Equinor halts U.S. land activities as part of $3B cost-reduction plan

Equinor presented an updated outlook for 2020 and an approximately $3 billion action plan to strengthen the financial resilience. Company presents updated outlook for 2020 and an around USD 3 billion action plan. Equinor has started to implement measures to reduce operating costs. The companies have signed a Memorandum of Understanding on digital collaboration.

The market impacted by the COVID-19 and low commodity prices. Equinor and partner Neptune have struck oil in the Sigrun East prospect in the North Sea. In 2019 Equinor purchased goods and services worth NOK 161.6 billion from more than 9,000 suppliers globally. Equinor says the company can be organic cash flow neutral before capital distribution in 2020.

The oil price around $25/bbl for the remaining part of the year. An updated outlook is expected to be presented to the market by the end of March 2020. The collaboration is expected to entail co-innovation across the whole value chain. Exploring near existing infrastructure we prove resources that can be profitably realized.

Reducing organic capex for 2020 from $10-11 billion to approximately $8.5 billion, a reduction of around 20%. Equinor can be organic cash flow neutral(1) before capital distribution in 2020. Equinor has a strong balance sheet and is in a good position to deal with the current circumstances. NOK 113 billion, i.e. 70% of total purchases, went to suppliers with a Norwegian billing address.

“We are already collaborating closely in the Open Subsurface Data Universe (OSDU) initiative”, said Torbjorn F. Folgero, chief digital officer in Equinor ASA.

It reducing exploration activity for 2020 from approximately $1.4 billion to approximately $1 billion. Company now taking actions to remain resilient in a period of low prices. The average CO emissions per produced unit on the Norwegian continental shelf is around half. A competitive supply industry is highly important for Norway and for Equinor.

Company reducing operating costs for 2020 by approximately $700 million compared to original estimates. The share buy-back programme of up to USD 5 billion, intended to be executed in the market until 2022. Mutual benefits as both companies have applied cloud-based digital solutions. Equinor’s goal is to reduce total greenhouse gas emissions from operated fields and onshore facilities in Norway.

Reductions in organic capex are driven by a strict process of prioritization where flexibility of cost and schedule for sanctioned. Company announced 5 September 2019 together with the launch of the first tranche which was executed in the market. Such collaborations are increasingly important to strengthen safety, reduce carbon emissions.

Within U.S. onshore activities, drilling and completion activities are being halted to produce the volumes at a later period. Company said that we aim to be an industry leader on carbon-efficient production. It reducing investments significantly for 2020. A proportionate share of the Norwegian State holding will as planned be redeemed.

These cost reductions come in addition to the already announced suspension of buy-back under the share buy-back program until further notice. Equinor announced 6 February 2020 its intention to launch a second tranche of around USD 675 million. The agreement will be further detailed on a project basis. Sigrun East contributes towards this end.

The second tranche of around $675 million, including the Norwegian State share, intended to be launched from around 18 May to 28 October 2020. It will enable the companies an agile foundation to explore specific digital initiatives and projects. Calculations so far indicate that we will manage to produce the oil with carbon emissions.

It will not be executed as previously planned. It included the Norwegian State share, from around 18 May to 28 October 2020. Open Innovation is key to accelerating digital innovation across the energy industry. The strategy remains firm, and it now taking actions to further strengthen resilience in this situation.

President and CEO of Equinor ASA, Eldar Saetre says “Equinor is in a strong financial position to handle market volatility and uncertainty”.

Company implemented measures to reduce the risk of spreading the corona virus. Equinor recently increased its 2025 improvement ambition by 50%, from 2 to 3 billion USD. Exploration wells 15/3-12S and 15/3-12AT2 in production licence PL025/187 were drilled some 11 kilometres south-east of the Gudrun field.

This is a recognition of the good work done by the Norwegian suppliers. It have so far been able to maintain production at all fields. The main well proved oil in three zones in moderate-quality sandstone in the Hugin formation. Equinor’s total procurements increased from NOK 141.7 billion to NOK 161.6 billion from 2018 to 2019.

Equinor has over the past years realized significant improvements. It mainly due to scaling digital solutions across our global portfolio faster than expected. In 2014 Equinor needed an average oil price of around $100/bbl to be organic cash flow. The Sigrun East wells are follow-up wells to the Sigrun appraisal well (15/3-11) drilled in 2018.

Safe operations remain our first priority in this situation. The speed of implementation of new digital solutions has already delivered a cashflow impact. The aim was to prove extra resources and clarify the commercial basis. This is related to the high project activity, increased exploration.

With the measures now being implemented, Equinor can be organic cash flow neutral before capital distribution in 2020. Under the current market conditions, Equinor is suspending buy-back under the share buy-back programme. The wells were drilled by the West Phoenix drilling rig to a vertical depth (TD) of 3810 metres.

The rig will now move to PL889 in the Norwegian Sea to drill a new exploration well. Equinor operated fields were put in production, including the giant Johan Sverdrup field. The wells were drilled as sole risk wells by Equinor Energy AS (75%) and Neptune Energy Norge AS (25%). The average oil price around $25/bbl for the remaining part of the year.

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