Report
Allen Good
EUR 850.00 For Business Accounts Only

Morningstar | Equinor Expects Further Improvement in Returns and Cash Generation

Like peers, Equinor has focused on cost-cutting in recent years to adapt its portfolio to the lower oil price environment. Its efforts have largely paid off as a host of operational efficiency improvement projects have reduced dividend break-even levels to $40/bbl Brent, according to our estimates. Going forward, Equinor expects further improvement in returns and cash flow generation as its queue of major project startups slated between 2019 and 2025 collectively break-even at $30/bbl oil while delivering 3% compound annual volume growth. The Norwegian Continental Shelf, where Equinor has a wealth of operating experience, remains central to its strategy. Successful cost reductions of existing projects along with recent discoveries like the prolific and low-cost Johan Sverdrup (upward of 3 billion boe) have left Equinor with a large queue of low break-even, high return projects to drive the bulk of its growth. Furthermore, it continues to improve recoveries from existing assets while maintaining a deep exploration opportunity set that should allow it to capitalize on existing infrastructure to add future volumes at low cost. Internationally, Equinor has applied its best practices developed on the NCS to drive growth and improve margins, which has contributed to the improvement in overall financial performance. Its onshore U.S. assets have also benefited from industrywide cost deflation and efficiency gains. New project startups during the next three years in Brazil, the North Sea, and Gulf of Mexico create an opportunity for Equinor to leverage its offshore operating experience to generate additional volume growth. Long term, Equinor's position in Brazil holds the greatest opportunity for growth outside of the NCS. Through a combination of potential exploration success, new project startups, and improved recovery on acquired mature assets, Equinor estimates it can grow volumes to upward of 500 mboed by 2030 from a little less than 100 mboed, currently.
Underlying
Equinor ASA

Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Allen Good

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