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Equinor makes CAPEX cuts

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Oilfield Technology,

Equinor has announced an updated outlook for 2020 and an approximately US$3 billion action plan to strengthen financial resilience in a market impacted by the Covid-19 pandemic and low commodity prices. The company has said it can be organic cash flow neutral before capital distribution in 2020 with an average oil price around US$25/bbl for the remaining part of the year.

The main elements of the action plan are:

  • Reducing organic CAPEX for 2020 from US$10 – 11 billion to approximately US$8.5 billion, a reduction of around 20%.
  • Reducing exploration activity for 2020 from around US$1.4 billion to around US$1 billion.
  • Reducing operating costs for 2020 by around US$700 million compared to original estimates.

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

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

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

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

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

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

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