Equinor Sitting on Over NOK 500 Billion in Cash After Solid Profits, Eyeing New Acquisitions

Equinor is sitting on over NOK 500 billion in cash after solid profits. Much must be returned to the owners and cover upcoming tax bills, but the company can also smell new acquisitions.

For six consecutive quarters, Equinor has delivered adjusted operating results of more than USD 10 billion – far above what was usual in previous years.

The high point was the third quarter, when gas prices peaked and adjusted profit ticked in at a whopping 24.3 billion dollars (249 billion kroner at the exchange rate of the time).

The good results will also benefit the owners. The state is the largest owner with a direct ownership of 67 per cent, while Folketrygdfondet (State pension fund Norway) is the second largest owner with 3.3 per cent.

According to the plan, Equinor will pay dividends and buy back shares from the owners for 17 billion dollars (around NOK 180 billion) during 2023.

– There is an increase from a very high level last year too, it was 13.6 billion dollars, says CFO Torgrim Reitan at Equinor to E24.

– Very extraordinary year

The expected payouts to the owners in 2023 are the highest ever, confirms Reitan.

– It comes as a result of a very extraordinary year last year. Everything that goes into the extraordinary dividend and the extraordinary buybacks is linked to money that we have already earned, he says.

In the first quarter, Equinor pays out USD 0.9 per share in dividends, of which USD 0.3 per share is an ordinary dividend and the rest an extraordinary dividend. In addition, the company will buy back shares worth six billion dollars this year.

– What could threaten these 17 billion – we saw in 2020 that the buyback programme was terminated?

– The 17 billion, they are fixed, says Reitan.

– We have a very strong balance sheet, we have a debt ratio that is far on the negative side and a very large cash balance, he says.

The debt ratio is the debt as a proportion of the company’s employed capital. Equinor’s debt ratio was minus 52 percent at the end of the first quarter, while it was minus 23.9 percent at the end of last year. Equinor aims for the debt ratio to remain at 15–30 per cent over time, and current levels are very unusual.

A lot of money in the coffers

– How much money do you have now?

– Our cash holdings are over 50 billion dollars. It is a significant amount, says Reitan.

According to the quarterly report Equinor had a total of USD 52.5 billion (NOK 561 billion) in cash and what the company refers to as financial investments at the end of the first quarter.

– Then we have to remind ourselves and remember that we had the best result ever last year, but then it was no more than two years before that when we had the worst result ever. And then we had a debt ratio that was above our guidance, it was over 30 per cent then, says Reitan.

– So we have tremendous volatility that we have to deal with going forward. It is very important for us to be prepared for high volatility and a lot of unrest in the market. That is why we are going to drive with a conservative and strong balance, he says.

Tax, dividends and buybacks

Theoretically, Equinor has enough cash to buy both DNB (market value of about 288 billion) and Telenor (market value of about 178 billion) and still have money left over.

But a good part of Equinor’s cash has been set aside for dividends, share buybacks and tax to be paid in the second quarter, Reitan points out. Equinor made only one tax payment in Norway in the first quarter.

– In the next quarter, the cash flow will look completely different. Then we will have two tax payments, and in addition we will pay the authorities for the buybacks last year. That’s almost four billion dollars. Then there is the buyback of shares and cash dividends, says the CFO.

– So we expect 17 billion dollars in payments in the next quarter, related to tax and capital distribution, adds Reitan.

– What will the debt ratio be then?

– We’ll see, it depends on prices and so on, says Reitan.

– It is clear, we will pay out a lot more in the next quarter. What we are saying is that we are planning for a negative cash flow throughout the year as a whole. It is because we enter the year with a very, very, very solid balance sheet, he says.

Equinor informed Thursday that the company must make two tax payments totaling NOK 108 billion in the second quarter. These are the two remaining payments for the financial year 2022.

Can buy more

Equinor’s money bin leaves room for further acquisitions. In the first quarter, the company bought Suncor Energy UK for around NOK nine billion, which increased the company’s stake in the British field Buzzard and in Rosebank, which has not yet been developed.

Last year, Equinor bought Danish BeGreen Solar and British Triton Power Holdings Ltd, which owns the gas-fired power plant Saltend Power Station.

– Are there more acquisitions on the horizon?

– Acquisitions and sales are an integral part of our strategy, so we will continue to do so, says Reitan.

– We are going to make some sales in areas that are less strategically important for us. And then we will make acquisitions in areas that will be important in the future, both in renewable and low carbon, but also in some of the most important geographies for oil and gas. We have the Norwegian continental shelf, Great Britain, the USA and Brazil as the most important geographies we focus on, says the CFO.