)      The reversal of the provision related to profit oil and interest expense relate to Block 4, Block 15, Block 17 and Block 31 offshore Angola of USD 1,073 million in the second quarter of 2017 had no cash effect and was excluded from Cash flow provided by operating activity.

  

 

 

Notes to the Condensed interim financial statements

 

1 Organisation and basis of preparation


General information and organisation

Equinor ASA, originally Den Norske Stats Oljeselskap AS and subsequently Statoil ASA, was founded in 1972 and is incorporated and domiciled in Norway. The address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway.

Statoil ASA changed its name to Equinor ASA following approval of the name change by the company’s annual general meeting on
15 May 2018.

The Equinor group’s (Equinor’s) business consists principally of the exploration, production, transportation, refining and marketing of petroleum and petroleum-derived products, and other forms of energy. Equinor ASA is listed on the Oslo Børs (Norway) and the New York Stock Exchange (USA).

On 27 April 2018, Equinor announced certain changes to its corporate and management structure, including changes to certain business areas. The changes take effect in the period up to 15 October 2018, and will upon implementation not lead to changes in Equinor’s reportable segments.

All Equinor's oil and gas activities and net assets on the Norwegian continental shelf are owned by Equinor Energy AS (previously named Statoil Petroleum AS), a 100% owned operating subsidiary of Equinor ASA. Equinor Energy AS is co-obligor or guarantor of certain debt obligations of Equinor ASA.

Equinor's Condensed interim financial statements for the second quarter of 2018 were authorised for issue by the board of directors on 25 July 2018.

Basis of preparation

These Condensed interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The Condensed interim financial statements do not include all the information and disclosures required by International Financial Reporting Standards (IFRS) for a complete set of financial statements, and these Condensed interim financial statements should be read in conjunction with the Consolidated annual financial statements. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB, but the differences do not impact Equinor's financial statements for the periods presented. A description of the significant accounting policies applied in preparing these Condensed interim financial statements is included in Equinor`s Consolidated annual financial statements for 2017.

With effect from 1 January 2018, Equinor implemented IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers. As of the same date, Equinor voluntarily changed its policy for recognition of revenue from the production of oil and gas properties in which Equinor shares an interest with other companies, as well as its policy for presentation of certain elements related to derivatives, non-cash currency effects and working capital items in the statement of cash flows. Reference is made to note 9 Changes in accounting policies for further information about these policy changes.

There have been no other changes to significant accounting policies in the first half year of 2018 compared to the Consolidated annual financial statements for 2017.

The Condensed interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the dates and interim periods presented. Interim period results are not necessarily indicative of results of operations or cash flows for an annual period. The subtotals and totals in some of the tables may not equal the sum of the amounts shown due to rounding.

The Condensed interim financial statements are unaudited.

 

 

 

 

Use of estimates

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis, considering current and expected future market conditions. A change in an accounting estimate is recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

2 Segments


Equinor’s operations are managed through the following business areas; Development & Production Norway (DPN), Development & Production USA (DPUSA), Development & Production International (DPI), Marketing, Midstream & Processing (MMP), New Energy Solutions (NES), Technology, Projects & Drilling (TPD), Exploration (EXP) and Global Strategy & Business Development (GSB). The changes in the corporate structure announced on 27 April 2018 are not yet effective.

The reporting segments Exploration & Production Norway (E&P Norway) and MMP consist of the business areas DPN and MMP respectively. The business areas DPI and DPUSA are aggregated into the reporting segment Exploration & Production International
(E&P International). The aggregation has its basis in similar economic characteristics, such as the assets’ long term and capital-intensive nature and exposure to volatile oil and gas commodity prices, the nature of products, service and production processes, the type and class of customers, the methods of distribution and regulatory environment. The business areas NES, GSB, TPD, EXP and corporate staffs and support functions are aggregated into the reporting segment “Other” due to the immateriality of these areas. The majority of costs within the business areas GSB, TPD and EXP are allocated to the E&P Norway, E&P International and MMP reporting segments.

The eliminations section includes the elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products. Inter-segment revenues are based upon estimated market prices.

Segment data for the second quarter of 2018 and 2017 is presented below. The reported measure of segment profit is net operating income/(loss).  Deferred tax assets, pension assets and non-current financial assets are not allocated to the segments. The line item additions to PP&E, intangibles and equity accounted investments exclude movements related to changes in asset retirement obligations.

 

Second quarter 2018

E&P Norway

E&P International

MMP

Other

Eliminations

Total

(in USD million)

 

 

 

 

 

 

 

Revenues third party, other revenue and other income

76

561

17,491

(6)

0

18,122

Revenues inter-segment

5,151

2,378

88

0

(7,617)

0

Net income/(loss) from equity accounted investments

(27)

9

6

25

0

13

 

 

 

 

 

 

 

Total revenues and other income

5,200

2,947

17,586

19

(7,617)

18,135

 

 

 

 

 

 

 

Purchases [net of inventory variation]

0

2

(16,685)

0

7,267

(9,415)

Operating, selling, general and administrative expenses

(843)

(703)

(1,144)

(69)

180

(2,579)

Depreciation, amortisation and net impairment losses

(606)

(1,272)

65

(18)

(0)

(1,830)

Exploration expenses

(61)

(414)

0

0

0

(475)

 

 

 

 

 

 

 

Net operating income/(loss)

3,692

561

(179)

(68)

(170)

3,835

 

 

 

 

 

 

 

Additions to PP&E, intangibles and equity accounted investments

1,359

3,905

114

157

0

5,535

 

 

 

 

 

 

 

 

 

Second quarter 2017

E&P Norway

E&P International

MMP

Other

Eliminations

Total

(in USD million)

 

 

 

 

 

 

 

Revenues third party, other revenue and other income

10

1,092

13,759

8

0

14,869

Revenues inter-segment

3,789

1,655

30

0

(5,474)

0

Net income/(loss) from equity accounted investments

63

(2)

12

(7)

0

66

 

 

 

 

 

 

 

Total revenues and other income

3,861

2,744

13,801

2

(5,474)

14,935

 

 

 

 

 

 

 

Purchases [net of inventory variation]

(0)

(1)

(12,371)

(0)

5,515

(6,857)

Operating, selling, general and administrative expenses

(701)

(638)

(918)

(56)

103

(2,210)

Depreciation, amortisation and net impairment losses

(1,090)

(1,126)

(70)

(26)

0

(2,312)

Exploration expenses

(97)

(215)

0

0

0

(312)

 

 

 

 

 

 

 

Net operating income/(loss)

1,973

764

443

(80)

143

3,244

 

 

 

 

 

 

 

Additions to PP&E, intangibles and equity accounted investments

1,302

1,052

79

33

0

2,465



 

First half 2018

E&P Norway

E&P International

MMP

Other

Eliminations

Total

(in USD million)

 

 

 

 

 

 

 

Revenues third party, other revenue and other income

231

1,032

36,634

9

0

37,906

Revenues inter-segment

10,724

4,422

110

0

(15,256)

0

Net income/(loss) from equity accounted investments

19

17

12

65

0

114

 

 

 

 

 

 

 

Total revenues and other income

10,974

5,471

36,756

75

(15,256)

38,019

 

 

 

 

 

 

 

Purchases [net of inventory variation]

1

(3)

(34,050)

0

14,843

(19,209)

Operating, selling, general and administrative expenses

(1,636)

(1,402)

(2,186)

(156)

288

(5,093)

Depreciation, amortisation and net impairment losses

(1,902)

(2,234)

(26)

(36)

0

(4,198)

Exploration expenses

(160)

(564)

0

0

(0)

(724)

 

 

 

 

 

 

 

Net operating income/(loss)

7,277

1,267

494

(118)

(125)

8,795

 

 

 

 

 

 

 

Additions to PP&E, intangibles and equity accounted investments

4,179

5,189

164

181

0

9,713

 

 

 

 

 

 

 

Balance sheet information

 

 

 

 

 

 

Equity accounted investments

1,120

233

123

1,194

0

2,670

Non-current segment assets

32,613

38,860

5,449

375

0

77,296

Non-current assets, not allocated to segments 

 

 

 

 

 

8,951

 

 

 

 

 

 

 

Total non-current assets

 

 

 

 

 

88,918

 

 

First half 2017

E&P Norway

E&P International

MMP

Other

Eliminations

Total

(in USD million)

 

 

 

 

 

 

 

Revenues third party, other revenue and other income

74

1,435

28,806

24

0

30,340

Revenues inter-segment

8,381

3,469

34

0

(11,884)

0

Net income/(loss) from equity accounted investments

101

7

23

(7)

0

123

 

 

 

 

 

 

 

Total revenues and other income

8,556

4,911

28,863

17

(11,884)

30,463

 

 

 

 

 

 

 

Purchases [net of inventory variation]

0

(5)

(25,117)

(0)

11,799

(13,323)

Operating, selling, general and administrative expenses

(1,427)

(1,620)

(1,880)

(123)

198

(4,852)

Depreciation, amortisation and net impairment losses

(1,749)

(2,310)

(143)

(53)

0

(4,255)

Exploration expenses

(167)

(372)

0

0

0

(539)

 

 

 

 

 

 

 

Net operating income/(loss)

5,214

604

1,722

(159)

113

7,494

 

 

 

 

 

 

 

Additions to PP&E, intangibles and equity accounted investments

2,607

1,952

146

158

0

4,863

 

 

 

 

 

 

 

Balance sheet information

 

 

 

 

 

 

Equity accounted investments

1,143

232

127

727

0

2,230

Non-current segment assets

29,814

36,155

4,555

363

0

70,887

Non-current assets, not allocated to segments 

 

 

 

 

 

8,653

 

 

 

 

 

 

 

Total non-current assets

 

 

 

 

 

81,769

 

 

 

 

 

 

 

 

In the second quarter of 2018 Equinor recognised net impairment reversal of USD 273 million, of which net impairment loss of
USD 481 million was recognised in the E&P International segment, net impairment reversal of USD 600 million in the E&P Norway
segment and an impairment reversal of USD 155 million in the MMP segment.

 

The net impairment loss in the E&P International segment was mainly related to impairments of USD 762 million in the North America unconventional area, of which USD 237 million is classified as exploration expenses. The impairments were triggered by changes in long-term price assumptions and reduced fair value of one asset. In the North America conventional offshore Gulf of Mexico an impairment reversal of USD 156 million was recognised mainly due to a shift in the production profile. In the North Africa area an extension of license period caused an impairment reversal of USD 126 million.

 

In the E&P Norway segment impairment reversal of USD 600 million was recognised related to two offshore assets, mainly due to change in long term exchange rate assumptions.

 

In the MMP segment an impairment reversal of USD 155 million related to a refinery was recognised due to increased refinery margin forecast.

 

For information regarding implementation of IFRS 15 and change of accounting policy for recognition of revenue from the production of oil and gas properties in which Equinor shares an interest with other companies, see note 9 Changes in accounting policies.

 

For information regarding acquisition of interests, see note 3 Acquisitions and disposals.

  

Revenues by geographic areas

When attributing the line item revenues third party, other revenue and other income to the country of the legal entity executing the sale for the first half of 2018, Norway constitutes 75% and the US constitutes 18% of such revenues.

  

 

 

Non-current assets by country

 

 

 

 

 

 

 

 

 

 

At 30 June

At 31 March

At 31 December

At 30 June

(in USD million)

2018

2018

2017

2017

 

 

 

 

 

Norway

37,060

37,511

34,588

33,575

USA

19,087

19,312

19,267

18,440

Brazil

7,762

4,940

4,584

5,242

UK

4,430

4,553

4,222

3,660

Angola

2,374

2,594

2,888

3,323

Canada

1,592

1,645

1,715

1,623

Azerbaijan

1,458

1,461

1,472

1,304

Algeria

1,111

1,057

1,114

1,244

Other countries

5,093

4,999

4,958

4,706

 

 

 

 

 

Total non-current assets1)

79,967

78,072

74,809

73,116

 

1)   Excluding deferred tax assets, pension assets, non-current financial assets and assets classified as held for sale.

  

 

3 Acquisitions and disposals

 

Acquisition and divestment of operated interest in Carcara field in Brazil

In the second quarter of 2018 Equinor completed the divestment of 39.5% of its 76% interest in BM-S-8, agreed in October 2017. 36.5% interest was divested to ExxonMobil and 3% to Galp for a total consideration of USD 1,493 million. The transaction is accounted for in the E&P International segment with no impact on the Consolidated statement of income. The cash proceeds from the sale were USD 1,016 million and the divested assets were previously presented as Assets classified as held for sale.

 

On 4 July 2018 Equinor and Barra Energia (“Barra”) signed an agreement for Equinor to acquire Barra’s 10% interest in the BM-S-8 licence in Brazil’s Santos basin. Upon closing, Equinor intends to sell down 3.5% to ExxonMobil and 3% to Galp, so fully aligning interests across BM-S-8 and Carcará North. The total consideration for Barra’s 10% interest is USD 379 million, the same as for Equinor’s earlier transaction in BM-S-8 with Queiroz Galvão Exploração e Produção (QGEP) in July 2017. Closing is subject to customary conditions, including partner and government approval and is expected within a year.

 

Acquisition of interest in Roncador field in Brazil

In the second quarter of 2018 Equinor closed an agreement with Petrobras to acquire a 25% interest in Roncador, an oil field in the Campos Basin in Brazil. Equinor paid Petrobras a cash consideration of USD 2,133 million, in addition to recognising a liability for contingent consideration of USD 392 million. The assets and liabilities related to the acquired portion of Roncador have been reflected in accordance with the principles of IFRS 3 Business Combinations. The acquisition resulted in an increase of Equinor’s property, plant and equipment of USD 2,327 million, intangible assets of USD 392 million and an increase in provisions of USD 586 million. At this stage, both the purchase price and the purchase price allocation are preliminary. The partners have joint control and Equinor will account for its interest on a pro-rata basis. The transaction has been accounted for in the E&P International segment.  

 

Acquisition of  Cobalt’s North Platte interest in the Gulf of Mexico

In the first quarter of 2018 Equinor’s co-bid with Total in the bankruptcy auction for Cobalt’s interest in the North Platte discovery was successful with an aggregate bid of USD 339 million. The transaction was closed in April 2018. Upon closing, Total as operator owns 60% of North Platte and Equinor owns the remaining 40%. The value of the acquired exploration assets has been recognised in the Exploration & Production International (E&P International) segment for an amount of USD 246 million as intangible assets. Additionally, the transaction includes a contingent consideration up to USD 20 million.

 

Acquisition of interests in Martin Linge field and Garantiana discovery

In the first quarter of 2018 Equinor and Total closed an agreement to acquire Total’s equity stakes in the Martin Linge field (51%) and the Garantiana discovery (40%) on the Norwegian continental shelf. Through this transaction Equinor increased the ownership share in the Martin Linge field from 19% to 70%. Equinor has paid Total a consideration of USD 1,541 million and has taken over the operatorships. The assets and liabilities related to the acquired portion of Martin Linge and Garantiana have been reflected in accordance with the principles of IFRS 3 Business Combinations. Including certain changes in the second quarter the acquisition resulted in an increase of Equinor’s property, plant and equipment of USD 1,418 million, intangible assets of USD 116 million, goodwill of USD 265 million, deferred tax liabilities of USD 265 million and other assets of USD 7 million. At this stage, the purchase price allocation is preliminary. The partners have joint control and Equinor continues to account for its interest on a pro-rata basis using Equinor's new ownership share. The transaction has been accounted for in the Exploration and Production Norway (E&P Norway) segment.

 

 

4 Financial items

Quarters

 

 

First half

Full year

Q2 2018

Q1 2018

Q2 2017

 

(in USD million)

2018

2017

2017

 

 

 

 

 

 

 

 

(138)

(19)

(21)

 

Gains (losses) on net foreign exchange

(157)

65

126

155

(7)

85

 

Interest income and other financial items

148

267

487

(55)

(164)

(88)

 

Gains (losses) on derivative financial instruments

(220)

(205)

(61)

(278)

(229)

68

 

Interest and other finance expenses

(507)

(289)

(903)

 

 

 

 

 

 

 

 

(317)

(420)

44

 

Net financial items

(737)

(162)

(351)

 

The line item Interest income and other financial items includes expenses of USD 64 million in the first quarter of 2018 and in the first half of 2018 related to implementation of IFRS 9. See note 9 Changes in accounting policies.

 

The line item Interest and other finance expenses includes an income of USD 319 million in the second quarter of 2017, first half of 2017 and full year 2017 related to a release of a provision. See note 23 Other commitments, contingent liabilities and contingent assets in Equinor’s 2017 Annual Report and Form 20-F.

 

Equinor has a US Commercial paper programme available with a limit of USD 5 billion of which USD 1,320 million has been utilised as of 30 June 2018.

 

5 Income taxes

Quarters

 

 

First half

Full year

Q2 2018

Q1 2018

Q2 2017

 

(in USD million)

2018

2017

2017

 

 

 

 

 

 

 

 

3,518

4,540

3,288

 

Income/(loss) before tax

8,059

7,332

13,420

(2,298)

(3,255)

(1,852)

 

Income tax expense

(5,553)

(4,832)

(8,822)

65.3%

71.7%

56.3%

 

Effective tax rate

68.9%

65.9 %

65.7 %

 

The tax rate for the second quarter of 2018 and for the first half of 2018 was primarily influenced by recognition of USD 350 million of previously unrecognised deferred tax assets reflected in the E&P International segment and positive operating income in countries with unrecognised deferred tax assets. This was partially offset by impairments recognised in countries with unrecognised deferred tax assets and currency effects in entities that are taxable in other currencies than the functional currency.

 

The tax rate for the second quarter of 2017 and for the first half of 2017 was primarily influenced by the agreement with the Angolan Ministry of Finance related to Equinor’s participation in several blocks offshore Angola.

 

The tax rate for the first half of 2017 was also influenced by a loss related to the sale of interest in the Kai Kos Dehseh (KKD) oil sand project.

 

 

6 Property, plant and equipment and intangible assets

(in USD million)

Property, plant and equipment

Intangible assets

 

 

 

 

 

Balance at 31 December 2017

63,637

8,621

 

Additions through business combinations

3,745

773

 

Additions

4,280

936

 

Transfers

87

(87)

 

Disposals and reclassifications

0

(128)

 

Expensed exploration expenditures and impairment losses

-

(280)

 

Depreciation, amortisation and net impairment losses

(4,193)

(5)

 

Effect of foreign currency translation adjustments

(58)

(31)

 

 

 

 

 

Balance at 30 June 2018

67,498

9,798

 

 

Equinor’s Block 2 Exploration License in Tanzania was formally due to expire in June 2018, but based on communication with the applicable Tanzanian authorities, continues to be in operation while the process related to the grant of a new exploration licence to the existing licensees for the block is ongoing. The Block 2 asset remains capitalised within Intangible assets in the E&P International segment as of 30 June 2018.

 

Impairments/reversal of impairments

For information on impairment losses and reversals per reporting segment see note 2 Segments.

 

  

First half 2018

Property, plant and equipment

Intangible assets

Total

(in USD million)

 

 

 

 

Producing and development assets

(515)

237

(278)

Acquisition costs related to oil and gas prospects

-

16

16

 

 

 

 

Total net impairment losses (reversals) recognised

(515)

253

(262)

 

 

 

 

 

The impairment charges have been recognised in the Consolidated statement of income as depreciation, amortisation and net impairment losses and exploration expenses based on the impaired assets’ nature of property, plant and equipment and intangible assets, respectively.

 

The recoverable amounts of the impairments and impairment reversals in the second quarter of 2018 were mainly based on value in use.

 

Value in Use estimates and discounted cash flows used to determine the recoverable amount of assets tested for impairment are based on internal forecasts on costs, production profiles and commodity prices. The price assumptions in the second quarter of 2018 were as follows (price assumptions used in the fourth quarter of 2017 are indicated in brackets):

 

Year

Prices in real terms 1)

2018

 

2020

 

2025

 

2030

 

 

 

 

 

 

 

 

 

 

 

 

Brent Blend (USD/bbl)

74

(63)

 

75

(70)

 

77

(80)

 

80

(84)

NBP (USD/mmBtu)

7.9

(6.9)

 

6.8

(6.8)

 

8.0

(8.4)

 

8.0

(8.4)

Henry Hub (USD/mmBtu)

2.9

(3.0)

 

3.0

(3.7)

 

4.0

(4.2)

 

4.0

(4.2)

1) Basis year 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

7 Dividends

 

In May 2018, Equinor’s general assembly approved a dividend of USD 0.23 per share for the fourth quarter of 2017 and it was paid in the second quarter of 2018. For the first quarter of 2018 a dividend of USD 0.23 per share will be paid around 30 August 2018. The Equinor share will trade ex-dividend on Oslo Børs (OSE) and on New York Stock Exchange (NYSE) 21 August 2018. Record date will be
22 August.

 

On 25 July 2018, the board of directors resolved to declare a dividend for the second quarter of USD 0.23 per share. The Equinor share will trade ex-dividend 21 November 2018 on OSE and 20 November 2018 for ADR holders on NYSE. Record date will be 22 November 2018 on OSE and 21 November 2018 on NYSE. Payment date will be around 30 November 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First half

 

Full year

Dividends

 

Q2 2018

2018

Q2 2017

2017

 

 

 

 

 

 

Dividends paid in cash (in USD million)

 

744

1,147

728

1,491

USD per share or ADS

 

0.2300

0.4501

0.4402

0.8804

NOK per share

 

1.8575

3.5964

3.7168

7.2615

 

 

 

 

 

 

Scrip dividends (in USD million)

 

0

338

678

1,357

Number of shares issued (in million)

 

0.0

15.5

41.8

78.1

 

 

 

 

 

 

Total dividends

 

744

1,485

1,406

2,848

 

8 Provisions, commitments, contingent liabilities and contingent assets

 

In 2016, Equinor initiated arbitration to set aside an expert ruling affecting Equinor’s ownership percentage in the ongoing redetermination process for the Agbami field in Nigeria. In April 2018, the Arbitration panel ruled, dismissing Equinor’s claims, which however has no impact on Equinor’s accounting for the Agbami redetermination as the outcome of the expert ruling has been provided for. For further information see note 23 Other commitments, contingent liabilities and contingent assets in Equinor’s 2017 Annual Report and Form 20-F.  

 

On 28 February 2018, Equinor received a notice of deviation from Norwegian tax authorities related to an ongoing dispute regarding the level of Research & Development cost to be allocated to the offshore tax regime, increasing the maximum exposure in this matter to approximately USD 500 million. Equinor has provided for its best estimate in the matter.

 

Due to the passage of time as well as a counterparty’s revised claim in an ongoing case, the range of exposure related to long-term gas sales price review arbitration has broadened in the second quarter of 2018. However, Equinor’s best estimate and the corresponding provision for contractual gas price disputes have not changed, other than through the passage of time, since year-end 2017.

  

In March 2016 Equinor Energy AS, acting on behalf of the Troll field partners, terminated a long-term contract for the drilling rig COSL Innovator. The termination was disputed in court by the rig owner COSL Offshore Management AS (COSL). Equinor’s share of the total exposure, based on COSL’s original claim, has been estimated to be approximately USD 200 million excluding penalty interest. In May 2018, the court of first instance (Oslo District Court) ruled that while the contract could be cancelled according to the applicable clauses of the contract and with payment of the appropriate cancellation charge, the contract had not been validly terminated. In June 2018 both parties appealed the verdict to the court of appeal. Oslo District Court’s ruling is consequently not final. Equinor intends to defend its own and the Troll partners’ position, and considers it to be more likely than not that the final verdict will conclude that the termination of the rig contract was valid under its terms. No provision related to the dispute is included in Equinor’s accounts as of 30 June 2018.

During the normal course of its business Equinor is involved in legal and other proceedings, and several claims are unresolved and currently outstanding. The ultimate liability or asset, respectively, in respect of such litigation and claims cannot be determined now. Equinor has provided in its Condensed interim financial statements for probable liabilities related to litigation and claims based on the company's best judgement. Equinor does not expect that its financial position, results of operations or cash flows will be materially affected by the resolution of these legal proceedings.

 

 

9 Changes in accounting policies


With effect from 1 January 2018, Equinor has implemented IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers. As of the same date, Equinor has voluntarily changed its policy for recognition of revenue from the production of oil and gas properties in which Equinor shares an interest with other companies, as well as its policy for presentation of certain elements related to derivatives, non-cash currency effects and working capital items in the statement of cash flows.  

Information about each accounting policy change is available in the following. For certain tables as listed below, reference is however made to note 9 of Equinor’s first quarter 2018 Condensed interim financial statements;

·         IFRS 9: Table showing the financial assets at 1 January 2018 by category, according to previous requirements and according to IFRS 9, with differences in carrying amounts noted.

·         Change in Cash flow presentation – restatement of comparative periods: Tables showing originally reported and restated amounts for the full years 2017 and 2016, and for the four quarters of 2017.

IFRS 9 Financial Instruments
IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 has been implemented retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application. The implementation impact of IFRS 9 is immaterial, and Equinor’s equity as at January 2018 have consequently not been adjusted upon adoption of the standard. In accordance with the IFRS 9’s transitional provisions, comparative figures have not been restated.

There are no changes related to classification of Equinor’s liabilities following the implementation of IFRS 9.

Portions of Equinor’s cash equivalents and current financial investments tied to liquidity management, which under IAS 39 are classified as held for trading and reflected at fair value through profit and loss, are under IFRS 9 to be measured at amortised cost, based on an evaluation of the contractual terms and the business model applied. The impact of the change is immaterial.

For certain financial assets currently classified as Available for sale (AFS), changes in fair value which under IAS 39 are reflected in OCI, are reflected in profit and loss under IFRS 9. As a result, fair value loss of USD 64 million that had been accumulated in the available-for-sale financial assets reserve were expensed in the statement of income as an implementation effect.

No significant changes were made for Equinor’s expected loss recognition process to satisfy IFRS 9’s financial asset impairment requirements. Credit risk related to financial assets measured at amortised cost is immaterial.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 covers the recognition of revenue in the financial statements and related disclosure, and has replaced existing revenue recognition guidance, including IAS 18 Revenue. Equinor has implemented IFRS 15 retrospectively, with the cumulative effect recognised at the date of initial application. The impact on Equinor’s equity was immaterial. As allowed by the standard, prior periods have not been restated. Total revenues and other income in the Consolidated statement of income has not been impacted materially by the implementation of IFRS 15. 

IFRS 15 requires identification of the performance obligations for the transfer of goods and services in each contract with customers. Revenue is recognised upon satisfaction of the performance obligations for the amounts that reflect the consideration to which Equinor expects to be entitled in exchange for those goods and services. Under IFRS 15, revenue from the sale of crude oil, natural gas, petroleum products and other merchandise is recognised when a customer obtains control of those products, which normally is when title passes at point of delivery, based on the contractual terms of the agreements. Each such sale normally represents a single performance obligation. In the case of natural gas, sales are completed over time in line with the delivery of the actual physical quantities. 

The accounting for Equinor’s sale of the SDFI’s natural gas and crude oil under IFRS 15 has not led to changes compared to the practice under IAS 18.

With effect from 1 January 2018, Equinor has presented ‘Revenue from contracts with customers’ and ‘Other revenue’ (USD 18.7 billion and USD (0.6) billion in the second quarter of 2018, and USD 38.3 billion and USD (0.4) billion for the first half of 2018) as a single caption, Revenues, in the Consolidated statement of income. The impact of commodity-based derivatives within Other revenue reduced Revenues with USD 1 billion in the second quarter of 2018, and with USD 1.1 billion in the first half of 2018. In addition to the impact of commodity-based derivatives connected with sales contracts or revenue-related risk management, ‘Other revenue’ also includes taxes paid in kind under certain production sharing agreements (PSAs) and adjustments for imbalances between oil and gas production and sales. These items represent a form of revenue, or are closely connected to revenue transactions. In addition, the

 

 

impact of certain commodity-based earn-out and contingent consideration agreements are now presented under 'Other income'. These elements were previously presented within Revenues.

Change in accounting for lifting imbalances
Equinor voluntarily changed its policy for recognition of revenue from the production of oil and gas properties in which Equinor shares an interest with other companies. Previously Equinor recognised revenue on the basis of volumes lifted and sold to customers during the period (the sales method). Under the new method, Equinor recognises revenues according to Equinor’s ownership in producing fields, where the accounting for the imbalances is presented as Other revenue. This voluntary change in policy has been made because it better reflects Equinor’s operational performance, and also increases comparability with the financial reporting of Equinor’s peers. The change in policy affects the timing of revenue recognition from oil and gas production; however, the pre-tax implementation impact of USD 287 million recognised in the first quarter of 2018 has been considered immaterial. Equinor’s equity as at 1 January 2018 has consequently not been adjusted upon the change in policy, and comparative figures have not been restated.  

Change in Cash flow presentation – restatement of comparative periods
Equinor has changed its presentation of certain elements related to derivatives, non-cash currency effects and working capital items in the Consolidated statement of cash flows. The presentation was changed to better reflect the cash impact of the different items within operating, investing and financing activities. The changes impacts the classification of cash flow items within cash flows provided by operating activities and reclassification of cash flow elements relating to foreign exchange derivatives from operating activities to investing and financing activities.

Changes to classification of foreign currency derivatives
Equinor applies foreign currency derivatives to hedge currency exposure related financial investments and long-term debt in foreign currencies. Cash receipts and payments related to these derivatives has previously been classified as an operating cash flow together with cash flows from other derivative positions. To better align the cash receipt and payments from foreign currency derivatives with the cash flows related to the underlying hedged items, the cash receipts and payments from these derivatives have been reclassified from an operating cash flow to an investing or financing cash flow depending on the nature of the hedged item.

Changes to classification of non-cash currency effects
Non-cash currency exchange gains and losses and currency translation effects previously presented as part of the individual line items within Cash flows provided by operating activities have been reclassified into the line item gain/loss on foreign currency transactions and balances. This to better distinguish changes in items relating to operating activities, i.e. decrease/increase in working capital, from the balance sheet impact of non-cash currency effects.

Changes to classification related to working capital items
Certain items that previously has been presented as part of change in working capital has been reclassified to other items related to operating activities if the nature of the item is non-cash provisions.

 

10 Subsequent events


On 6 July 2018 Equinor has entered into agreement to buy 100% of the shares in a Danish energy trading company Danske Commodities (DC) for a consideration of EUR 400 million, which will be adjusted for certain net cash and net working capital positions at closing. In addition some smaller contingent payments depending on DC’s performance have been agreed. The closing of this transaction is subject to certain conditions, including European Commission approval. Closing is expected in the second half of 2018. Upon closing of the transaction, the assets and liabilities related to the acquired business will be reflected according to IFRS 3 Business Combinations. The transaction will be accounted for in the Marketing, Midstream & Processing (MMP) segment.



 

 

11 Condensed consolidated financial information related to guaranteed debt securities


Equinor Energy AS, a 100% owned subsidiary of Equinor ASA, is the co-obligor of certain existing debt securities of Equinor ASA that are registered under the US Securities Act of 1933 ("US registered debt securities"). As co-obligor, Equinor Energy AS fully, unconditionally and irrevocably assumes and agrees to perform, jointly and severally with Equinor ASA, the payment and covenant obligations for these US registered debt securities. In addition, Equinor ASA is also the co-obligor of a US registered debt security of Equinor Energy AS. As co-obligor, Equinor ASA fully, unconditionally and irrevocably assumes and agrees to perform, jointly and severally with Equinor Energy AS, the payment and covenant obligations of that security. In the future, Equinor ASA may from time to time issue future US registered debt securities for which Equinor Energy AS will be the co-obligor or guarantor.

The following financial information on a condensed consolidated basis provides financial information about Equinor ASA, as issuer and co-obligor, Equinor Energy AS, as co-obligor and guarantor, and all other subsidiaries as required by SEC Rule 3-10 of Regulation S-X. The condensed consolidated information is prepared in accordance with Equinor's IFRS accounting policies as described in note 2 Significant accounting policies in the Annual report on Form 20-F, except that investments in subsidiaries and jointly controlled entities are accounted for using the equity method as required by Rule 3-10.

The following is condensed consolidated financial information as of 30 June 2018 and 2017, and for the year ended 31 December 2017.

  

  

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

First half 2018 (unaudited, in USD million)

 

 

 

 

 

 

Revenues and other income

25,889

11,860

13,527

(13,370)

37,906

Net income/(loss) from equity accounted companies

2,722

(145)

85

(2,548)

114

 

 

 

 

 

 

Total revenues and other income

28,611

11,715

13,612

(15,919)

38,019

 

 

 

 

 

 

Total operating expenses

(25,791)

(4,819)

(11,911)

13,297

(29,224)

 

 

 

 

 

 

Net operating income/(loss)

2,820

6,895

1,702

(2,622)

8,795

 

 

 

 

 

 

Net financial items

(221)

(272)

(162)

(82)

(737)

 

 

 

 

 

 

Income/(loss) before tax

2,598

6,624

1,539

(2,702)

8,059

 

 

 

 

 

 

Income tax

(12)

(5,137)

(409)

5

(5,553)

 

 

 

 

 

 

Net income/(loss)

2,587

1,486

1,130

(2,697)

2,506

 

 

 

 

 

 

Other comprehensive income/(loss)

(224)

(99)

(150)

331

(142)

 

 

 

 

 

 

Total comprehensive income/(loss)

2,362

1,387

980

(2,365)

2,364

 

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

First half 2017 (unaudited, in USD million)

 

 

 

 

 

 

Revenues and other income

19,004

10,499

11,238

(10,401)

30,340

Net income/(loss) from equity accounted companies

2,774

(376)

17

(2,292)

123

 

 

 

 

 

 

Total revenues and other income

21,779

10,123

11,256

(12,695)

30,463

 

 

 

 

 

 

Total operating expenses

(18,851)

(4,383)

(10,186)

10,451

(22,969)

 

 

 

 

 

 

Net operating income/(loss)

2,927

5,740

1,070

(2,243)

7,494

 

 

 

 

 

 

Net financial items

20

(245)

464

(401)

(162)

 

 

 

 

 

 

Income/(loss) before tax

2,948

5,495

1,534

(2,645)

7,332

 

 

 

 

 

 

Income tax

(49)

(4,480)

(296)

(7)

(4,832)

 

 

 

 

 

 

Net income/(loss)

2,899

1,014

1,238

(2,651)

2,500

 

 

 

 

 

 

Other comprehensive income/(loss)

675

343

642

(583)

1,077

 

 

 

 

 

 

Total comprehensive income/(loss)

3,573

1,357

1,881

(3,234)

3,577

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

Full year 2017 (unaudited, in USD million)

 

 

 

 

 

 

Revenues and other income

39,750

20,579

22,204

(21,535)

60,999

Net income/(loss) from equity accounted companies

5,051

(401)

33

(4,495)

188

 

 

 

 

 

 

Total revenues and other income

44,801

20,178

22,237

(26,029)

61,187

 

 

 

 

 

 

Total operating expenses

(39,570)

(9,217)

(20,022)

21,392

(47,416)

 

 

 

 

 

 

Net operating income/(loss)

5,232

10,961

2,216

(4,637)

13,771

 

 

 

 

 

 

Net financial items

311

(378)

439

(724)

(351)

 

 

 

 

 

 

Income/(loss) before tax

5,543

10,583

2,655

(5,361)

13,420

 

 

 

 

 

 

Income tax

(230)

(8,094)

(539)

40

(8,822)

 

 

 

 

 

 

Net income/(loss)

5,314

2,489

2,116

(5,321)

4,598

 

 

 

 

 

 

Other comprehensive income/(loss)

1,017

355

878

(509)

1,741

 

 

 

 

 

 

Total comprehensive income/(loss)

6,330

2,843

2,995

(5,830)

6,339

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

At 30 June 2018 (unaudited, in USD million)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Property, plant, equipment and intangible assets

514

35,306

41,499

(23)

77,296

Equity accounted companies

41,574

22,704

1,459

(63,067)

2,670

Other non-current assets

3,297

388

5,317

(51)

8,951

Non-current financial receivables from subsidiaries

26,232

0

23

(26,255)

0

 

 

 

 

 

 

Total non-current assets

71,616

58,398

48,298

(89,394)

88,918

 

 

 

 

 

 

Current receivables from subsidiaries

3,214

4,461

11,219

(18,894)

0

Other current assets

13,523

1,081

5,358

(580)

19,382

Cash and cash equivalents

4,893

7

1,178

(0)

6,078

 

 

 

 

 

 

Total current assets

21,629

5,549

17,755

(19,473)

25,460

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

93,246

63,947

66,052

(108,867)

114,378

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

Total equity

41,018

23,133

40,454

(63,562)

41,043

 

 

 

 

 

 

Non-current liabilities to subsidiaries

21

14,756

11,478

(26,255)

0

Other non-current liabilities

28,959

17,053

7,873

(133)

53,752

 

 

 

 

 

 

Total non-current liabilities

28,979

31,808

19,351

(26,386)

53,752

 

 

 

 

 

 

Other current liabilities

8,600

7,575

3,432

(24)

19,583

Current liabilities to subsidiaries

14,647

1,431

2,815

(18,893)

0

 

 

 

 

 

 

Total current liabilities

23,248

9,006

6,247

(18,918)

19,583

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

52,227

40,814

25,598

(45,304)

73,335

 

 

 

 

 

 

Total equity and liabilities

93,246

63,947

66,052

(108,867)

114,378

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

At 30 June 2017 (unaudited, in USD million)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Property, plant, equipment and intangible assets

536

32,062

38,316

(27)

70,887

Equity accounted companies

39,645

17,855

989

(56,259)

2,230

Other non-current assets

3,133

944

4,653

(77)

8,653

Non-current financial receivables from subsidiaries

24,372

(0)

20

(24,392)

0

 

 

 

 

 

 

Total non-current assets

67,687

50,861

43,979

(80,758)

81,769

 

 

 

 

 

 

Current receivables from subsidiaries

2,956

4,084

9,858

(16,898)

(0)

Other current assets

17,982

1,840

4,398

(576)

23,644

Cash and cash equivalents

4,072

304

706

1

5,083

 

 

 

 

 

 

Total current assets

25,009

6,228

14,963

(17,473)

28,727

 

 

 

 

 

 

Total assets

92,696

57,089

58,941

(98,231)

110,496

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

Total equity

37,882

19,323

37,174

(56,468)

37,911

 

 

 

 

 

 

Non-current liabilities to subsidiaries

18

13,192

11,228

(24,438)

0

Other non-current liabilities

31,499

15,743

6,059

(77)

53,224

 

 

 

 

 

 

Total non-current liabilities

31,517

28,935

17,287

(24,515)

53,224

 

 

 

 

 

 

Other current liabilities

9,366

6,430

3,941

(376)

19,361

Current liabilities to subsidiaries

13,931

2,401

540

(16,872)

0

 

 

 

 

 

 

Total current liabilities

23,297

8,831

4,481

(17,248)

19,361

 

 

 

 

 

 

Total liabilities

54,814

37,767

21,768

(41,764)

72,585

 

 

 

 

 

 

Total equity and liabilities

92,696

57,089

58,941

(98,231)

110,496

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

At 31 December 2017 (unaudited, in USD million)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Property, plant, equipment and intangible assets

541

32,956

38,786

(25)

72,258

Equity accounted companies

42,625

21,593

1,311

(62,978)

2,551

Other non-current assets

3,851

346

4,989

(84)

9,102

Non-current financial receivables from subsidiaries

25,896

0

22

(25,918)

0

 

 

 

 

 

 

Total non-current assets

72,914

54,895

45,107

(89,005)

83,911

 

 

 

 

 

 

Current receivables from subsidiaries

2,448

2,615

14,215

(19,278)

0

Other current assets

16,165

923

5,582

(1,240)

21,430

Cash and cash equivalents

3,759

27

603

0

4,390

 

 

 

 

 

 

Total current assets

22,372

3,566

20,400

(20,517)

25,820

 

 

 

 

 

 

Assets classified as held for sale

0

0

1,369

0

1,369

 

 

 

 

 

 

Total assets

95,286

58,460

66,876

(109,523)

111,100

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

Total equity

39,861

20,813

42,634

(63,422)

39,885

 

 

 

 

 

 

Non-current liabilities to subsidiaries

19

14,682

11,263

(25,964)

0

Other non-current liabilities

29,070

16,145

7,104

(122)

52,197

 

 

 

 

 

 

Total non-current liabilities

29,090

30,827

18,367

(26,086)

52,198

 

 

 

 

 

 

Other current liabilities

9,242

5,879

4,632

(736)

19,017

Current liabilities to subsidiaries

17,094

941

1,243

(19,278)

0

 

 

 

 

 

 

Total current liabilities

26,335

6,821

5,874

(20,014)

19,017

 

 

 

 

 

 

Total liabilities

55,425

37,648

24,242

(46,100)

71,214

 

 

 

 

 

 

Total equity and liabilities

95,286

58,460

66,876

(109,523)

111,100

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

First half 2018 (unaudited, in USD million)

 

 

 

 

 

 

Cash flows provided by (used in) operating activities

4,020

7,409

3,034

(4,386)

10,077

Cash flows provided by (used in) investing activities

3,005

(5,954)

(3,900)

1,888

(4,961)

Cash flows provided by (used in) financing activities

(5,532)

(1,500)

1,501

2,498

(3,033)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

1,493

(46)

635

0

2,083

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

(430)

25

(61)

0

(466)

Cash and cash equivalents at the beginning of the period (net of overdraft)

3,759

27

603

0

4,390

 

 

 

 

 

 

Cash and cash equivalents at the end of the period (net of overdraft)

4,822

7

1,177

0

6,006

 

 

 

 

 

 

 

 

 

 

 

 

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

First half 2017 (unaudited, in USD million) (restated*)

 

 

 

 

 

 

Cash flows provided by (used in) operating activities

734

5,955

3,360

(280)

9,769

Cash flows provided by (used in) investing activities

(86)

(3,631)

(1,666)

(3,633)

(9,015)

Cash flows provided by (used in) financing activities

(1,070)

(2,077)

(1,765)

3,913

(999)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

(422)

248

(71)

0

(245)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

220

14

5

0

239

Cash and cash equivalents at the beginning of the period (net of overdraft)

4,274

46

770

0

5,090

 

 

 

 

 

 

Cash and cash equivalents at the end of the period (net of overdraft)

4,072

307

704

0

5,083

 

 

 

 

 

 

 

 

 

 

 

 

 

Equinor ASA

Equinor Energy AS

Non-guarantor subsidiaries

Consolidation adjustments

The Equinor group

Full year 2017 (unaudited, in USD million) (restated*)

 

 

 

 

 

 

Cash flows provided by (used in) operating activities

339

9,506

5,243

(286)

14,802

Cash flows provided by (used in) investing activities

3,227

(9,070)

(4,718)

444

(10,117)

Cash flows provided by (used in) financing activities

(4,459)

(478)

(727)

(158)

(5,822)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

(893)

(42)

(202)

0

(1,137)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

377

23

36

0

436

Cash and cash equivalents at the beginning of the period (net of overdraft)

4,274

46

770

0

5,090

 

 

 

 

 

 

Cash and cash equivalents at the end of the period (net of overdraft)

3,758

27

604

0

4,390

 

 

 

 

 

 

*    Related to a change in accounting policies, see note 9 Changes in accounting policies for more information

 

 

 

 

 

Supplementary disclosures

 

OPERATIONAL DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters

Change

 

 

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

Operational data

2018

2017

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prices

 

 

 

74.5

66.8

49.6

50%

 

Average Brent oil price (USD/bbl)

70.7

51.7

37%

67.4

61.2

45.1

50%

 

E&P Norway average liquids price (USD/bbl)

64.1

47.8

34%

63.9

58.8

43.7

46%

 

E&P International average liquids price (USD/bbl)

61.5

45.3

36%

65.8

60.2

44.5

48%

 

Group average liquids price (USD/bbl)

63.0

46.7

35%

527.7

472.0

378.9

39%

 

Group average liquids price (NOK/bbl) [1]

499.3

396.1

26%

5.18

5.48

3.94

31%

 

Transfer price natural gas (USD/mmbtu) [9]

5.34

4.09

31%

6.52

6.90

5.10

28%

 

Average invoiced gas prices - Europe (USD/mmbtu) [8]

6.73

5.30

27%

2.44

3.48

2.76

(12%)

 

Average invoiced gas prices - North America (USD/mmbtu) [8]

2.95

3.07

(4%)

6.3

3.8

6.6

(4%)

 

Refining reference margin (USD/bbl) [2]

5.0

6.0

(16%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Entitlement production (mboe per day)

 

 

 

543

601

586

(7%)

 

E&P Norway entitlement liquids production

571

601

(5%)

428

395

412

4%

 

E&P International entitlement liquids production

412

425

(3%)

971

996

998

(3%)

 

Group entitlement liquids production

983

1,026

(4%)

677

780

667

2%

 

E&P Norway entitlement gas production

728

722

1%

203

218

171

19%

 

E&P International entitlement gas production

210

174

21%

880

998

838

5%

 

Group entitlement gas production

938

895

5%

1,851

1,993

1,836

1%

 

Total entitlement liquids and gas production [3]

1,921

1,921

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity production (mboe per day)

 

 

 

543

601

586

(7%)

 

E&P Norway equity liquids production

571

601

(5%)

562

538

548

3%

 

E&P International equity liquids production

550

552

(0%)

1,105

1,139

1,135

(3%)

 

Group equity liquids production

1,122

1,153

(3%)

677

780

667

2%

 

E&P Norway equity gas production

728

722

1%

247

261

195

27%

 

E&P International equity gas production

254

196

29%

924

1,041

862

7%

 

Group equity gas production

982

918

7%

2,028

2,180

1,996

2%

 

Total equity liquids and gas production [4]

2,104

2,071

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MMP sales volumes

 

 

 

211.5

218.1

205.0

3%

 

Crude oil sales volumes (mmbl)

429.6

405.0

6%

12.4

13.8

12.3

0%

 

Natural gas sales Equinor entitlement (bcm)

26.2

25.4

3%

1.1

1.7

1.0

5%

 

Natural gas sales third-party volumes (bcm)

2.7

3.4

(20%)

 

EXCHANGE RATES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters

Change

 

 

First half

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

Exchange rates

2018

2017

Change

 

 

 

 

 

 

 

 

 

0.1247

0.1276

0.1174

6%

 

NOK/USD average daily exchange rate

0.1262

0.1180

7%

0.1226

0.1286

0.1192

3%

 

NOK/USD period-end exchange rate

0.1226

0.1192

3%

8.0172

7.8382

8.5145

(6%)

 

USD/NOK average daily exchange rate

7.9262

8.4765

(6%)

8.1588

7.7773

8.3870

(3%)

 

USD/NOK period-end exchange rate

8.1588

8.3870

(3%)

1.1915

1.2290

1.1017

8%

 

EUR/USD average daily exchange rate

1.2103

1.0823

12%

1.1658

1.2398

1.1412

2%

 

EUR/USD period-end exchange rate

1.1658

1.1412

2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters

Change

 

Exploration expenses

First half

 

Q2 2018

Q1 2018

Q2 2017

Q2 on Q2

 

(in USD million)

2018

2017

Change

 

 

 

 

 

 

 

 

 

74

131

85

(13%)

 

E&P Norway exploration expenditures (activity)

205

207

(1%)

195

193

172

13%

 

E&P International exploration expenditures (activity)

388

293

33%

 

 

 

 

 

 

 

 

 

270

323

258

5%

 

Group exploration expenditures (activity)

593

499

19%

10

17

7

53%

 

Expensed, previously capitalised exploration expenditures

27

19

43%

(47)

(103)

(39)

19%

 

Capitalised share of current period's exploration activity

(150)

(92)

62%

242

11

87

>100%

 

Impairment (reversal of impairment)

253

113

>100%

 

 

 

 

 

 

 

 

 

475

249

312

52%

 

Exploration expenses IFRS

724

539

34%

 

 



 

HEALTH, SAFETY AND THE ENVIRONMENT

 

 

 

 

 

 

 

 

Twelve months average per

 

 

First half

First half

Q2 2018

Q2 2017

 

Health, safety and the environment

2018

2017

 

 

 

 

 

 

 

 

 

Injury/incident frequency

 

 

2.9

2.7

 

Total recordable injury frequency (TRIF)

3.0

2.8

0.5

0.7

 

Serious incident frequency (SIF)

0.5

0.7

 

 

 

Oil spills

 

 

261

147

 

Accidental oil spills (number of)

127

72

104

82

 

Accidental oil spills (cubic metres)

97

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

First half

Full year

Climate

 

 

 

2018

2017

 

 

 

 

 

 

Upstream CO2 intensity (kg CO2/boe) 1)

9

9

 

1)      For Equinor operated assets in E&P Norway and E&P International, the total amount of direct CO2 released to the atmosphere (kg), divided by total hydrocarbon production (boe).

 

 

 

FORWARD-LOOKING STATEMENTS


This report contains certain forward-looking statements that involve risks and uncertainties. In some cases, we use words such as "ambition", "continue", "could", "estimate", "expect", “believe”, "focus", "likely", "may", "outlook", "plan", "strategy", "will", "guidance" and similar expressions to identify forward-looking statements. All statements other than statements of historical fact, including, among others, statements regarding plans and expectations with respect to Equinor’s returns, balance sheet and long-term underlying earnings growth; the name change to Equinor ASA; market outlook and future economic projections and assumptions; capital expenditure and exploration guidance for 2018 and beyond; production guidance through 2020; CAGR for the period 2017 – 2020; organic capital expenditure for 2018; Equinor’s intention to mature its portfolio; exploration and development activities, including estimates regarding exploration activity levels; ambition to keep unit of production cost in the top quartile of its peer group; equity production and expectations for 2018; planned maintenance activity and the effects thereof for 2018; accounting decisions and policy judgments, ability to put exploration wells into profitable production, and the impact thereof; expected dividend payments and dividend subscription price; changes to Equinor’s corporate and management structure; estimated provisions and liabilities, including the COSL Offshore Management AS litigation; implementation of IFRS 9 and IFRS 15, and the impact thereof; planned and announced acquisitions and divestments, including timing and impact thereof, including the acquisition of interests in the Martin Linge field, Garantiana discovery, Carcara field and other pending acquisitions, such as the acauisition of Danske Commodities, and divestments discussed in this report; and the projected impact or timing of administrative or governmental rules, standards, decisions or laws, including with respect to and future impact of legal proceedings are forward-looking statements.

You should not place undue reliance on these forward- looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons.

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including levels of industry product supply, demand and pricing; price and availability of alternative fuels; currency exchange rate and interest rate fluctuations; the political and economic policies of Norway and other oil-producing countries; EU developments; general economic conditions; political and social stability and economic growth in relevant areas of the world; global political events and actions, including war, political hostilities and terrorism; economic sanctions, security breaches; changes or uncertainty in or non-compliance with laws and governmental regulations; the timing of bringing new fields or wells on stream; an inability to exploit growth or investment opportunities; material differences from reserves estimates; unsuccessful drilling; an inability to find and develop reserves; ineffectiveness of crisis management systems; adverse changes in tax regimes; the development and use of new technology; geological or technical difficulties; operational problems; operator error; inadequate insurance coverage; the lack of necessary transportation infrastructure when a field is in a remote location and other transportation problems; the actions of competitors; the actions of field partners; the actions of governments (including the Norwegian state as majority shareholder); counterparty defaults; natural disasters and adverse weather conditions, climate change, and other changes to business conditions; an inability to attract and retain personnel;relevant governmental approvals; labor relations and industrial actions by workers and other factors discussed elsewhere in this report. Additional information, including information on factors that may affect Equinor’s business, is contained in Equinor’s Annual Report on Form 20-F for the year ended December 31, 2017, filed with the U.S. Securities and Exchange Commission (and section 2.11 Risk review – Risk factors thereof). Equinor’s 2017 Annual Report and Form 20-F is available at Equinor’s website www.equinor.com.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, level of activity, performance or achievements will meet these expectations. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any of these statements after the date of this report, whether to make them either conform to actual results or changes in our expectations or otherwise.

 

 

END NOTES

 

1.    The Group's average liquids price is a volume-weighted average of the segment prices of crude oil, condensate and natural gas liquids (NGL).

2.    The refining reference margin is a typical average gross margin of our two refineries, Mongstad and Kalundborg. The reference margin will differ from the actual margin, due to variations in type of crude and other feedstock, throughput, product yields, freight cost, inventory, etc.

3.    Liquids volumes include oil, condensate and NGL, exclusive of royalty oil.

4.    Equity volumes represent produced volumes under a Production Sharing Agreement (PSA) that correspond to Equinor's ownership share in a field. Entitlement volumes, on the other hand, represent Equinor's share of the volumes distributed to the partners in the field, which are subject to deductions for, among other things, royalty and the host government's share of profit oil. Under the terms of a PSA, the amount of profit oil deducted from equity volumes will normally increase with the cumulative return on investment to the partners and/or production from the license. Consequently, the gap between entitlement and equity volumes will likely increase in times of high liquids prices. The distinction between equity and entitlement is relevant to most PSA regimes, whereas it is not applicable in most concessionary regimes such as those in Norway, the UK, the US, Canada and Brazil.

5.    Not applicable this quarter.

6.    Transactions with the Norwegian State. The Norwegian State, represented by the Ministry of Petroleum and Energy (MPE), is the majority shareholder of Equinor and it also holds major investments in other entities. This ownership structure means that Equinor participates in transactions with many parties that are under a common ownership structure and therefore meet the definition of a related party. Equinor purchases liquids and natural gas from the Norwegian State, represented by SDFI (the State's Direct Financial Interest). In addition, Equinor sell the State's natural gas production in its own name, but for the Norwegian State's account and risk as well as related expenditures refunded by the State. All transactions are considered priced on an arms-length basis.

7.    The production guidance reflects our estimates of proved reserves calculated in accordance with US Securities and Exchange Commission (SEC) guidelines and additional production from other reserves not included in proved reserves estimates.

8.    The Group's average invoiced gas prices include volumes sold by the MMP segment.

9.    The internal transfer price paid from MMP to E&P Norway.

  

 

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

 

EQUINOR ASA

(Registrant)

 

Dated: 26 July, 2018

By: ___/s/ Hans Jakob Hegge

Name: Hans Jakob Hegge

Title:    Chief Financial Officer

 

 

 

EXHIBITS

 

The following exhibit is filed as part of this quarterly report:

EXHIBIT 12.1 Calculation of ratio of earnings to fixed charges

EXHIBIT 101 Interactive Data Files (formatted in XBRL (Extensible Business Reporting Language)). Submitted electronically with this report on Form 6-K.