6-K 1 eqnr4q20_6k.htm EQUINOR FOURTH QUARTER 2020 REPORT fsrq42020
 
 
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
 
10 February 2021
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
 
contains a report of the fourth
 
quarter 2020 results of Equinor
 
ASA.
 
 
Equinor fourth quarter 2020
 
2
Equinor fourth quarter 2020
 
and year end results
 
Equinor reports adjusted earnings of positive USD 0.76 billion and negative USD 0.55 billion
after tax in the fourth quarter of 2020.
 
IFRS net operating income was negative USD 0.99
billion and the IFRS net income was negative USD 2.41 billion, following net impairments of
USD 1.30 billion and a write down of USD 0.98 billion related to the Tanzania
 
LNG project.
 
2020 was characterised
 
by:
 
 
Results impacted by
 
low oil and gas prices
 
 
Solid operational
 
performance during extraordinary
 
circumstances
 
Positive cash flow in
 
a low-price environment
 
Delivering USD 3.7
 
billion in capex and
 
cost reductions,
 
well above ambition for
 
the action plan to strengthen
 
financial resilience
 
Progressing and
 
capturing value within
 
renewables
 
Setting ambition to
 
be a net-zero energy company
 
by 2050 to create value
 
as a leader in the energy
 
transition
 
“Our results are impacted
 
by the market turmoil
 
during the year,
 
but with strong cost
 
improvements and capital
 
discipline we delivered
positive net cash
 
flow for the quarter
 
and the full year.
 
During 2020 we have
 
delivered more than 3.7
 
billion dollars in savings,
 
well
above our ambition
 
for the action plan we laun
 
ched in March to strengthen
 
financial resilience.
 
We are well position
 
ed for value
creation and strong cash
 
flow in 2021 and the coming
 
years,” says Anders
 
Opedal,
 
President and CEO of Equinor
 
ASA.
 
“I am impressed
 
by how the organisation
 
has responded, delivering
 
strong operational
 
performance and production
 
growth in a long-
lasting challenging situation
 
during the pandemic. We
 
are increasing production
 
volumes from Johan Sverdrup
 
even further,
 
and we
used our flexibility to
 
have high gas production
 
as
 
gas prices increased in
 
the quarter. In addition
 
,
 
we have
 
started production from
Snorre Expansion ahead
 
of time and
 
well below cost estimates
 
,” says Opedal.
 
“Equinor is committed
 
to ensuring long-term competitiveness
 
and creating value as
 
a leader in the energy
 
transition, setting an
 
ambition to be a net-zero
 
energy company by 2050.
 
During 2020 we delivered
 
significant progress
 
in our renewables portfolio
 
,
 
taking the investment
 
decision for Dogger Bank
 
A and B, winning the
 
largest ever offshore
 
wind award in the US,
 
starting construction
 
at Hywind Tampen
 
and capturing value from transactions.
 
We are also taking action
 
s
 
to optimise within oil and gas,
 
building a more
robust portfolio for the
 
future, but resulting in
 
a write down in Tanzania
 
and an impairment
 
related to an operated
 
US onshore asset in
the quarter,” says Opedal
 
.
 
Adjusted earnings [5]
 
were USD 0.76
 
billion in the fourth quarter,
 
down from USD 3.55
 
billion in the same period
 
in 2019.
 
Adjusted
earnings after tax [5]
 
were negative USD 0.55 billion,
 
down from USD 1.19
 
billion in the same period
 
last year.
 
Low prices for liquids
impacted the earnings
 
for the quarter.
 
Equinor launched an
 
action plan of USD 3 billion
 
in March 2020 to strengthen
 
financial resilience, including
 
a reduction in operating
costs of USD 0.70 billion.
 
Delivery on the plan resulted
 
in savings of more than
 
USD 3.7
 
billion, including a reduction
 
in fixed operating
costs of around USD 1 b
 
illion. Unit production
 
costs are reduced by
 
5%
 
since 2019, realising the
 
2021 ambition already in
 
2020.
 
In the E&P Norway segment
 
,
 
Equinor realised weaker
 
liquids prices and the
 
production was reduced
 
mainly as a result of turnarounds
moved to fourth quarter
 
due to the ongoing pandemic.
 
Results in the E&P International
 
segment were impacted
 
by low prices and the
 
impairment of the Tanzania
 
LNG project of
 
USD 0.98 billion.
 
The E&P USA
 
segment was also
 
impacted by weak prices,
 
partially offset by significant
 
reductions in operating
costs.
 
The Marketing, midstream
 
and processing segment
 
captured value from
 
strong trading results from
 
gas to Europe, partially offset
 
by
low refinery margins
 
and shutdown of production
 
at Hammerfest
 
LNG plant.
 
New energy solutions
 
delivered high availability
 
on offshore wind assets.
 
A capital gain of around
 
USD 1 billion is expected to
 
be
booked from the
 
divestment of a 50% non
 
-operated interest of the
 
offshore wind projects
 
Empire Wind and Beacon
 
Wind in the US.
 
A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
3
capital gain from the
 
farm down of 10% equity interest
 
in Dogger Bank A and
 
B in the UK is expected
 
to be booked in the first
 
quarter
of 2021.
 
IFRS net operating
 
income was negative
 
USD 0.99 billion in the fourth
 
quarter, down from
 
positive USD 1.52 billion
 
in the same period
in 2019.
 
IFRS net income was negative
 
USD 2.42 billion in the fourth
 
quarter, compared
 
to negative USD 0.23
 
billion in the fourth
quarter of 2019.
 
Net operating income was
 
negatively impacted by
 
net impairments of
 
USD 1.30 billion,
 
mainly relating to a refinery
 
as
a result of reduced
 
margin assumptions and
 
some increase in cost
 
estimates,
 
and to an operated
 
unconventional onshore
 
asset in
North America due
 
to reclassification as
 
held for sale.
 
 
Equinor
 
delivered total equity
 
production of 2,043
 
mboe per day in the fourth
 
quarter, down from
 
2,198 mboe per day in the
 
same
period in 2019, with
 
a minor increase in gas
 
share due to high flexible
 
production in gas field
 
s.
 
Adjusting for portfolio transactions
 
the
production growth for
 
2020 was 2.4%.
 
In 2020, Equinor
 
completed 34 exploration
 
wells with 16
 
commercial discoveries
 
and 1 well under evaluation.
 
At year end, 12 wells
were ongoing. Adjusted
 
exploration expenses in
 
the fourth quarter were USD 1.25
 
billion,
 
compared to USD 0.44 billion
 
in the same
quarter in 2019.
 
The proved reserves
 
replacement ratio (RRR) was
 
negative 5%
 
in 2020,
 
following capital discipline
 
and the prioritisation of financial
flexibility during market
 
uncertainty,
 
with a three-year average of
 
95%. With 5.26 billion
 
barrels in proved reserves,
 
Equinor’s reserves
to production ratio (R/P)
 
was 7.4 years.
 
Cash flows provided
 
by operating activities
 
before taxes paid and changes
 
in working capital amounted
 
to USD 14.0
 
billion in 2020,
compared to USD 21.8
 
billion in 2019.
 
Organic capital expenditure
 
[5] was USD 7.8 billion
 
for 2020.
 
At year end, net debt to
 
capital
employed
 
(1)
 
was 31.7%, stable from 31.6
 
%
 
at the end of the third
 
quarter of 2020.
 
Following the implementation
 
of IFRS 16, net debt
to capital employed
(1)
 
was 37.3%.
 
The board of directors
 
proposes to the annual general
 
meeting a cash dividend
 
of USD 0.12 per share
 
for the fourth quarter 2020.
 
 
Average CO2-emissions
 
from Equinor’s operated
 
upstream production,
 
on a 100% basis, was 8.0
 
kg per barrel in 2020.
 
 
The twelve-month average
 
Serious Incident Frequency
 
(SIF) for 2020 was 0.
 
5,
 
down from 0.6
 
in 2019. The twelve-month
 
average
Recordable Injury Frequency
 
(TRIF) was 2.3 for
 
2020, compared to
 
2.5 in 2019.
 
 
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million, unless stated otherwise)
2020
2019
Change
(989)
(2,019)
1,516
N/A
Net operating income/(loss)
(3,423)
9,299
N/A
756
780
3,550
(79%)
Adjusted earnings [5]
3,938
13,484
(71%)
(2,416)
(2,124)
(230)
>(100%)
Net income/(loss)
(5,496)
1,851
N/A
(554)
271
1,186
N/A
Adjusted earnings after tax [5]
924
4,925
(81%)
2,043
1,994
2,198
(7%)
Total equity
 
liquids and gas production (mboe
 
per day) [4]
2,070
2,074
(0%)
40.6
38.3
56.5
(28%)
Group average liquids price (USD/bbl)
 
[1]
36.5
56.0
(35%)
1
 
This is a non-GAAP figure. Comparison
 
numbers and reconciliation to IFRS
 
are presented in the table Calculation
 
of capital employed and
net debt to capital employed ratio as
 
shown under the Supplementary
 
section in the report.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
4
GROUP REVIEW
Fourth quarter 2020
Total equity
 
liquids and gas production
 
[4] was 2,043 mboe
 
per day in the fourth quarter
 
of 2020,
 
down 7%
 
compared to 2,198
mboe per day in the
 
fourth quarter of 2019 mainly
 
due to expected natural
 
decline, turnarounds for
 
several fields especially
 
on the
Norwegian continental
 
shelf (NCS)
 
and the shutdown at
 
the Hammerfest LNG plant
 
.
 
Production halt in Brazil
 
and the divestment of
the Eagle Ford asset
 
in the E&P USA segment
 
in the fourth quarter
 
of 2019 contributed to
 
the decrease.
 
New fields on the NCS,
higher flexible gas off
 
-take and new wells in
 
the US onshore partially
 
offset the decrease.
 
 
 
Total entitlement
 
liquids and gas production
[3] was 1,912 mboe
 
per day in the fourth quarter
 
of 2020,
 
down 7%
 
compared to
 
2,056 mboe per day
 
in the fourth quarter of 2019
 
.
 
The production was negatively
 
influenced by the factors
 
mentioned above,
 
partially
offset by lower effects
 
from production sharing
 
agreements (PSA) [4],
 
and lower US royalty
 
volumes. The net effect
 
of PSA and US
royalties was 131 mboe
 
per day in total in the fourth
 
quarter of
 
2020 compared to 142
 
mboe per day in the fourth
 
quarter of 2019.
 
Quarters
Change
Condensed income statement under IFRS
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(unaudited, in USD million)
2020
2019
Change
11,746
11,339
15,169
(23%)
Total revenues
 
and other income
45,818
64,357
(29%)
(5,533)
(5,307)
(6,603)
(16%)
Purchases [net of inventory variation]
(20,986)
(29,532)
(29%)
(2,156)
(2,368)
(2,405)
(10%)
Operating and administrative expenses
(9,537)
(10,469)
(9%)
(3,478)
(4,798)
(4,165)
(17%)
Depreciation, amortisation and net
 
impairment losses
(15,235)
(13,204)
15%
(1,569)
(886)
(480)
>100%
Exploration expenses
(3,483)
(1,854)
88%
(989)
(2,019)
1,516
N/A
Net operating income/(loss)
(3,423)
9,299
N/A
(2,416)
(2,124)
(230)
>(100%)
Net income/(loss)
(5,496)
1,851
N/A
Net operating income
was negative USD 989
 
million in the fourth quarter
 
of 2020,
 
compared to positive
 
USD 1,516 million in the
fourth quarter of 2019.
 
The decrease was mainly
 
due to lower liquids
 
and gas prices and
 
write down of previously
 
capitalised well
costs of
 
USD 982 million
 
related to the Tanzania
 
LNG project. Lower
 
production for liquids
 
and gas in addition
 
to weak refinery margins
contributed to the decrease
 
.
 
Lower depreciation expenses
 
and operating expenses
 
partially offset the
 
decrease.
 
In the fourth quarter
 
of 2020, net operating income
 
was negatively impacted
 
by impairments
2
 
of USD 1,299 million
 
and inventory
hedging effects
 
of USD 315 million.
 
In the fourth quarter
 
of 2019, net operating income
 
was negatively impacted
 
mainly by net impairments
 
of USD 1,425 million which
includes USD 23 million
 
related to associated companies,
 
changes in fair value of
 
derivatives and inventory
 
hedge contracts of
 
USD 282 million
 
and higher volumes
 
in inventory with unrealised
 
profit written down to
 
production cost of USD 591
 
million. Net
operating income was
 
positively affected
 
by a net gain from
 
the sale of assets of USD 185
 
million.
 
2
 
For more information, see note 2
 
Segments to the Condensed
 
interim financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
5
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
11,985
10,909
15,336
(22%)
Adjusted total revenues and other
 
income
45,908
63,335
(28%)
(5,298)
(5,203)
(6,048)
(12%)
Adjusted purchases [6]
(21,154)
(29,024)
(27%)
(2,184)
(2,179)
(2,496)
(13%)
Adjusted operating and administrative
 
expenses
(9,159)
(9,850)
(7%)
(2,495)
(2,445)
(2,806)
(11%)
Adjusted depreciation, amortisation
 
and net impairment
losses
(9,520)
(9,775)
(3%)
(1,252)
(302)
(437)
>100%
Adjusted exploration expenses
(2,138)
(1,203)
78%
756
780
3,550
(79%)
Adjusted earnings [5]
3,938
13,484
(71%)
(554)
271
1,186
N/A
Adjusted earnings after tax [5]
924
4,925
(81%)
For items impacting net
 
operating income/(loss),
 
see Use and reconciliation
 
of non-GAAP financial
 
measures in the Supplementary
disclosures.
 
Adjusted total revenues
 
and other income
were USD 11,985
 
million in the fourth
 
quarter of 2020 compared
 
to USD 15,336 million
in the fourth quarter
 
of 2019.
 
The decrease was mainly
 
due to lower average prices
 
for liquids and gas and lower
 
production,
especially for liquids.
 
Adjusted purchases
 
[6] were USD 5,298 million
 
in the fourth quarter
 
of 2020,
 
compared to USD 6,048
 
million in the fourth quarter
 
of
2019. The decrease
 
was mainly due to lower
 
average prices for liquids
 
and gas,
 
partially offset by higher
 
third-party volumes for
liquids.
 
Adjusted operating and administrative
 
expenses
were USD 2,184 million
 
in the
 
fourth quarter of 2020
 
,
 
compared to USD 2,496
million in the fourth
 
quarter of 2019. The decrease
 
was mainly due to lower
 
transportation costs, especially
 
in the MMP segment,
primarily due to lower
 
freight rates on shipping
 
of liquids in addition to
 
decreased production
 
in the E&P International
 
segment. Lower
operation and maintenance
 
costs due to reduced
 
activity in the E&P International
 
and E&P USA segments,
 
the divestment of the
Eagle Ford asset
 
in the E&P USA segment,
 
and a settlement with
 
COSL in the fourth
 
quarter of 2019 contributed
 
to the decrease.
Increased Gassled
 
removal cost in the E&P Norway
 
segment partially
 
offset the decrease.
 
 
Adjusted depreciation, amortisation
 
and net impairment
 
losses
were USD 2,495 million
 
in the fourth quarter of 2020,
 
compared
to USD 2,806 million
 
in the fourth quarter
 
of 2019. The decrease
 
was mainly due to lower
 
production in all segments
 
and higher
proved reserves estimates
 
especially in the E&P International
 
and E&P USA segments. Lower
 
depreciation basis
 
resulting from net
impairments in previous
 
periods contributed
 
to the decrease. Higher
 
investments partially offset
 
the decrease.
 
 
Adjusted exploration expenses
were USD 1,252
 
million in the fourth quarter
 
of 2020,
 
compared to USD 437 million
 
in the fourth
quarter of 2019.
 
The increase was mainly due
 
to write down of previously
 
capitalised well costs
 
of USD 982 million related
 
to the
Tanzania
 
LNG project and a lower
 
portion of exploration
 
expenditures being
 
capitalised. Lower drilling,
 
seismic and field development
costs partially offset
 
the increase. For more information,
 
see the table titled Adjusted
 
exploration expenses
 
in the Supplementary
disclosures.
 
After total adjustments
3
 
of USD 1,746 million
 
to net operating income,
Adjusted earnings
 
[5] were USD 756 million
 
in the fourth
quarter of 2020,
 
a 79%
 
decrease from USD 3,550
 
million in the fourth
 
quarter of 2019.
 
Adjusted earnings after
 
tax
 
[5] were negative USD 554
 
million in the fourth quarter
 
of 2020,
 
which reflects an effective
 
tax rate on
adjusted earnings of
 
173.2%, compared
 
to 66.6%
 
in the fourth quarter
 
of 2019. The increase
 
in the effective tax rate
 
was mainly due
to decreased adjusted
 
earnings in the fourth
 
quarter of 2020 in entities
 
with lower than average
 
tax rates, and in entities
 
without
recognised taxes, partially
 
offset by the temporary
 
changes to Norway’s
 
petroleum tax system as
 
described in note 8
 
Impact of
pandemic and oil
 
price decline to the
 
Condensed interim financial
 
statements.
 
Cash flows provided by operating
 
activities
increased by USD 570 million
 
compared to the fourth
 
quarter of 2019. The increase
was mainly due to decreased
 
tax payments, partially
 
offset by
 
lower liquids and gas
 
prices and a change in working
 
capital.
 
 
3
 
For items impacting net operating income,
 
see Use and reconciliation
 
of non-GAAP financial measures
 
in the Supplementary disclosures.
 
 
 
 
 
Equinor fourth quarter 2020
 
6
Cash flows used in investing
 
activities
increased by USD 577 million
 
compared to the fourth quarter
 
of 2019. The increase
 
was
mainly due to reduced
 
proceeds from sale of
 
assets, increased derivative
 
payments and increased
 
financial investments,
 
partially
offset by lower capital
 
expenditures.
 
 
 
Cash flows provided by financing
 
activities
increased by USD 379 million
 
compared to the fourth quarter
 
of 2019. The increase
was mainly due to decreased
 
dividend paid, increased
 
collateral received and
 
increased short-term
 
debt,
 
partially offset by no
 
new
finance debt in the quarter.
 
 
 
Total cash
 
flows
increased by USD 370 million
 
compared to the fourth
 
quarter of 2019.
 
 
Free cash flow
 
[5] in the fourth quarter of 2020
 
was USD 1,363 million compared
 
to negative USD 513 million
 
in the fourth quarter of
2019. The increase
 
was mainly due to decreased
 
tax payments and decreased
 
dividend paid,
 
partially offset by lower
 
liquids and gas
prices and reduced
 
proceeds from sale of assets.
 
Full year 2020
 
Net operating income
was negative USD 3,423
 
million in 2020 compared
 
to positive USD 9,299
 
million in 2019. The decrease
 
was
mainly due to lower
 
liquids and gas prices, net
 
impairments
4
 
primarily related to
 
reduced price assumptions
5
in addition to negative
reserve updates
 
and write down of previously
 
capitalised well costs of
 
USD 982 million related
 
to the Tanzania
 
LNG project.
 
 
In 2020, net operating
 
income was negatively impacted
 
mainly by net impairments
4
 
of USD 7,053
 
million
 
and provisions of
 
USD 296 million.
 
In 2019, net operating
 
income was negatively affected
 
mainly by net impairments
 
of USD 4,103 million which
 
includes USD 23 million
related to associated
 
companies, provisions
 
of USD 485 million
 
and a change in accounting
 
policy of USD 123 million
 
and net overlift
effect of USD 134
 
million. Net operating income
 
was positively impacted by a
 
net gain on the sale of assets
 
of USD 1,184 million and
operational storage
 
effects of USD 121 million
 
in 2019.
 
Adjusted total revenues
 
and other income
were USD 45,908
 
million in 2020 compared
 
to USD 63,335 million
 
in 2019.
 
The
decrease was mainly
 
due to lower average
 
prices for liquids and
 
gas.
 
Adjusted purchases
[6] were USD 21,154
 
million in 2020 compared
 
to USD 29,024 million in 2019.
 
The decrease was mainly
 
due to
lower average prices
 
for liquids and gas,
 
partially offset by higher
 
volumes for liquids.
 
Adjusted operating and administrative
 
expenses
were
 
USD 9,159
 
million in 2020, a decrease
 
of USD 691
 
million compared to
2019. The decrease
 
was mainly due to the NOK/USD exchange
 
rate development and
 
the divestment of the
 
Eagle Ford asset in the
E&P USA segment in
 
the fourth quarter of 2019.
 
Lower royalties and
 
production fees driven by lower
 
volumes and prices in addition
 
to
lower activity level contributed
 
to the decrease. Higher
 
transportation cost for
 
liquids mainly due to higher
 
freight rates on shipping in
the MMP segment partially
 
offset the decrease.
 
 
Adjusted depreciation, amortisation
 
and net impairment
 
losses
were
 
USD 9,520 million in 2020
 
,
 
down USD 255 million c
 
ompared
to 2019. The decrease
 
was mainly due to higher
 
proved reserves estimates
 
for several fields and
 
lower depreciation basis
 
resulting
from net impairments
 
in previous periods. Lower
 
field specific production
 
especially in the E&P International
 
segment contributed to
the decrease. Higher
 
investments mainly
 
in the US in addition to
 
ramp-up of new fields
 
especially on the NCS partially
 
offset the
decrease.
 
Adjusted exploration expenses
increased by USD 936
 
million to USD 2,138 million
 
in 2020,
 
primarily due to write
 
down of
previously capitalised
 
well costs of USD 982 million
 
related to the Tanzania
 
LNG project and a lower
 
portion of exploration
 
expenses
being capitalised
 
this year.
 
Lower seismic,
 
drilling,
 
field development and
 
other costs partially offset
 
the increase. For more
information, see table
 
titled Adjusted exploration
 
expenses in the Supplementary
 
disclosures.
 
After total adjustments
6
 
of USD 7,361 million
 
to net operating income,
Adjusted earnings
 
[5] were USD 3,938
 
million in 2020,
 
down
71%
 
from USD
 
13,484 million in
 
2019.
 
Adjusted earnings aft
 
er tax
 
[5] were USD 924
 
million in full year of 2020,
 
compared to USD 4,925
 
million in the full year
 
of 2019.
The effective
 
tax rate on adjusted earnings
 
was 76.5% in full year of
 
2020, compared to an effective
 
tax rate of 63.5%
 
in full year of
2019. The increase
 
in the effective tax rate
 
was mainly due to decreased
 
adjusted earnings in 2020
 
in entities with lower than
 
average
tax rates, and in entities
 
without recognised taxes,
 
partially offset by the
 
temporary changes to
 
Norway’s petroleum tax system
 
as
4
 
For more information, see note 2
 
Segments to the Condensed
 
interim financial statements.
5
 
For more information, see note 6
 
Property, plant
 
and equipment and intangible assets
 
to the Condensed interim financial
 
statements.
 
6
 
For items impacting net operating
 
income, see Use and reconciliation
 
of non-GAAP financial measures
 
in the Supplementary disclosures
 
.
 
 
Equinor fourth quarter 2020
 
7
described in note
 
8 Impact of pandemic
 
and oil price decline to the
 
Condensed interim financial
 
statements, in addition
 
to changes in
provision for best estimates
 
for uncertain
 
tax positions.
 
 
 
Equinor fourth quarter 2020
 
8
Based on adjusted earnings
 
after tax and average capital
 
employed, calculated
return on average capital
 
employed (ROACE)
 
[5]
was 1.8% for the
 
12-month period ended
 
31 December 2020
 
and 9.0%
 
for the 12-month period
 
ended 31 December 2019.
 
Organic capital expenditures
 
[5] amounted to USD 7.8
 
billion for the year ended
 
2020, compared to
 
guidance for 2020 of
 
USD 8.5 billion. Total
 
capital expenditures were
 
USD 9.8 billion in 2020.
 
Estimated
Proved reserves
at the end of 2020 were
 
5.260 billion barrels
 
of oil equivalent (boe),
 
a net decrease of 744 million
 
boe
compared to 6.004
 
billion boe at the end of 2019.
 
The decrease was mainly
 
due to negative revisions
 
of net 171 million boe
 
,
 
strongly influenced
 
by the reduction in commodity
 
prices in
2020.
 
Negative revisions totaled
 
388 million boe,
 
of which 194 million
 
boe was due to the reduction
 
in prices. Positive reserves
revisions and improved
 
oil recovery (IOR) efforts
 
of 217 million boe,
 
extensions and discoveries
 
of 131 million boe and purchases
 
of 6
million boe added to
 
proved reserves in
 
2020.
 
The negative effect
 
of the entitlement production
 
was 710 million boe in 2020,
 
compared to 698 million
 
boe in 2019.
 
The reserve replacement
 
ratio (RRR)
was negative 5
 
%
 
in 2020 compared to
 
positive 76% in 2019
 
.
 
The RRR measures the
estimated proved reserves
 
added to the reserve base
 
,
 
including the effects
 
of sales and purchases,
 
relative to the amount
 
of oil and
gas produced. The
 
reduction in RRR from last
 
year was primarily due
 
to
 
negative revisions caused
 
by lower prices and less
 
proved
reserves added from new
 
projects sanctioned. The
 
average three-year replacement
 
ratio (including the effects
 
of sales and
purchases), was
 
95%
 
at the end of 2020 compared
 
to 147%
 
at the end of 2019.
 
All numbers are preliminary
 
and including equity accounted
 
entities.
 
Cash flows provided by operating
 
activities
 
decreased by USD 3,362 million
 
compared to 2019. The
 
decrease was mainly
 
due to
lower liquids and
 
gas prices and a change in
 
working capital, partially
 
offset by decreased
 
tax payments and increased
 
cash flow from
derivatives.
 
 
Cash flows used in investing
 
activities
 
increased by USD 1,498 million
 
compared to 2019.
 
The increase was mainly due
 
to
increased financial
 
investments, reduced
 
proceeds from sale
 
of assets and increased
 
derivative payments
 
,
 
partially offset by lower
cash flow used for business
 
combinations and capital expenditures.
 
 
 
Cash flows provided by financing
 
activities
 
increased by USD 8,487 million
 
compared to 2019.
 
The increase was mainly due
 
to
bond issues, increased
 
short-term debt, decreased
 
dividend paid and increased
 
collateral payments related
 
to derivatives, partially
offset by increased
 
repayment of
 
finance debt and increased
 
payments related to
 
the share buy-back programme.
 
 
 
Total cash
 
flows
 
increased by USD 3,627
 
million compared to 2019.
 
 
Free cash flow
[5] for 2020 was USD 85 million
 
including USD 332 million
 
received from the Lundin
 
divestment included in the
 
line
item (Increase)/decrease
 
in the Consolidated statement
 
of cash flow, compared
 
to negative USD 175 million
 
in
2019. The increase
 
was mainly due to decreased
 
tax payments, lower cash
 
flow used for business combinations,
 
lower capital
expenditures, decreased
 
dividend paid and increased
 
cash flow from derivatives,
 
partially offset
 
by lower liquids and gas
prices, reduced proceeds
 
from sale of assets and
 
increased payments related
 
to the share buy-back
 
programme.
 
 
 
 
 
Equinor fourth quarter 2020
 
9
OUTLOOK
 
 
Organic capital expenditures
 
[5] are estimated
 
at an annual average
 
of USD 9-10 billion for
 
2021-2022
7
 
 
Equinor intends to continue
 
to mature its attractive portfolio
 
of exploration assets and
 
estimates a total
exploration activity
 
level
of around USD 0.9 billion
 
for 2021,
 
excluding signature bonuses,
 
accruals and field development
 
costs
 
 
Equinor’s ambition is
 
to keep the
unit of production cost
 
in the top quartile of
 
its peer group
 
 
For the period 2020
 
–2026,
production growth
 
[7] is expected
 
to come from new projects
 
resulting in around
 
3% CAGR
(Compound Annual
 
Growth Rate) based on
 
current forecast
 
 
Scheduled maintenance
 
activity
 
is estimated to reduce
 
equity production by around
 
50 mboe per day for the
 
full year of 2021
 
 
Production
[7] for 2021 is estimated
 
to be around 2% above
 
2020 level
 
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.
 
We continue to
 
monitor the
impact of Covid-19
 
on our operations. Deferral
 
of production to create
 
future value, production
 
cuts, gas off-take,
 
timing of new
capacity coming on
 
stream, operational regularity,
 
the ongoing impact of
 
Covid-19 and activity level
 
in the US onshore represent
 
the
most significant risks
 
related to the foregoing production
 
guidance. There has been
 
considerable uncertainty
 
created by the Covid-19
pandemic and we are
 
still unable to predict the
 
ultimate impact of this
 
event,
 
including impact on general
 
economic conditions
worldwide. Our future
 
financial performance,
 
including cash flow and
 
liquidity, will
 
be impacted by the
 
extent and duration
 
of the
current market conditions,
 
the development in realised
 
prices, including price
 
differentials and the
 
effectiveness of actions
 
taken in
response to the pandemic.
 
For further information,
 
see section Forward-looking
 
statements.
7
 
USD/NOK exchange rate assumption
 
of 9.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
10
EXPLORATION & PRODUCTION NORWAY
 
Fourth quarter 2020 review
 
Average daily production
 
of liquids and gas
 
decreased by 2% to
 
1,314 mboe per day in the
 
fourth quarter of 2020,
 
compared to
 
1,346 mboe per day
 
in the fourth quarter of 2019.
 
The decrease was mainly
 
due to turnarounds, natural
 
decline on Equinor operated
assets and shutdown
 
at the Hammerfest
 
LNG plant,
 
partially offset by
 
ramp-up of new fields
 
and increased flexible gas
 
outtake.
Net operating income
 
was USD 1,803 million
 
in the fourth quarter of 2020 compared
 
to USD 1,476 million in
 
the fourth quarter of
2019.
 
The increase was mainly
 
due to lower impairments,
 
partially offset by lower
 
liquids price.
 
 
In the fourth quarter
 
of 2020, net operating income
 
was negatively impacted
 
by impairment of goodwill
 
of USD 41 million. In the
 
fourth
quarter of 2019, net
 
operating income was negatively
 
impacted by impairment
 
of assets of USD 1,284
 
million.
 
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to a settlement with COSL in
 
the fourth quarter of
 
2019 in
addition to reduced
 
transportation cost in
 
the fourth quarter of 2020
 
.
 
Adjusted depreciation, amortisation
 
and net impairment losses
decreased mainly due
 
to lower field specific
 
production and lower depreciation
 
basis resulting from net
 
impairments in previous
periods. Ramp-up of
 
new fields and higher
 
investments partially offset
 
the decrease. Adjusted
 
exploration expenses
 
decreased mainly
due to lower drilling and
 
seismic costs. Lower portion
 
of exploration expenditure
 
being capitalised partially
 
offset the decrease.
 
 
After total adjustments
 
of USD 38 million to net
 
operating income,
Adjusted
 
earnings
[5] were USD 1,841
 
million in the fourth quarter
of 2020, compared
 
to USD 2,738 million in the
 
fourth quarter of 2019.
 
 
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
3,891
2,763
4,944
(21%)
Adjusted total revenues and other
 
income
11,962
17,951
(33%)
(770)
(699)
(852)
(10%)
Adjusted operating and administrative
 
expenses
(2,867)
(3,274)
(12%)
(1,187)
(1,126)
(1,210)
(2%)
Adjusted depreciation, amortisation
 
and net impairment
losses
(4,286)
(4,155)
3%
(94)
(165)
(142)
(34%)
Adjusted exploration expenses
(418)
(478)
(12%)
1,841
773
2,738
(33%)
Adjusted earnings/(loss) [5]
4,391
10,043
(56%)
For comparable IFRS figures,
 
see note 2 Segments
 
to the Condensed interim financial
 
statements. For items
 
impacting net operating
income/(loss), see Use
 
and reconciliation of non
 
-GAAP financial measures
 
in the Supplementary
 
disclosures.
Full year 2020
 
Net operating income
 
for E&P Norway was USD
 
3,097 million
 
in 2020 compared to USD 9
 
,631 million in 2019.
 
The decrease was
mainly due to lower
 
liquids and gas transfer
 
prices in the full year of
 
2020.
 
Higher liquids volumes partially
 
offset the decrease.
 
In 2020, net operating
 
income was negatively impact
 
ed by impairments of
 
USD 1,265 million and underlifted
 
volumes of USD 26
million.
 
In 2019, net operating income
 
was negatively impacted
 
by impairment of assets
 
of USD 1,284 million,
 
a negative impact of
USD 81 million from underlifted
 
volumes in the period and
 
an implementation effect
 
of USD 42 million from a
 
change in accounting
policy for lifting imbalances,
 
partially offset by gain
 
on sale of assets of USD 977
 
million.
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to the NOK/USD exchange
 
rate development,
 
a settlement
 
 
Equinor fourth quarter 2020
 
11
with COSL in the
 
fourth quarter of 2019
 
in addition to reduced transportation
 
cost including the reduction
 
in Gassled removal costs.
Adjusted depreciation,
 
amortisation and net impairment
 
losses increased mainly
 
due to ramp-up of new fields
 
and higher investments.
The NOK/USD exchange
 
rate development, lower
 
field specific production
 
and lower depreciation
 
basis resulting from net
impairments in previous
 
periods partially offset
 
the increase. Adjusted
 
exploration expenses
 
decreased mainly due
 
to lower drilling,
seismic and other costs.
 
Lower portion of exploration
 
expenditure being capit
 
alised and a higher portion
 
of exploration expenditure
capitalised in earlier
 
years being expensed this
 
period partially offset
 
the decrease.
 
After total adjustments
 
of USD 1,294 million to net
 
operating income,
Adjusted earnings
[5] were USD 4,391
 
million in 2020, a
decrease of 56% from
 
USD 10,043
 
million in 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
12
EXPLORATION & PRODUCTION INTERNATIONAL
 
In the second quarter
 
of 2020, Equinor changed
 
its internal reporting to management,
 
impacting the composition
 
of Equinor's
operating and reporting
 
segments. Equinor’s
 
upstream activities
 
in the USA are now reported
 
separately to management,
 
and such
information is also considered
 
to be useful to the users
 
of the financial statements,
 
resulting in the exploration
 
and production activities
in the USA being considered
 
a separate operating-
 
and reporting segment as
 
of the second quarter
 
of 2020. Previously these
activities were included
 
in the DPI operating segment
 
and presented as part
 
of the E&P International
 
reporting segment. Prior
segment results have
 
been restated to reflect this
 
change.
 
Fourth quarter 2020 review
 
Average daily equity production
 
of liquids and gas
 
was 340 mboe per day
 
in the fourth quarter of
 
2020 compared to 415
 
mboe per
day in the fourth quarter
 
of 2019. The decrease was
 
primarily due to natural decline
 
in mature fields
 
and repairs on Peregrino
 
(Brazil)
resulting in a production
 
halt.
 
Average daily entitlement
 
production of liquids
 
and gas
was 267 mboe per day
 
in the fourth quarter of
 
2020 compared to 336
mboe per day in the
 
fourth quarter of 2019. The
 
decrease was due to lower
 
equity production partially
 
offset by lower effects
 
from
production sharing agreements
 
(PSA). The net effects
 
from PSA were 73 mboe
 
per day in the fourth quarter
 
of 2020 compared to 78
mboe per day in the
 
fourth quarter of 2019.
 
Net operating income
was negative USD 1,376
 
million in the fourth
 
quarter of 2020 compared
 
to positive USD 53 million
 
in the fourth
quarter of 2019. The
 
decrease was mainly
 
due to write down of previously
 
capitalised well costs
 
of USD 982 million related
 
to the
Tanzania
 
LNG project and lower
 
liquids and gas prices. Lower
 
entitlement productio
 
n
 
in the fourth quarter of
 
2020 contributed to the
decrease. Lower
 
depreciation in addition
 
to lower operating and administrative
 
expenses partially offset
 
the decrease.
 
In the fourth quarter
 
of 2020,
 
net operating income
 
was negatively impacted
 
by impairments of USD 229
 
million. In the fourth
 
quarter
of 2019,
 
net operating income was
 
negatively impacted by impairments
 
of USD 98 million.
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to lower operation, maintenance
 
and transportation expenses
in addition to lower
 
royalties primarily driven
 
by reduced activities and
 
lower production. Adjusted
 
depreciation, amortisation
 
and net
impairment losses decreased
 
mainly due to higher proved
 
reserves estimates, lower
 
production from mature
 
fields in addition to lower
depreciation basis resulting
 
from net impairments
 
in previous periods. Increased
 
production from certain
 
fields partially offset
 
the
decrease. Adjusted
 
exploration expenses increased
 
mainly due to write down
 
of previously capitalised
 
well costs of USD 982 million
related to the Tanzania
 
LNG project and a lower
 
portion of exploration
 
expenditure being capitalised
 
this quarter. Lower
 
drilling and
seismic costs partially
 
offset the increase.
 
After total adjustments
 
of USD 161 million to
 
net operating income,
Adjusted earnings
 
[5] were negative
 
USD 1,215 million in the
fourth quarter of 2020,
 
down from positive USD 192
 
million in the fourth
 
quarter of 2019.
 
 
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
706
820
1,554
(55%)
Adjusted total revenues and other
 
income
3,295
6,130
(46%)
(16)
12
(26)
(39%)
Adjusted purchases
(72)
(34)
>100%
 
(317)
(306)
(396)
(20%)
Adjusted operating and administrative
 
expenses
(1,313)
(1,623)
(19%)
(516)
(511)
(682)
(24%)
Adjusted depreciation, amortisation
 
and net impairment
losses
(2,045)
(2,233)
(8%)
(1,072)
(119)
(258)
>100%
Adjusted exploration expenses
(1,560)
(625)
>100%
(1,215)
(104)
192
N/A
Adjusted earnings/(loss) [5]
(1,695)
1,616
N/A
 
 
 
Equinor fourth quarter 2020
 
13
* Restated to reflect
 
change to segment
For comparable IFRS figures,
 
see note 2 Segments
 
to the Condensed interim financial
 
statements. For items
 
impacting net operating
income/(loss), see Use
 
and reconciliation of non
 
-GAAP financial measures
 
in the Supplementary
 
disclosures.
 
 
Equinor fourth quarter 2020
 
14
Full year 2020
 
Net operating income
for E&P International
 
was negative USD 3,565
 
million in 2020,
 
compared to positive
 
USD 1,471 million in
2019. The negative
 
development was mainly
 
due to lower liquids and
 
gas prices,
 
higher impairments in 2020
 
,
 
write down of previously
capitalised well costs
 
of USD 982 million
 
related to the Tanzania
 
LNG project and
 
lower entitlement production
 
in 2020.
 
In 2020, net operating
 
income was negatively impacted
 
by net impairments of
 
USD 1,933 million. In 2019,
 
net operating income
 
was
negatively impacted
 
by net impairments of USD 38
 
million and an implementation
 
effect of USD 63 million
 
from a change in
accounting policy for
 
lifting imbalances.
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to lower royalties and
 
production fees primarily
 
driven by lower
volumes and prices.
 
Lower operation and maintenance
 
expenses contributed
 
to the decrease. Adjusted
 
depreciation, amortisation
and net impairment
 
losses decreased due to
 
higher proved reserves
 
estimates and lower production
 
from mature fields.
 
New fields
 
on
stream partially offset
 
the decrease.
 
Adjusted exploration expenses
 
increased mainly due
 
to write down of previously
 
capitalised well
costs of USD 982 million
 
related to the Tanzania
 
LNG project and a lower
 
portion of exploration
 
expenditure being capitalised
 
this
period.
 
Lower seismic, drilling and
 
field development costs
 
partially offset the
 
increase.
 
After total adjustments
 
of USD 1,870 million to net
 
operating income,
Adjusted
 
earnings
 
[5] were negative
 
USD 1,695 million in 2020,
down from positive
 
USD 1,616 million in 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
15
EXPLORATION & PRODUCTION USA
 
In the second quarter
 
of 2020, Equinor changed
 
its internal reporting to management,
 
impacting the composition
 
of Equinor's
operating and reporting
 
segments. Equinor’s
 
upstream activities
 
in the USA are now reported
 
separately to management,
 
and such
information is also considered
 
to be useful to the users
 
of the financial statements,
 
resulting in the exploration
 
and production activities
in the USA being considered
 
a separate operating-
 
and reporting segment as
 
of the second quarter
 
of 2020. Previously these
activities were included
 
in the DPI operating segment
 
and presented as part
 
of the E&P International
 
reporting segment.
 
Fourth quarter 2020 review
 
Average daily equity production
 
of liquids and gas
 
was 390 mboe per day
 
in the fourth quarter of
 
2020 compared to 437
 
mboe per
day in the fourth quarter
 
of 2019. The decrease was
 
mainly due to the divestment
 
of the Eagle Ford asset
 
in 2019, planned
maintenance and
 
weather shutdowns in the
 
US offshore.
 
Average daily entitlement
 
production of liquids
 
and gas
decreased slightly to
 
332 mboe per day in the
 
fourth quarter of 2020
compared to 374
 
mboe per day in the fourth
 
quarter of 2019. The decrease
 
was due to lower equity
 
production,
 
slightly offset by lower
effects from US onshore
 
royalty volumes after
 
the divestment of the
 
Eagle Ford asset. The net
 
effects from US royalties
 
were 58
mboe per day in the
 
fourth quarter of 2020 compared
 
to 64 mboe per day
 
in the fourth quarter of 2019.
 
Net operating income
was negative USD 559
 
million in the
 
fourth quarter of 2020
 
compared to positive
 
USD 7 million in the fourth
quarter of 2019. The
 
decrease was mainly
 
due to impairments of
 
assets in the fourth
 
quarter of 2020 in addition
 
to lower production
and lower commodity
 
prices.
 
Lower operating costs
 
due to the divestment
 
of the Eagle Ford asset
 
in the fourth quarter of
 
2019 in
addition to lower
 
depreciation cost partially
 
offset the decrease.
 
 
 
In the fourth quarter
 
of 2020,
 
net operating income
 
was negatively impacted
 
by net impairments of USD 369
 
million, with the largest
effect from unconventional
 
US onshore assets. In the
 
fourth quarter of 2019
 
,
 
net operating income
 
was negatively impacted by loss
 
on
the divestment of
 
unconventional US onshore
 
asset of USD 27 million.
 
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to the divestment of the
 
Eagle Ford asset in the
 
fourth quarter
of 2019. Lower transportation
 
cost due to reduced production
 
volumes in addition
 
to lower production fees
 
driven by lower prices
contributed to the decrease.
 
Adjusted depreciation, amortisation
 
and net impairment
 
losses decreased mainly
 
due to lower
depreciation basis resulting
 
from net impairments
 
in previous periods in addition
 
to higher proved reserves
 
estimates in US offshore.
Adjusted exploration
 
expenses increased
 
mainly due to a lower portion
 
of exploration expenditure
 
being capitalised. Lower
 
field costs
partially offset the
 
increase.
 
 
After total adjustments
 
of USD 387 million to
 
net operating income,
Adjusted earnings
 
[5] were negative
 
USD 172 million in the
fourth quarter of 2020,
 
down from USD 54 million
 
in the fourth quarter
 
of 2019.
 
 
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
644
611
1,060
(39%)
Adjusted total revenues and other
 
income
2,615
4,229
(38%)
(287)
(315)
(395)
(27%)
Adjusted operating and administrative
 
expenses
(1,263)
(1,538)
(18%)
(442)
(469)
(575)
(23%)
Adjusted depreciation, amortisation
 
and net impairment
losses
(1,886)
(2,209)
(15%)
(87)
(20)
(37)
>100%
Adjusted exploration expenses
(161)
(101)
60%
(172)
(193)
54
N/A
Adjusted earnings/(loss) [5]
(696)
381
N/A
 
 
Equinor fourth quarter 2020
 
16
* Restated to reflect
 
this segment
For comparable IFRS figures,
 
see note 2 Segments
 
to the Condensed interim
 
financial statements. For
 
items impacting net operating
income/(loss), see Use
 
and reconciliation of non
 
-GAAP financial measures
 
in the Supplementary.
 
 
Equinor fourth quarter 2020
 
17
Full year 2020
 
Net operating income
for E&P USA was negative
 
USD 3,512 million in 2020
 
compared to negative USD 2,27
 
1
 
million in 2019. The
negative development
 
was mainly due to higher
 
net impairments in 2020
 
in addition to lower liquids
 
and gas prices. This was
 
partially
offset by lower operating
 
and administrative expenses
 
in addition to lower
 
depreciation expenses.
 
In 2020, net operating
 
income was negatively impacted
 
by net impairment losses
 
of USD 2,760 million, mainly
 
due to reduced price
assumptions with the
 
largest effect being on
 
an unconventional US onshore
 
asset. In 2019, net operating
 
income was negatively
impacted by net impairments
 
of USD 2,532 million,
 
with the largest effect
 
on unconventional US onshore
 
assets.
 
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to the divestment of the
 
Eagle Ford asset in the
 
fourth quarter
of 2019. Reduced severance
 
taxes due to lower prices
 
contributed to the decrease.
 
Adjusted depreciation,
 
amortisation and net
impairment losses decreased
 
mainly due to lower depreciation
 
basis resulting from net
 
impairments in previous
 
periods in addition to
higher proved reserves
 
estimates in US offshore.
 
Increased investments
 
and acquired interest in
 
the Caesar Tonga
 
field during 2019
partially offset the
 
decrease. Adjusted exploration
 
expenses increased
 
mainly due to higher drilling costs.
 
Lower seismic, field
development and
 
other costs partially offset
 
the increase.
 
 
After total adjustments
 
of USD 2,816 million to net
 
operating income.
Adjusted
 
earnings
 
[5] were negative
 
USD 696 million in
 
2020,
down from positive
 
USD 381 million in 2019.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
18
MARKETING, MIDSTREAM &
 
PROCESSING
 
Fourth quarter 2020 review
 
Natural gas sales
 
volumes
amounted to 15.0
 
billion standard cubic
 
meters (bcm) in the fourth
 
quarter of 2020, decrease
 
of 0.9 bcm
compared to the
 
fourth quarter of 2019. Of the
 
total gas sales in the fourth
 
quarter of 2020, entitlement
 
gas was 13.2 bcm,
 
down 0.4 bcm from
 
the fourth quarter of 2019.
 
The decrease was mainly
 
due to the absence of equity
 
LNG volumes as a
 
result of the
outage at the Hammerfest
 
LNG plant due to shutdown
 
.
 
 
Liquids sales volumes
 
amounted to 184.1
 
million barrels (mmbl) in the
 
fourth quarter of 2020
 
,
 
up 12.8 mmbl compared
 
to the fourth
quarter of 2019
 
mainly due to increased
 
purchase from third party.
 
Average invoiced European
 
natural gas sales price
was 5%
 
lower in the fourth quarter
 
of 2020 compared to the
 
fourth quarter of
2019 mainly due
 
to change in gas sales strategy
 
.
Average invoiced
 
North American piped gas
 
sales price
 
decreased by 11
 
%
 
in
the same period mainly
 
due to weakening prices
 
in the US gas sales areas.
 
Net operating income
 
was negative USD 480
 
million in the fourth quarter
 
of 2020 compared to positive
 
USD 360 million in the fourth
quarter of 2019.
 
The decrease was mainly
 
due to impairments of
 
USD 638 million mostly
 
related to refinery asset
 
in addition to
inventory hedging effects
 
of USD 315 million
 
in the fourth quarter of
 
2020, compared to inventory
 
hedging effects of USD 180
 
million
in the fourth quarter
 
of 2019. Negative results from
 
weak refinery margin and
 
the absence of LNG sales
 
due to the outage at the
Hammerfest LNG plant
 
contributed to the decrease
 
of net operating income
 
in the fourth quarter of 2020.
 
Unrealised gain on
derivatives of USD 50 million
 
positively impacted net
 
operating income in
 
the fourth quarter of 2020,
 
compared to a loss on derivatives
of USD 111
 
million in the fourth
 
quarter of 2019.
 
 
Adjusted purchases
 
[6] decreased mainly due to
 
lower prices for all
 
products, partially offset
 
by higher third-party volumes
 
for
 
liquids.
Adjusted operating
 
and administrative expenses
 
decreased mainly due
 
to lower freight rates on
 
shipping of liquids.
 
Adjusted
depreciation, amortisation
 
and net impairment losses
 
slightly increased.
 
 
After total adjustments
 
of USD 832 million to
 
net operating income,
Adjusted earnings
 
[5] were USD 352 million
 
in the fourth quarter
of 2020, compared
 
to USD 524 million in
 
the fourth quarter of 2019.
 
The decrease was mainly
 
due to negative results
 
from weak
refinery margins
 
and the absence of
 
LNG sales due to the
 
outage at the Hammerfest
 
LNG plant,
 
partially offset by
 
piped gas activity.
 
 
Quarters
Change
Adjusted earnings
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
11,866
10,704
14,766
(20%)
Adjusted total revenues and other
 
income
45,158
60,989
(26%)
(10,342)
(9,174)
(12,909)
(20%)
Adjusted purchases [6]
(37,944)
(54,574)
(30%)
(1,064)
(1,167)
(1,237)
(14%)
Adjusted operating and administrative
 
expenses
(4,816)
(4,479)
8%
(107)
(102)
(96)
11%
Adjusted depreciation, amortisation
 
and net impairment
losses
(394)
(394)
0%
352
262
524
(33%)
Adjusted earnings [5]
2,004
1,541
30%
For comparable IFRS figures,
 
see note 2 Segments
 
to the Condensed interim financial
 
statements. For items
 
impacting net operating
income/(loss), see Use
 
and reconciliation of non
 
-GAAP financial measures
 
in the Supplementary
 
disclosures.
Full year 2020
 
 
 
Equinor fourth quarter 2020
 
19
Net operating income
for MMP was positive
 
USD 359 million in 2020
 
compared to positive USD 1,004
 
million in 2019. The decrease
was mainly due to impairments
 
of USD 1,060 million mostly
 
related to refinery asset
 
s
 
in 2020, compared to impairments
 
of USD 206
million related to
 
damage to the South Riding
 
Point oil terminal in the
 
Bahamas in 2019. Negative
 
results from weak refinery
 
margin
and the absence
 
of LNG sales due to
 
the outage at the Hammerfest
 
LNG plant contributed to
 
the decrease of net operating
 
income in
2020. Lower provisions
 
of USD 245 million in 2020
 
compared to USD 418 million
 
in 2019 partially offset
 
the decrease.
 
 
Adjusted total revenues
 
and other income and Adjusted
 
purchases [6] decreased
 
mainly due to lower prices
 
for all products, partially
offset by
 
higher volumes for
 
liquids.
 
Adjusted operating and administrative
 
expenses increased mainly
 
due to higher freight rates
 
on
shipping of liquids. Adjusted
 
depreciation, amortisation
 
and net impairment losses
 
were stable.
 
After total net adjustments
 
of USD 1,645
 
million,
 
Adjusted earnings
 
[5] were USD 2,004
 
million in 2020, an
 
increase from
 
USD 1,541 million in
 
2019,
 
mainly due to increased
 
results from piped gas and
 
liquids trading.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
20
CONDENSED INTERIM FINANCIAL
 
STATEMENTS
 
Fourth quarter 2020
CONSOLIDATED
 
STATEMENT
 
OF INCOME
 
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
Note
2020
2019*
11,876
11,250
14,900
Revenues
 
45,753
62,911
(137)
86
14
Net income/(loss) from equity accounted
 
investments
 
53
164
7
3
255
Other income
 
12
1,283
11,746
11,339
15,169
Total revenues
 
and other income
2
45,818
64,357
(5,533)
(5,307)
(6,603)
Purchases [net of inventory variation]
(20,986)
(29,532)
(2,005)
(2,187)
(2,238)
Operating expenses
(8,831)
(9,660)
(151)
(181)
(167)
Selling, general and administrative
 
expenses
(706)
(809)
(3,478)
(4,798)
(4,165)
Depreciation, amortisation and net
 
impairment losses
6
(15,235)
(13,204)
(1,569)
(886)
(480)
Exploration expenses
6
(3,483)
(1,854)
(12,735)
(13,359)
(13,653)
Total operating
 
expenses
2
(49,241)
(55,058)
(989)
(2,019)
1,516
Net operating income/(loss)
2
(3,423)
9,299
(326)
(343)
(421)
Interest expenses and other financial
 
expenses
 
(1,392)
(1,450)
(84)
142
(74)
Other financial items
 
556
1,443
(410)
(201)
(495)
Net financial items
4
(836)
(7)
(1,400)
(2,220)
1,020
Income/(loss) before tax
 
(4,259)
9,292
(1,016)
95
(1,250)
Income tax
5
(1,237)
(7,441)
(2,416)
(2,124)
(230)
Net income/(loss)
(5,496)
1,851
(2,421)
(2,127)
(236)
Attributable to equity holders of the company
(5,510)
1,843
 
 
 
 
 
Equinor fourth quarter 2020
 
21
6
3
6
Attributable to non-controlling interests
14
8
(0.75)
(0.65)
(0.07)
Basic earnings per share (in USD)
(1.69)
0.55
(0.75)
(0.65)
(0.07)
Diluted earnings per share (in USD)
(1.69)
0.55
3,247
3,248
3,313
Weighted average number of ordinary
 
shares outstanding (in millions)
3,269
3,326
3,257
3,257
3,322
Weighted average number of ordinary
 
shares outstanding diluted (in millions)
3,277
3,334
* Audited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
22
CONSOLIDATED
 
STATEMENT
 
OF COMPREHENSIVE INCOME
 
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
2020
2019*
(2,416)
(2,124)
(230)
Net income/(loss)
(5,496)
1,851
(303)
34
63
Actuarial gains/(losses) on defined
 
benefit pension plans
(106)
427
75
(6)
(12)
Income tax effect on income and
 
expenses recognised in OCI
1)
19
(98)
(228)
27
51
Items that will not be reclassified to
 
the Consolidated statement
 
of income
(87)
330
2,798
888
1,203
Currency translation adjustments
1,064
(51)
0
0
0
Share of OCI from equity accounted
 
investments
0
44
2,798
888
1,203
Items that may be subsequently reclassified
 
to the Consolidated statement
 
of
income
1,064
(7)
2,570
915
1,253
Other comprehensive income/(loss)
977
323
154
(1,209)
1,023
Total comprehensive
 
income/(loss)
(4,519)
2,174
149
(1,212)
1,017
Attributable to the equity holders of the
 
company
(4,533)
2,166
6
3
6
Attributable to non-controlling interests
14
8
* Audited
1) Other comprehensive income (OCI).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
23
CONSOLIDATED
 
BALANCE SHEET
 
At 31 December
 
At 30 September
 
At 31 December
(unaudited, in USD million)
Note
2020
2020
2019*
ASSETS
Property, plant and
 
equipment
6
65,672
62,988
69,953
Intangible assets
6
8,148
9,667
10,738
Equity accounted investments
2,262
1,650
1,442
Deferred tax assets
4,974
4,251
3,881
Pension assets
1,310
1,103
1,093
Derivative financial instruments
2,476
1,964
1,365
Financial investments
4,083
3,437
3,600
Prepayments and financial receivables
861
1,240
1,214
 
Total non-current
 
assets
89,786
86,300
93,285
 
Inventories
3,084
2,860
3,363
Trade and other receivables
8,232
6,108
8,233
Derivative financial instruments
886
570
578
Financial investments
11,865
10,563
7,426
Cash and cash equivalents
6,757
7,844
5,177
 
Total current
 
assets
30,824
27,944
24,778
 
Assets classified as held for sale
3
1,362
188
0
 
Total assets
121,972
114,432
118,063
 
EQUITY AND LIABILITIES
Shareholders' equity
33,873
34,084
41,139
Non-controlling interests
19
24
20
 
Total equity
33,892
34,108
41,159
 
Finance debt
4
32,338
32,193
24,945
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
24
Deferred tax liabilities
11,224
9,451
9,410
Pension liabilities
4,292
3,705
3,867
Provisions and other liabilities
7
19,731
19,191
17,951
Derivative financial instruments
676
787
1,173
 
Total non-current
 
liabilities
68,260
65,328
57,346
 
Trade, other payables
 
and provisions
10,510
8,118
10,450
Current tax payable
5
1,148
543
3,699
Finance debt
4
5,777
5,277
4,087
Dividends payable
357
292
859
Derivative financial instruments
1,710
765
462
 
Total current
 
liabilities
19,502
14,996
19,557
 
Liabilities directly associated with the
 
assets classified as held for
 
sale
 
3
318
0
0
 
Total liabilities
88,081
80,324
76,904
 
Total equity
 
and liabilities
121,972
114,432
118,063
* Audited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
25
CONSOLIDATED
 
STATEMENT
 
OF CHANGES IN EQUITY
 
(unaudited, in USD million)
Share
capital
Additional
paid-in
capital
Retained
earnings
Currency
translation
adjustments
OCI from
equity
accounted
investments
Share-
holders'
equity
Non-
controlling
interests
Total equity
At 31 December 2018*
1,185
8,247
38,790
(5,206)
(44)
42,970
19
42,990
Net income/(loss)
1,843
1,843
8
1,851
Other comprehensive income/(loss)
330
(51)
44
323
323
Total comprehensive
 
income/(loss)
2,174
Dividends
(3,453)
(3,453)
(3,453)
Share buy-back
1)
(500)
(500)
(500)
Other equity transactions
(15)
(29)
(44)
(7)
(52)
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
At 31 December 2019*
1,185
7,732
37,481
(5,258)
0
41,139
20
41,159
Net income/(loss)
(5,510)
(5,510)
14
(5,496)
Other comprehensive income/(loss)
(87)
1,064
0
977
977
Total comprehensive
 
income/(loss)
(4,519)
Dividends
(1,833)
(1,833)
(1,833)
Share buy-back
1)
(21)
(869)
(890)
(890)
Other equity transactions
(11)
0
(11)
(15)
(25)
At 31 December 2020
1,164
6,852
30,050
(4,194)
0
33,873
19
33,892
* Audited
 
 
1) In September 2019
 
Equinor launched a USD 5
 
billion share buy-back programme,
 
where the first tranche of the
 
programme of around
 
USD 1.5 billion has been finalis
 
ed. A proportionate share of 67%
 
from the Norwegian State was
 
redeemed in accordance with an
agreement with the Ministry of Petroleum
 
and Energy for the Norwegian State
 
to maintain their ownership percentage
 
in Equinor.
 
The
redemption was approved by the
 
annual general meeting held
 
14 May 2020.
 
The first tranche of USD 500 million
 
acquired in the market has been
 
recognised as a reduction in equity
 
as treasury shares in third
quarter 2019.
 
The State’s share including
 
interest and dividends has been
 
recognised as a short-term obligation
 
and as a reduction in
equity as treasury shares, subsequent
 
to the decision at the annual
 
general meeting held on 14 May
 
2020. The liability of USD 0.9
 
billion
 
(NOK 9.1 billion) was settled 23 July
 
2020. The corresponding shares
 
of the first tranche of the buy-back
 
programme were cancelled
 
on 16 July 2020.
 
Equinor has suspended the remaining
 
share buy-back programme until
 
further notice. The announced
 
second tranche of around
 
USD 675 million, including the Norwegian
 
State share, will under the current
 
market conditions not be executed
 
as previously
 
announced
and planned.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
26
CONSOLIDATED
 
STATEMENT
 
OF CASH FLOWS
 
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(unaudited, in USD million)
Note
2020
2019*
(1,400)
(2,220)
1,020
Income/(loss) before tax
(4,259)
9,292
3,478
4,798
4,165
Depreciation, amortisation and net
 
impairment losses
6
15,235
13,204
1,284
662
104
Exploration expenditures written
 
off
2,506
777
491
131
(23)
(Gains)/losses on foreign currency
 
transactions and balances
4
646
(224)
20
(1)
(193)
(Gains)/losses on sale of assets
 
and businesses
3
18
(1,187)
168
258
(143)
(Increase)/decrease in other items
 
related to operating activities
918
1,016
(5)
(182)
393
(Increase)/decrease in net derivative
 
financial instruments
(451)
(595)
12
41
49
Interest received
162
215
(204)
(146)
(197)
Interest paid
(730)
(723)
3,843
3,342
5,175
Cash flows provided by operating activities
 
before taxes paid and working
capital items
14,045
21,776
(393)
(110)
(2,651)
Taxes paid
(3,134)
(8,286)
(1,107)
(600)
(751)
(Increase)/decrease in working capital
(524)
259
2,343
2,632
1,774
Cash flows provided by operating activities
 
10,386
13,749
0
0
(0)
Cash used in business combinations
1)
3
0
(2,274)
(2,504)
(1,723)
(2,700)
Capital expenditures and investments
(8,476)
(10,204)
(538)
(1,034)
(212)
(Increase)/decrease in financial investments
2)
(3,703)
(1,012)
(288)
(261)
3
(Increase)/decrease in derivatives financial
 
instruments
(620)
298
218
(18)
(18)
(Increase)/decrease in other interest-
 
bearing items
202
(10)
490
14
882
Proceeds from sale of assets and
 
businesses
3
505
2,608
(2,623)
(3,023)
(2,045)
Cash flows used in investing activities
(12,092)
(10,594)
0
0
984
New finance debt
8,347
984
(1,066)
(1,642)
(1,029)
Repayment of finance debt
(3,332)
(2,419)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
27
(292)
(287)
(850)
Dividends paid
(2,330)
(3,342)
(0)
(1,001)
(351)
Share buy-back
3)
(1,059)
(442)
254
1,308
(237)
Net current finance debt and other
 
financing activities
1,365
(277)
(1,104)
(1,623)
(1,483)
Cash flows provided by/(used in)
 
financing activities
2,991
(5,496)
(1,383)
(2,014)
(1,755)
Net increase/(decrease) in cash and
 
cash equivalents
1,285
(2,341)
296
158
115
Effect of exchange rate changes
 
on cash and cash equivalents
294
(38)
7,844
9,700
6,816
Cash and cash equivalents at the beginning
 
of the period (net of overdraft)
5,177
7,556
6,757
7,844
5,177
Cash and cash equivalents at the end
 
of the period (net of overdraft)
4)
6,757
5,177
* Audited
1) Net after cash and
 
cash equivalents acquired.
2) Includes sale of Lundin
 
shares in the second quarter
 
of 2020.
 
For more information,
 
see note 3 Acquisition
 
and disposals.
3) For more information,
 
see Consolidated statement of
 
changes in equity.
4) At 31
 
December 2020 and at 31
 
December 2019 cash and
 
cash equivalents net overdraft were
 
zero.
 
 
 
Equinor fourth quarter 2020
 
28
Notes to the Condensed interim
 
financial statements
 
1 Organisation and basis of preparation
 
Organisation and principal
 
activities
 
Equinor ASA, originally
 
Den Norske Stats Oljeselskap
 
AS, was founded in 1972 and
 
is incorporated and domiciled
 
in Norway.
 
The
address of its registered
 
office is Forusbeen
 
50, N-4035 Stavanger,
 
Norway.
 
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).
 
All of Equinor's oil and
 
gas activities and net
 
assets on the Norwegian continental
 
shelf are owned by Equinor
 
Energy AS, a 100%
owned operating subsidiary
 
of Equinor ASA. Equinor Energy
 
AS is co-obligor or guarantor
 
of certain debt obliga
 
tions of Equinor ASA.
 
Following changes
 
in Equinor's internal reporting
 
to management the
 
composition of Equinor's operating
 
and reporting segments
 
has
changed as of the second
 
quarter of 2020. Segment
 
information for prior
 
periods has been restated
 
to align with the new segment
presentation. For
 
further information see
 
note 2 Segments to
 
these Condensed interim
 
financial statements.
 
Equinor's Condensed
 
interim financial statements
 
for the fourth quarte
 
r
 
of 2020 were authorised
 
for issue by the board
 
of directors on
 
9 February 2021.
 
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
 
for 2019. IFRS as adopted
 
by the EU differs
 
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 2019.
 
On 1 January 2020,
 
Equinor implemented amendments
 
to IFRS 3 Business Combinations,
 
which apply to relevant
 
transactions that
occur on or after
 
the implementation date. The
 
amendments introduce
 
clarification to the definition
 
of a business, and also
 
establish
an optional test to identify
 
a concentration of fair
 
value that, if applied and
 
met, will lead to the conclusion
 
that an acquired set of
activities and assets
 
is not a business.
 
There have been
 
no other changes to the
 
significant accounting policies
 
during 2020 compared to the
 
Consolidated annual financial
statements for 2019.
 
The Condensed interim
 
financial statements reflect
 
all adjustments which
 
are, in the opinion of management,
 
necessary for a fair
presentation 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. Certain
 
amounts in the comparable
periods in the note disclosures
 
have been reclassified to
 
conform to current period
 
presentation. 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,
 
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.
 
The ongoing Covid-19
 
pandemic and the significant
 
effects it has had on
 
the oil
price during 2020, in
 
addition to the increasing
 
momentum towards a
 
transition into a low carbon
 
future,
 
create additional estimation
uncertainties and
 
impact key assumptions
 
applied by Equinor in
 
the valuation of our asse
 
ts and the measurement
 
of our liabilities, and
related sensitivities.
 
Reference is made to n
 
ote 8 Impact of the Covid
 
-19 pandemic and oil price
 
decline for further information.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
29
2 Segments
 
Equinor’s operations
 
are managed through
 
the following operating segments
 
(business areas): Development
 
& Production Norway
(DPN), Development
 
& Production International
 
(DPI), Development & Production
 
Brazil (DPB), Development
 
& Production USA
(DPUSA), Marketing,
 
Midstream & Processing (MMP),
 
New Energy Solutions
 
(NES), Technology,
 
Projects & Drilling (TPD),
Exploration (EXP) and
 
Global Strategy & Business
 
Development (GSB).
 
The reporting segments
 
Exploration & Production Norway
 
(E&P Norway),
 
Exploration & Production
 
USA (E&P USA) and MMP consist
of the business areas
 
DPN,
 
DPUSA and MMP respectively.
 
The operating segments
 
DPI and DPB are aggregated
 
into the reporting
segment Exploration
 
& Production
 
International (E&P International).
 
The aggregation has its
 
basis in similar economic
 
characteristics,
such as similar revenue
 
growth, net operating income,
 
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 operating
 
segments NES, GSB, TPD,
 
EXP and corporate
 
staffs and support
 
functions
are aggregated into
 
the reporting segment “Other”
 
due to the immateriality
 
of these operating segments.
 
The majority of the costs
within the operating segments
 
GSB, TPD and EXP are allocated
 
to the E&P Norway,
 
E&P USA, E&P International
 
and MMP reporting
segments.
 
In the second quarter
 
of 2020, Equinor
 
changed its internal reporting
 
to management, impacting
 
the composition of Equinor's
operating and reporting
 
segments. Equinor’s
 
upstream activities
 
in the USA is as from the
 
second quarter reported
 
separately to
management. The fact
 
that such information
 
is also considered to be
 
useful to the users of
 
the financial statements,
 
resulted in the
exploration and production
 
activities in the USA as of
 
the second quarter
 
of 2020 were considered
 
a separate operating-
 
and reporting
segment. Previously
 
these activities were included
 
in the DPI operating segment
 
and presented as part
 
of the E&P International
reporting segment.
 
The new structure has been
 
reflected retrospectively
 
with restated comparable
 
figures.
 
Inter-segment sales
 
and related unrealised profits,
 
mainly from the sale of
 
crude oil and products,
 
are eliminated in the
 
Eliminiations
column below.
 
Inter-segment revenues
 
are based upon estimated
 
market prices.
 
 
Segment data for the
 
fourth quarter of 2020
 
and 2019 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 measurement basis
 
for segments is IFRS as applied
 
by the group with the exception
 
of IFRS 16 Leases
 
and the line item
Additions to PP&E, intangibles
 
and equity accounted
 
investments. All IFRS 16 leases
 
are presented within the
 
Other segment. The
lease costs for the period
 
are allocated to the
 
different segments
 
based on underlying lease
 
payments, with a corresponding
 
credit in
the Other segment.
 
Lease costs allocated to
 
licence partners are recognised
 
as other revenues
 
in the Other segment. Additions
 
to
PP&E, intangible assets
 
and equity accounted
 
investments in the E&P and
 
MMP segments include
 
the period’s allocated
 
lease costs
related to activity
 
being capitalised with
 
a corresponding negative addition
 
in the Other segment. The
 
line item Additions to PP&E,
intangibles and equity
 
accounted investments excludes
 
movements related to
 
changes in asset retirement
 
obligations.
 
 
Fourth quarter 2020
E&P
Norway
 
E&P
Internationa
l
E&P
 
USA
MMP
Other
Eliminations
 
Total
 
(in USD million)
Revenues third party,
 
other revenues and other income
58
143
83
11,519
80
0
11,883
Revenues inter-segment
3,819
771
561
77
1
(5,229)
0
Net income/(loss) from equity accounted
 
investments
0
(168)
0
5
26
0
(137)
Total revenues
 
and other income
 
3,877
747
644
11,601
107
(5,229)
11,746
Purchases [net of inventory variation]
(0)
(16)
(0)
(10,273)
0
4,756
(5,533)
Operating, selling, general and administrative
expenses
(753)
(288)
(305)
(1,062)
83
170
(2,156)
Depreciation, amortisation and net
 
impairment losses
(1,227)
(588)
(653)
(745)
(264)
0
(3,478)
Exploration expenses
(94)
(1,231)
(244)
0
0
0
(1,569)
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
30
Total operating
 
expenses
(2,074)
(2,123)
(1,202)
(12,081)
(181)
4,926
(12,735)
Net operating income/(loss)
1,803
(1,376)
(559)
(480)
(75)
(303)
(989)
Additions to PP&E, intangibles
 
and equity accounted
investments
1,340
1,026
123
47
277
0
2,813
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
31
Fourth quarter 2019
E&P
Norway
 
E&P
Internationa
l
E&P
 
USA
MMP
Other
Eliminations
 
Total
 
(in USD million)
(restated)
(restated)
Revenues third party,
 
other revenues and other income
22
375
122
14,342
293
0
15,154
Revenues inter-segment
4,934
1,105
938
127
1
(7,104)
0
Net income/(loss) from equity accounted
 
investments
 
0
(3)
1
5
11
0
14
Total revenues
 
and other income
 
4,956
1,477
1,060
14,474
305
(7,104)
15,169
Purchases [net of inventory variation]
(2)
(26)
1
(12,873)
(0)
6,297
(6,603)
Operating, selling, general and administrative
expenses
(842)
(360)
(442)
(1,145)
169
215
(2,405)
Depreciation, amortisation and net
 
impairment losses
(2,494)
(737)
(575)
(96)
(262)
0
(4,165)
Exploration expenses
(142)
(301)
(37)
0
0
0
(480)
Total operating
 
expenses
(3,480)
(1,424)
(1,053)
(14,114)
(93)
6,511
(13,653)
Net operating income/(loss)
 
1,476
53
7
360
211
(593)
1,516
Additions to PP&E, intangibles
 
and equity accounted
investments
1,455
561
518
114
227
0
2,875
 
 
Full year 2020
E&P
Norway
 
E&P
Internationa
l
E&P
 
USA
MMP
Other
Eliminations
 
Total
 
(in USD million)
Revenues third party,
 
other revenue and other income
91
452
368
44,605
249
0
45,765
Revenues inter-segment
11,804
3,183
2,247
309
4
(17,547)
0
Net income/(loss) from equity accounted
 
investments
0
(146)
0
31
168
0
53
Total revenues
 
and other income
 
11,895
3,489
2,615
44,945
421
(17,547)
45,818
Purchases [net of inventory variation]
(0)
(72)
0
(38,072)
1
17,157
(20,986)
Operating, selling, general and administrative
expenses
(2,829)
(1,440)
(1,313)
(5,060)
419
685
(9,537)
Depreciation, amortisation and net
 
impairment losses
(5,546)
(3,471)
(3,824)
(1,453)
(940)
0
(15,235)
Exploration expenses
(423)
(2,071)
(990)
0
1
0
(3,483)
Total operating
 
expenses
(8,798)
(7,054)
(6,127)
(44,586)
(519)
17,842
(49,241)
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
32
Net operating income/(loss)
3,097
(3,565)
(3,512)
359
(98)
296
(3,423)
Additions to PP&E, intangibles
 
and equity accounted
investments
4,851
2,608
1,068
190
1,044
0
9,761
Balance sheet information
Equity accounted investments
3
1,125
0
92
1,042
0
2,262
Non-current segment assets
 
35,833
17,329
12,376
4,147
4,135
0
73,820
Non-current assets not allocated to
 
segments
 
13,704
Total non-current
 
assets
 
89,786
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
33
Full year 2019
E&P
Norway
 
E&P
Internationa
l
E&P
 
USA
MMP
Other
Eliminations
 
Total
 
(in USD million)
(restated)
(restated)
Revenues third party,
 
other revenue and other income
1,048
1,685
441
60,491
527
0
64,194
Revenues inter-segment
17,769
4,376
3,792
439
4
(26,379)
0
Net income/(loss) from equity accounted
 
investments
15
24
6
25
93
0
164
Total revenues
 
and other income
 
18,832
6,085
4,239
60,955
624
(26,379)
64,357
Purchases [net of inventory variation]
(1)
(34)
0
(54,454)
(1)
24,958
(29,532)
Operating, selling, general and administrative
expenses
(3,284)
(1,684)
(1,668)
(4,897)
272
793
(10,469)
Depreciation, amortisation and net
 
impairment losses
(5,439)
(2,228)
(4,133)
(600)
(804)
0
(13,204)
Exploration expenses
(478)
(668)
(709)
0
0
0
(1,854)
Total operating
 
expenses
(9,201)
(4,614)
(6,510)
(59,951)
(533)
25,750
(55,058)
Net operating income/(loss)
9,631
1,471
(2,271)
1,004
92
(629)
9,299
Additions to PP&E, intangibles
 
and equity accounted
investments
7,316
2,851
3,004
788
823
0
14,782
Balance sheet information
Equity accounted investments
 
3
321
0
90
1,028
0
1,442
Non-current segment assets
 
33,795
20,784
16,774
5,124
4,214
0
80,691
Non-current assets not allocated to
 
segments
 
11,152
Total non-current
 
assets
 
93,285
In the fourth quarter
 
of 2020,
 
Equinor recognised net
 
impairment of USD 1,302 million
 
of which USD 315 million
 
was acquisition cost
and signature bonuses
 
classified as exploration
 
expenses. The line item
 
Exploration expenses in
 
the Consolidated statement
 
of
income also includes
 
impairment of capitali
 
sed exploration well cost
 
.
 
For information regarding impairment
 
of capitalised exploration
cost,
 
see note 6 Property,
 
plant and equipment and
 
intangible assets.
 
 
In the E&P International
 
segment the impairments
 
were USD 229 million
 
of which USD 157 million was
 
classified as exploration
expenses and related
 
to an exploration asset
 
in South America.
 
The impairment of other
 
assets was mainly caused
 
by reduced
reserve estimates in
 
the Europe
 
and Asia area.
 
 
In the E&P USA segment the
 
impairments were USD 369
 
million of which USD 158 million
 
was classified as exploration
 
expenses.
The impairment was
 
mainly related to an
 
Equinor-operated North America
 
unconventional asset
 
measured at fair value less
 
cost of
disposal in connection
 
with reclassification to
 
held for sale.
 
 
In the E&P Norway segment
 
the impairment was
 
USD
 
41 million and related
 
to goodwill.
 
 
 
 
Equinor fourth quarter 2020
 
34
In the MMP segment the
 
impairments were USD 638
 
million, mainly related to
 
a refinery caused by reduced
 
margin assumptions and
increased cost
 
estimates.
 
 
Most of the renewable
 
assets in Equinor Group
 
are accounted for using
 
equity method and the results
 
are presented in the Other
reporting segment.
 
The net income from the
 
equity accounted investments
 
within the operating segment
 
NES was USD 21 million in
the fourth quarter of
 
2020 and USD 163 million
 
in the full
 
year 2020, which compares
 
to USD 13 million in the
 
fourth quarter of 2019
and
 
USD 95 million in the
 
full year 2019.
 
 
For information regarding
 
acquisition and disposal
 
of interests, see note
 
3 Acquisitions and disposals.
 
 
See also note 8 Impact
 
of the Covid-19 pandemic
 
and oil price decline.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
35
Revenues from contract
 
s
 
with customers
 
by geographical areas
 
When attributing the
 
line item Revenues third party,
 
other revenues and other
 
income to the country of the
 
legal entity executing
 
the
sale for the fourth quarter
 
of 2020, Norway constitutes
 
79%
 
and USA constitutes 13
 
%
 
of such revenues. For
 
the fourth quarter of
2019,
 
Norway and USA
 
constituted 78%
 
and 15%
 
of such revenues,
 
respectively.
 
 
For the full year of 2020,
 
Norway constitutes 80%
 
and USA
 
constitutes 1
 
4%
 
of such revenues. For
 
the full year of 2019, Norway
 
and
USA constituted 75
 
%
 
and 18%
 
of such revenues,
 
respectively.
 
 
Non-current assets
 
by country
At 31 December
 
At 30 September
 
At 31 December
 
(in USD million)
2020
2020
2019
Norway
41,054
37,327
40,292
USA
13,172
14,858
17,776
Brazil
9,341
8,752
8,724
UK
4,398
4,175
5,657
Azerbaijan
1,683
1,684
1,598
Canada
1,527
1,468
1,672
Russia
973
429
447
Denmark
953
911
984
Algeria
808
845
915
Angola
725
1,270
1,564
Other countries
1,447
2,587
2,504
Total non-current
 
assets
1)
76,082
74,305
82,133
 
1) Excluding deferred
 
tax assets, pension assets
 
and non-current financial
 
assets.
 
 
 
Revenues from contracts
 
with customers and other revenues
Quarters
Full Year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
6,015
6,635
7,837
Crude oil
24,509
33,505
2,503
1,351
2,642
Natural gas
7,213
11,281
2,100
1,048
2,154
 
- European gas
5,839
9,366
295
229
354
 
- North American gas
1,010
1,359
108
74
134
 
- Other incl. LNG
363
556
1,687
1,560
2,879
Refined products
6,534
10,652
1,499
1,282
1,548
Natural gas liquids
5,069
5,807
172
295
295
Transportation
1,083
967
365
91
27
Other sales
681
445
12,242
11,215
15,229
Revenues from contracts with customers
45,088
62,657
28
27
73
Taxes paid
 
in-kind
93
344
(27)
(16)
(110)
Physically settled commodity derivatives
209
(1,086)
(442)
(44)
(354)
Gain/(loss) on commodity derivatives
108
732
74
70
62
Other revenues
256
265
(367)
36
(329)
Total other
 
revenues
665
254
11,876
11,250
14,900
Revenues
45,753
62,911
 
 
Equinor fourth quarter 2020
 
36
3 Acquisitions and disposals
 
Acquisition onshore Russia
 
On 11
 
December 2020 Equinor
 
closed a transaction with
 
Rosneft to acquire a 49% interest
 
in the limited liability company
 
LLC
KrasGeoNaC (KGN) which
 
holds twelve conventional
 
onshore exploration
 
and production licences
 
in Eastern Siberia. The
 
cash
consideration at closing,
 
including interim period
 
adjustment, was around
 
USD 384 million. In addition
 
to the cash consideration
Equinor recognised
 
a contingent consideration
 
of USD 145 million related
 
to future exploration expenses.
 
The total consideration for
the acquisition of
 
USD 529 million has been
 
accounted using equity
 
method in the line item Equity
 
accounted investment
 
and reported
in the E&P International
 
segment.
 
 
As part of this agreement,
 
Equinor extinguished
 
its exploration commitments
 
offshore in the Sea
 
of Okhotsk and as such
 
has no
outstanding obligations
 
in that area. The previous
 
commitment in the Sea
 
of Okhotsk has been charged
 
to profit and loss at estimat
 
ed
fair value of USD 166
 
million. The charge has
 
been accounted as Net
 
income/(loss) from equity
 
accounted investments
 
in the E&P
International segment.
 
 
Divestment of 10% of Dogger
 
Bank Farm A and B
On 4 December 2020
 
Equinor entered into an
 
agreement with Eni to
 
sell a 10% equity interest
 
in the Dogger Bank Wind
 
Farm A and
B assets in the UK for
 
a total consideration of around
 
GBP 202.5 million (USD 273
 
million).
 
The carrying amount of
 
the interests to be
disposed of
 
is insignificant and is
 
classified as held for sale.
 
Once the transaction
 
s
 
are closed,
 
the new overall shareholding
 
in Dogger
Bank A and Dogger Bank
 
B will be – SSE (40%), Equinor
 
(40%) and Eni (20%).
 
Upon transaction closing, the
 
gain will be presented
in the line item Other
 
income in the Consolidated
 
statement of income in
 
the operating segment NES included
 
in the Other segment.
 
 
Divestment of non-operated
 
interest in the Empire
 
Wind and Beacon Wind assets
 
on the US east coast
On 10 September 2020
 
Equinor entered into an
 
agreement with BP to sell
 
50% of the non-operated
 
interests in the Empire Wind
 
and
Beacon Wind assets
 
for a total consideration
 
before adjustments
 
of USD 1.1 billion whereas
 
USD 500 million has been
 
prepaid at the
end of December 2020,
 
presented in the line items
 
Cash and cash equivalents
 
and Trade, other
 
payables and provisions
 
in the
Consolidated balance
 
sheet.
 
Through this transaction, the
 
two companies have establis
 
hed a strategic partnership
 
for further growth
within offshore wind
 
in the US. Following the transaction,
 
Equinor will remain the operator
 
with a 50% interest.
 
The 100% interest
share has been reclassified
 
as held for sale. After the transaction
 
Equinor will account
 
for the assets as a joint
 
venture using equity
accounting. The transaction
 
was closed
 
29 January 2021 where
 
the gain related to the
 
disposed interests was
 
recognised. For further
information see note
 
9 Subsequent events.
 
Upon transaction closing,
 
the gain will be presented
 
in the line item Other
 
income in the
Consolidated statement
 
of income in the operating
 
segment NES included
 
in the Other segment.
 
 
North America unconventional
 
onshore assets
 
In addition to the
 
Empire Wind and Beacon
 
Wind assets and the Dogger
 
Bank Farm A and B a
 
disposal group of assets
 
has been
classified as held
 
for sale. The disposal
 
group consists of an Equinor
 
-operated North America
 
unconventional onshore
 
asset included
in the reporting segment
 
E&P USA. Equinor has
 
together with a deal advisor
 
actively marketed the
 
disposal group. Equinor
 
is
expecting a divestment
 
during 2021. Equinor has
 
impaired the asset to
 
estimated fair value see
 
note 2 Segments.
 
 
Divestment of remaining shares
 
in Lundin
On 8 May 2020 Equinor
 
closed the divestment of
 
its remaining (4.9%) financial
 
shareholding in Lundin
 
Energy AB (formerly Lundin
Petroleum AB). The consideration
 
is SEK 3.3 billion (USD 0.3
 
billion). The impact on the
 
Consolidated statement
 
of income in the
second quarter was
 
a loss of USD 0.1 billion
 
and was recognised in
 
the line item Interest income
 
and other financial items.
 
 
Investment in interest
 
onshore Argentina
On 30 January 2020
 
Equinor closed a transaction
 
to acquire a 50% ownership
 
share in SPM Argentina
 
S.A (SPM) from Schlumberger
Production Management
 
Holding Argentina B.V.
 
Shell acquired the remaining
 
50% ownership share
 
of SPM.
 
SPM holds a 49%
interest in the Bandurria
 
Sur onshore block in Argentina,
 
and the
 
block is in the pilot phase
 
of development. The consideration
including final adjustments
 
is USD 187 million. In
 
the second quarter
 
,
 
Equinor increased its shareholding
 
in the Bandurria Sur
 
by 5.5%
to 30% for a final
 
consideration of USD 44 million.
 
The investment in SPM is
 
accounted for as
 
a joint venture using the
 
equity method
and reported in the
 
E&P International segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
37
4 Financial items
 
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(491)
(131)
23
Gains/(losses) on net foreign exchange
(646)
224
379
235
210
Interest income and other financial
 
items
754
746
27
39
(308)
Gains/(losses) on derivative financial
 
instruments
 
448
473
(326)
(343)
(421)
Interest and other finance expenses
(1,392)
(1,450)
(410)
(201)
(495)
Net financial items
(836)
(7)
 
Gains/(losses) on derivative
 
financial instruments is
 
a gain of USD 448 million
 
in 2020
 
compared to a gain
 
of USD 473 million
 
in 2019,
mainly due to decreased
 
interest rates.
 
Equinor has a US Commercial
 
paper programme available
 
with a limit of USD 5 billion
 
of which USD 903 million
 
has been
 
utilised as
of
 
31 December 2020.
 
During 2020, Equinor
 
recorded total lease payments
 
of USD 1,405 million,
 
of which USD 128 million
 
were payment of interests
 
and
USD 1,277 million were
 
payment of lease liabilities.
 
Lease liabilities as at 31
 
December 2020 were USD 4,406
 
million, presented in
the Consolidated
 
balance sheet within the
 
line items Current and
 
Non-current finance
 
debt with USD 1,186 million
 
and USD 3,220
million, respectively.
 
In the second quarter
 
of 2020 Equinor ASA issued
 
bonds with maturities
 
from 5 to 30 years for a
 
total amount of USD 8.3 billion.
 
The
bonds were issued
 
in USD and EUR, amounting
 
to USD 6.5 billion and
 
EUR 1.75 billion, and
 
are fully and unconditionally
 
guaranteed
by Equinor Energy AS.
 
 
 
5 Income taxes
Quarters
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(1,400)
(2,220)
1,020
Income/(loss) before tax
(4,259)
9,292
(1,016)
95
(1,250)
Income tax
(1,237)
(7,441)
(72.6%)
4.3%
>100%
Effective tax rate
(29.0%)
80.1%
 
The tax rate for the
 
fourth quarter of 2020 and
 
for the full year 2020 was
 
primarily influenced by losses
 
including net impairments
recognised in countries
 
with unrecognised deferred
 
taxes or in countries with
 
lower than average tax rates
 
.
 
The tax rate was also
influenced by currency
 
effects in entities that
 
are taxable in other
 
currencies than the
 
functional currency,
 
partially offset by the
temporary changes
 
to Norway’s petroleum
 
tax system and changes
 
in best estimates for uncertain
 
tax positions. See also
 
note 8
Impact of the Covid
 
-19 pandemic and oil price
 
decline.
 
 
The tax rate for the
 
fourth quarter of 2019 and
 
for the full year 2019 was
 
primarily influenced by losses
 
recognised in countries with
unrecognised deferred
 
tax assets or in countries
 
with lower than average
 
tax rates, partially offset
 
by the tax exempted gains
 
on
divestments. The tax
 
rate for the fourth quarter
 
of 2019 was also influenced
 
by currency effects in
 
entities that are taxable
 
in other
currencies than the
 
functional currency.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
38
6 Property, plant and equipment and intangible assets
(in USD million)
Property, plant and
equipment
Intangible
assets
Balance at 31 December 2019
69,953
10,738
Additions
 
10,339
491
Transfers
 
89
(89)
Disposals and reclassifications
 
(17)
(14)
Transferred to assets classified
 
as held for sale
(810)
(516)
Expensed exploration expenditures
 
and net impairment losses
-
(2,506)
Depreciation, amortisation and net
 
impairment losses
(15,158)
(77)
Effect of foreign currency translation
 
adjustments
1,276
120
Balance at 31 December 2020
65,672
8,148
Right-of-use (RoU)
 
assets are included within
 
property,
 
plant and equipment with
 
a net book value of USD 4,119
 
million per
 
31
 
December 2020. Additions
 
to RoU assets amount
 
to USD 1,326 million.
 
Gross depreciation and
 
impairment of RoU assets
 
amount
to USD 1,254 million
 
for the full year 2020,
 
of which depreciation
 
costs of USD 359 million
 
have been allocated to
 
exploration and
development activities
 
and are presented net
 
on the Depreciation, amortisation
 
and net impairment losses
 
and Additions lines
 
in the
table above.
 
In the fourth quarter
 
of 2020 it was decided to impair
 
capitalised well costs
 
of USD 982 related to
 
Equinor’s Block 2 exploration licen
 
ce
in Tanzania,
 
included in intangible assets,
 
because overall project
 
economics have not yet
 
improved sufficiently
 
to justify keeping it on
the balance sheet. The
 
impairment is presented
 
in the line item Exploration
 
expenses in the Consolidated
 
statement of income.
 
 
Impairments and impairment
 
reversals
For information on impairment
 
losses and reversals per
 
reporting segment, see note
 
2 Segments.
 
For the quarter
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2020
2019
2020
2019
2020
2019
Producing and development assets
938
1,199
91
0
1,030
1,199
Goodwill
-
-
41
164
41
164
Other intangible assets
-
-
8
0
8
0
Acquisition costs related to oil and gas
 
prospects
-
-
224
43
224
43
Total net
 
impairment loss/(reversal)
 
recognised
938
1,199
363
208
1,302
1,407
Full year
Property, plant and
equipment
Intangible assets
Total
(in USD million)
2020
2019
2020
2019
2020
2019
Producing and development assets
5,671
3,230
680
608
6,351
3,838
Goodwill
-
-
42
164
42
164
Other intangible assets
-
-
8
41
8
41
Acquisition costs related to oil and gas
 
prospects
-
-
657
49
657
49
Total net
 
impairment loss/(reversal)
 
recognised
5,671
3,230
1,386
863
7,057
4,093
 
 
 
Equinor fourth quarter 2020
 
39
The net impairments
 
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 in the fourth
 
quarter of 2020 were mainly
 
discounted cash flows
 
based on value in use,
 
except for one held
for sale assessment
 
as described in Note 2
 
Segment note.
 
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.
 
 
Changes to accounting assumptions
 
Management’s
 
future commodity price assumptions
 
and currency assumptions
 
are used for value-in-use
 
impairment testing. The
same assumptions
 
are also used for evaluating
 
investment opportunities,
 
together with other relevant
 
criteria, including among others
robustness targets
 
(value creation in lower
 
commodity price scenarios).
 
While there are inherent
 
uncertainties in the assumptions,
 
the
commodity price
 
assumptions as well as
 
currency assumptions
 
reflect management’s
 
best estimate of the price
 
and currency
development over the
 
life
 
of the Group’s assets
 
based on its view of relevant
 
current circumstances and
 
the likely future development
of such circumstances,
 
including energy demand
 
development, energy
 
and climate change policies
 
as well as the speed of the
 
energy
transition, population
 
and economic growth,
 
geopolitical risks, technology
 
and cost development, and
 
other factors. Management’s
best estimate also takes
 
into consideration a range
 
of external forecasts.
 
 
Equinor has performed
 
a thorough and broad
 
analysis of the expected
 
development in drivers
 
for the different
 
commodity markets and
exchange rates, following
 
the recent and ongoing Covid
 
-19 situation and management
 
has gained more insight
 
into the development
of the different markets
 
in which Equinor operates.
 
Significant uncertainty
 
continues to exist regarding
 
future commodity price
development due
 
to the potential long-term
 
impact on demand resulting
 
from the ongoing Covid
 
-19 pandemic and the
 
measures taken
to contain it, energy
 
investments in the transition
 
to a lower carbon economy
 
and future supply actions
 
by OPEC+ and other factors.
The management’s
 
analysis of the expected
 
development in drivers
 
for the different commodity
 
markets and exchange rates
 
resulted
in changes in the
 
long-term price assumptions
 
as from the third quarter
 
of 2020. The following price
 
assumptions have been
 
the basis
for the impairment calculations
 
.
 
All commodity prices
 
are on a real 2020 basis,
 
and comparables as per
 
fourth quarter 2019 and
 
up to the third quarter
 
of 2020 are
given in brackets
 
.
 
For Brent-blend,
 
compared to current prices,
 
we expect a strengthening
 
of the prices through the
 
2020s.
 
In 2025,
 
the assumption is 65
USD/bbl (78 USD/bbl)
 
,
 
with a further increase towards
 
2030. Beyond 2030
 
,
 
we expect a gradual decline
 
with an estimate of 64
USD/bbl in 2040
 
(82 USD/bbl),
 
which approximates the
 
average price level for the
 
period 2021-2050. In 2050,
 
the
 
oil prices are
expected to be below
 
60 USD/bbl.
 
For natural gas in the
 
UK (NBP), we expect
 
some volatility,
 
where the trend is a gradual
 
increase in prices from today’s
 
current prices
up to 6.5 USD/mmBtu in
 
2030 (7.7 USD/mmBtu).
 
From 2030, we expect
 
prices at levels sufficient
 
to incentivise the next
 
LNG
investment cycle
 
and a flatter price-curve,
 
with the price gradually
 
increasing to 7.8
 
USD/mmBtu close to
 
2040 (7.7 USD/mmBtu).
Beyond 2040, a declining
 
price trend is foreseen
 
as the energy transition
 
is expected to impact the demand
 
side. For 2050, the price
has been set at the
 
pre-2035 level. Henry Hub
 
follows the same pattern,
 
gradually increasing from
 
today’s current prices
 
to 3.3
USD/mmBtu in 2030
 
(3.7 USD/mmBtu) and
 
gradually increasing to 3
 
.7 USD/mmBtu in 2040 (3.7
 
USD/mmBtu) before gradually
declining through the
 
2040s.
 
 
Equinor has performed
 
analyses of the NOK currency
 
exchange rates, which
 
suggests that a return
 
to a previously assumed
 
long-
term equilibrium is less
 
likely. This
 
conclusion is supported
 
by the historical 5-year average
 
and spot prices in the
 
currency market, as
well as an expected
 
lower oil price and increased
 
market uncertainty.
 
In the third quarter of 2020,
 
Equinor therefore implemented
 
new
long-term exchange
 
rates from 2023 onwards.
 
The NOK/USD rate has
 
been revised to 8.5
 
(previously 7.0), while
 
the NOK/EUR rate
has been revised
 
to 10.0 (from previously
 
9.0).
 
During 2020, risk-free
 
interest rates continued
 
to drop for the first three
 
quarters, and long-term
 
risk-free interest rates
 
(10 years)
decreased by approximately
 
1.3 percentage points
 
in the period from year
 
-end 2019 to 30 September
 
2020. The stock market
recovery after the in
 
itial Covid-19 impact in March,
 
and despite lower expectations
 
of future cash flows, is
 
indicating a lower market
risk premium. The low
 
interest rates combined
 
with lack of good alternative
 
investment opportunities,
 
channels more funds
 
towards
the equity market resulting
 
in investors accepting lower
 
returns on investments,
 
and we see a downward
 
shift in the estimated equity
risk premium. Taking
 
this into account, even
 
though interest rates have
 
rebounded somewhat
 
during the fourth quarter
 
,
 
Equinor has
adjusted the Weighted
 
Average Cost of Capital
 
(WACC) for accounting
 
purposes, real post-tax,
 
down from 6% to 5% with
 
effect from
the third quarter of 2020.
 
 
Please refer to note
 
8 Impact of the Covid-19
 
pandemic and oil price.
 
 
 
Equinor fourth quarter 2020
 
40
Sensitivities
 
Commodity prices have
 
historically been volatile. Significant
 
downward adjustments
 
of Equinor’s commodity price
 
assumptions would
result in impairment
 
losses on certain producing and
 
development assets
 
in Equinor’s portfolio, while
 
an opposite adjustment
 
could
lead to impairment
 
-reversals. If a decline
 
in commodity price
 
forecasts over the lifetime
 
of the assets were 30%,
 
considered to
represent a reasonably
 
possible change, the impairment
 
amount to be recognised
 
could illustratively be
 
in the region of USD 12 billion
before tax effects.
 
This illustrative impairment
 
sensitivity,
 
based on a simplified method
 
,
 
assumes no changes
 
to input factors other
than prices; however,
 
a price reduction of 30%
 
is likely to result in changes
 
in business plans as well
 
as other factors used when
estimating an asset’s
 
recoverable amount. These
 
associated changes reduce
 
the stand-alone impact on
 
commodity price sensitivity.
 
 
Changes in such
 
input factors would
 
likely include a reduction in
 
the cost level in the oil and
 
gas industry as well as offsetti
 
ng currency
effects, both of which
 
have historically occurred
 
following significant changes
 
in commodity prices. The
 
illustrative sensitivity is
therefore not considered
 
to represent a best estimate
 
of an expected impairment
 
impact, nor an estimated impact
 
on revenues or
operating income in
 
such a scenario. In comparison,
 
following the amended assumptions
 
and the decline in commodity
 
prices
presently disclosed
 
for this quarter,
 
the impairment impact recognised
 
is considerably lower.
 
A significant and prolon
 
ged reduction in
oil and gas prices would
 
also result in mitigating
 
actions by Equinor and
 
its licence partners, as a
 
reduction of oil and gas
 
prices would
impact drilling plans
 
and production profiles for
 
new and existing assets.
 
Quantifying such impacts
 
is considered impracticable,
 
as it
requires detailed
 
technical, geological and
 
economical evaluations
 
based on hypothetical
 
scenarios and not based
 
on existing
business or development
 
plans.
 
 
7 Provisions, commitments, contingent liabilities and contingent
 
assets
 
Contingent consideration
 
In the fourth quarter
 
of 2020 Equinor recognised
 
a contingent consideration
 
of USD 145 million related
 
to the acquisition of 49%
interest in the limited
 
liability company LLC
 
KrasGeoNac (KGN). For further
 
information see note 3 Acquisition
 
and disposals.
 
 
Asset retirement obligation
 
Equinor’s estimated asset
 
retirement obligations
 
(ARO) have increased
 
by USD 2,572 million
 
to USD 17,292 million compared
 
to
year-end 2019,
 
mainly due to the decrease
 
in discount rates which are
 
reflected within Property,
 
plant and equipment and
 
Provisions
and other liabilities
 
in the Consolidated balance
 
sheet
 
 
Onerous contract
 
Due to significant
 
ly reduced expected use of
 
a transportation agreement
 
,
 
Equinor provided in the second
 
quarter USD 154 million
 
as
an onerous contract.
 
In the fourth quarter the
 
provision has increased
 
to USD 166 million.
 
The provision is recognised in
 
the MMP
segment as an operating
 
expense in the Consolidated
 
statement of income and
 
has been included in the
 
line item Provisions and
other liabilities in
 
the Consolidated balance
 
sheet.
 
 
Price review arbitration
 
Some long-term gas sales
 
agreements contain price
 
review clauses, which in
 
certain cases lead to claims
 
subject to arbitration.
The exposure related
 
to price reviews has been
 
reduced by approximately
 
USD 1.3 billion due to
 
settlements
 
in the second quarter.
The remaining exposure
 
for gas delivered prior to year
 
-end is immaterial.
 
Price review related changes
 
in the second quarter
represent an income
 
of approximately USD 150
 
million before tax and
 
USD 30 million after tax
 
.
 
The amounts have
 
been reflected in
the Consolidated
 
statement of income as
 
revenues
 
and income tax, respectively.
 
 
A dispute between the
 
Federal Government of Nigeria
 
and the Governments of Rivers,
 
Bayelsa and Akwa Ibom States
 
in
Nigera
 
In October 2018,
 
the Supreme Court
 
of Nigeria rendered
 
a judgement in a dispute
 
between the Federal Government
 
of Nigeria and
the Governments of
 
Rivers, Bayelsa and Akwa
 
Ibom States in favour
 
of the latter.
 
The Supreme Court judgement
 
provides for
potential retroactive
 
adjustment of certain production
 
sharing contracts in
 
favour of the Federal Government,
 
including OML 128
(Agbami). This case
 
has been withdrawn by
 
the plaintiff in the second
 
quarter of 2020 with no impact
 
on Equinor’s Interim financial
statements.
 
 
Dispute with Brazilian
 
tax authorities
 
Brazilian tax authorities
 
issued an updated tax assessment
 
for 2011
 
for Equinor’s Brazilian subsidiary
 
which was party to Equinor’s
divestment of 40%
 
of the Peregrino field to
 
Sinochem at that time. The
 
assessment disputed
 
Equinor’s allocation of the sale
 
proceeds
between entities and
 
assets involved, resulting
 
in a significantly higher assessed
 
taxable gain and related
 
taxes payable in Brazil.
Equinor disagreed with
 
the assessment and had
 
the case brought forward
 
to the second instance
 
of the Administrative Court
 
in Brazil
which decided the case
 
in Equinor’s favour.
 
Equinor has received confirmation
 
that the decision is considered
 
final and non-
appealable. The final
 
ruling did not have any
 
impact on Equinor’s Interim
 
Financial statements.
 
 
KKD Oil Sands Partnership
 
 
 
Equinor fourth quarter 2020
 
41
Canadian tax authorities
 
have issued a proposal
 
of re-assessment for
 
2014 for Equinor’s Canadian
 
subsidiary which was
 
party to
Equinor’s divestment
 
of 40% of the KKD Oil Sands
 
partnership at that
 
time. The proposal disputes
 
the partners allocation
 
between
entities and assets
 
involved. Maximum exposure
 
is estimated to be approximately
 
USD 396 million.
 
The ongoing
 
process of formal
communication with
 
the Canadian tax authorities,
 
as well as any subsequent
 
litigation that may become
 
necessary,
 
may take several
years. No taxes will
 
become payable until the matter
 
has been finally settled.
 
Equinor is of the view that
 
all applicable tax regulations
have been applied in
 
the case and that Equinor
 
has a strong position.
 
No amounts have consequently
 
been provided for in
 
Equinor’s
Interim financial statements.
 
 
Deviation notices from Norwegian
 
tax authorities
 
 
In respect of the previously
 
disclosed tax dispute
 
in Norway regarding the
 
level of Research & Development
 
cost to be allocated to
the offshore tax
 
regime, a Norwegian supreme
 
court ruling announced
 
in second quarter and
 
Equinor’s subsequent correspondence
with the Norwegian
 
tax authorities in third quarter
 
has resulted in a reduced
 
maximum exposure in
 
this matter to approximately
 
USD
220 million. Equinor
 
provides for its best estimate
 
in the matter.
 
 
Suit for an annulment of Petrobras'
 
sale of the interest
 
in BM-S-8 to Equinor
 
 
In March 2017, the
 
Union of Workers of
 
Oil Tankers
 
of Sergipe (Sindipetro)
 
filed a class action suit against
 
Petrobras, Equinor and
ANP - the Brazilian
 
Regulatory Agency - to seek
 
annulment of Petrobras'
 
sale of the interest and operatorship
 
in BM-S-8 to Equinor,
 
a
transaction which closed
 
in November 2016.
 
There was also an injunction
 
request aiming to suspend
 
the assignment, which first
 
was
granted in April 2017
 
by a federal
 
judge, but subsequently
 
lifted by the federal
 
court. The injunction request
 
has now been finally
dismissed by the
 
courts.
 
 
Claim from Petrofac regarding
 
multiple variation order
 
requests performed in Algeria
 
(In Salah)
 
 
Petrofac International
 
(UAE) LLC (PIUL) was awarded
 
the EPC Contract to execute
 
the ISSF Project (the In
 
Salah Southern
Fields Project which
 
has finalised the development
 
of four gas fields in
 
central Algeria). Following
 
suspension of activity
 
after the
terrorist attack at
 
another field in Algeria
 
(In Amenas) in 2013, PIUL issued
 
multiple Variation
 
Order Requests (VoRs)
 
related to the
costs incurred for stand
 
-by and remobilisation costs
 
after the evacuation
 
of expatriates. Several VoRs
 
have been paid, but
 
settlement
of the remaining VoRs
 
has been unsuccessful.
 
PIUL initiated arbitration
 
on 7 August 2020 claiming
 
an estimated amount
 
of USD 533
million, of which Equinor
 
In Salah AS holds a 31,85
 
%
 
share. Equinor's maximum
 
exposure amounts
 
to USD 170 million. Equinor
provides for its best
 
estimate in the matter.
 
 
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.
 
 
8 Impact of the Covid-19 pandemic and oil price decline
 
 
During 2020, the
 
Covid-19 pandemic has
 
slowed economic growth
 
and had dramatic consequences
 
for energy demand, particularly
mobility fuels. The collapse
 
in commodity prices seen
 
in the first half of 2020,
 
though followed by a partial
 
rebound in the second half,
significantly impacted
 
the energy industry and
 
Equinor by an unprecedented
 
decrease in short term demand
 
and increased
uncertainty with regards
 
to the phase of recovery
 
and future oil and gas
 
demand. The increasing momentum
 
and commitment towards
a transition into a
 
low carbon future aided
 
by technological advances
 
and decreasing cost of renewable
 
energy has also increased
 
the
uncertainty in estimating
 
the future development
 
in supply and demand. According
 
to the International
 
Energy Agency (IEA), Global
energy demand in 2020
 
was estimated to drop by 5
 
-6%. The OPEC+ agreement
 
to continue production
 
cuts of some 7 mmboe per
day into in the first quarter
 
of 2021 to clear surpluses
 
built up over the pandemic
 
has supported prices
 
to levels not seen since
January 2020. But second
 
and third-wave Covid
 
-19 lockdowns which continue
 
to dampen demand
 
are likely to put a cap
 
on prices in
the short-term. The
 
successful development
 
of vaccines and the
 
ongoing widespread
 
vaccination effort is
 
expected to increase
demand as countries
 
become able to reduce
 
measures implemented
 
to eliminate the spread of the
 
virus, for which we have
 
observed
new waves of outbreak
 
of more contagious mutant
 
versions late in 2020 and
 
the first quarter of 2021.
 
 
The negative impact
 
of the global pandemic
 
with the resulting decline
 
in commodity prices and a
 
renewed view on effects
 
expected
from the energy transition
 
resulted in updates to
 
Equinor’s view on key financial
 
assumptions in the third
 
quarter of 2020, including the
related key sources
 
of estimation uncertainty,
 
impacting the financial
 
statements. These assumptions
 
continue to apply for the
 
fourth
quarter of 2020. The
 
decline in the updated
 
future commodity price
 
estimates made in the third
 
quarter of 2020, and particularly
 
with
regards to oil, negatively
 
impacted the estimated
 
recoverable amount
 
of several assets in
 
our portfolio, and impairments
 
were
recognised for assets
 
for which the book value
 
no longer could be supported.
 
The negative impact was reduced
 
by the USD 3 billion
action plan implemented
 
in the spring of 2020 to strengthen
 
the financial resilience of
 
the company.
 
More details on the impairments
recognised and an overview
 
of Equinor’s price assumptions
 
have been provided in
 
note 6 Property,
 
plant and equipment and
intangible assets.
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
42
Equinor has also
 
evaluated the reasonable
 
possible changes in certain
 
assumptions as of 31
 
December 2020. The reasonable
possible change in
 
prices is deemed to be -30%/+30%
 
for short-term contracts,
 
and -30%/+30% for the
 
long-term derivatives,
 
based
on their duration.
 
The table below contains the
 
price risk sensitivities
 
of Equinor's commodity
 
-based derivatives contracts.
 
Equinor
enters into commodity
 
-based derivative contracts
 
mainly to manage short
 
-term commodity risk. However,
 
since none of the derivative
financial instruments
 
included in the table below
 
are part of formal hedging
 
relationships, any changes
 
in their fair values would be
recognised in the
 
Consolidated statement of
 
income
.
 
Commodity price sensitivity
 
31 December 2020
31 December 2019
(in USD million)
- 30%
+ 30%
- 30%
+ 30%
Crude oil and refined products net gain/(losses)
1,025
(1,025)
569
(563)
Natural gas and electricity net gains/(losses)
184
(94)
(33)
49
 
Due to market developments
 
and related consequences,
 
certain Equinor suppliers
 
and customers have indicated
 
that contractual
clauses such as those
 
involving force majeure
 
are being explored. The
 
potential impact for Equinor,
 
if any, is
 
currently uncertain.
 
 
Apart from the financial
 
impact, Equinor has only
 
experienced immaterial
 
effects on production
 
from assets in operation,
 
due to
actions taken to maintain
 
and secure safe production
 
during the pandemic.
 
Minor virus outbreaks
 
at some of our facilities
 
have
occurred, but effective
 
measures such as isolat
 
ion and quarantines combined
 
with social distancing and
 
increased sanitation
requirements have
 
prevented production
 
shutdown, and operations
 
have not been significantly
 
impacted. For projects
 
under
development, the
 
Covid-19 pandemic has impacted
 
progress due to personnel
 
limitations on offshore
 
and onshore facilities
 
/ yards
due to infection control
 
measures and associated
 
travel restrictions for migrant
 
workforce. The situation
 
is still unpredictable and
 
may
have additional consequences
 
for the progress and costs
 
of our projects.
 
 
Actions taken to mitigate
 
the impact of the pandemic
 
and commodity price
 
decline, including the
 
USD 3 billion action plan
implemented in the
 
spring of 2020, have had
 
consequences on investment
 
level and activity level
 
in general. Capital expenditure
 
has
been reduced during 2020,
 
representing both final reductions
 
(stopped projects i.e.
 
based on updated future
 
price estimates and
break-even levels) and
 
changes with regards
 
to scope and timing. As
 
a result, some value
 
creation has been cut
 
or delayed. Part of
cost improvements
 
and cost cuts identified and
 
implemented during 2020
 
as part of the action plan are
 
expected to be of a
sustainable nature and
 
impact future cost levels.
 
Cost related to activities
 
postponed from 2020
 
due to the pandemic will
 
impact cost
when these activities
 
are carried out.
 
 
Equinor complies with
 
the revised production
 
permits issued by the
 
authorities and the unilateral
 
oil production cuts portioned
 
out to
relevant fields via their
 
production licenses, however
 
these cuts did not have
 
significant impact on the
 
total production. As a measure
to maintain activity
 
in the oil and gas related
 
industry, the
 
Norwegian Government
 
on 19 June 2020 enacted
 
temporary targeted
changes to Norway’s
 
petroleum tax system
 
for investments incurred in
 
2020 and 2021 and
 
for new projects with final
 
investment
decisions submitted
 
by end of 2022. The changes
 
are effective from 1 January
 
2020 and provide companies
 
with a direct tax
deduction in the special
 
petroleum tax (56% tax
 
rate) instead of tax depreciation
 
over 6 years. One of the
 
changes is that the
 
tax uplift
benefit, which has increased
 
from 20.8%. to 24% will be
 
recognised over one year
 
instead of four years.
 
Tax
 
depreciation towards the
ordinary corporate tax
 
(22% tax rate) will continue
 
with a six-year depreciation
 
profile. The totality
 
of the petroleum tax
 
changes will
increase the profitability
 
for investments and strengthen
 
Equinor’s’ liquidity.
 
9 Subsequent events
 
On 9 February 202
 
1,
 
the board of directors
 
proposed to declare a dividend
 
for the fourth quarter of
 
2020 of USD 0.12 per
 
share
(subject to annual general
 
meeting approval). The
 
Equinor share will trade
 
ex-dividend 12 May 2021
 
on the Oslo Børs and
 
for ADR
holders on the New York
 
Stock Exchange. Record
 
date will be 14 May 2021
 
and payment date will be 27
 
May 2021.
 
On 16 November 2020,
 
Equinor communicated
 
a new organisational corporate
 
structure, which will come
 
into effect on 1 June
 
2021.
The main change
 
is that the operating segment
 
Development & Production
 
Brazil will be merged
 
into the operating segment
Exploration & Production
 
International. In addition,
 
the operating segments
 
Exploration will be divided
 
and merged into Exploration
 
&
Production Norway
 
and Exploration & Production
 
International. Global
 
Strategy & Business development
 
will be divided and merged
into the functions
 
for Chief Financial Officer
 
and Safety,
 
Security and Sustainability.
 
The operating segment
 
Technology,
 
Projects &
Drilling will be split
 
into Technology,
 
Digital & Innovation and
 
Projects, Drilling & Procurement.
 
The current organisational
 
structure will
remain in place until
 
the planned implementation
 
takes effect. The new organisational
 
corporate structure
 
will not imply any changes
in the reportable segments.
 
From the first quarter
 
of 2021, Equinor will start
 
reporting Renewables (previously
 
New Energy Solutions) as
 
a separate reportable
segment due to the
 
strategic importance of the
 
operating segment.
 
 
 
Equinor fourth quarter 2020
 
43
On 8 January 2021,
 
The Norwegian Government
 
announced a new climate
 
action plan. One proposed
 
measure to reduce CO2
emissions is to increase
 
the CO2 tax on offshore
 
oil and gas production
 
gradually and with full effect
 
from 2030. The plan also
proposes increased
 
offshore methane tax.
 
Compared to Equinor’s estimates
 
at 31 December 2020, it
 
is expected that the cost
increase for Equinor
 
for the year 2030 will be
 
approximately USD 0
 
.4 billion pre-tax. This
 
is not expected to significantly
 
impact
impairment assessments
 
in E&P Norway as of the
 
first quarter of 2021. The climate
 
action plan is expected to
 
be approved by the
Parliament in the
 
spring of 2021.
 
On 29 January 2021
 
,
 
Equinor closed the agreement
 
with BP to sell a 50% non
 
-operated interest in the
 
Empire Wind and Beacon
 
Wind
assets for a total
 
preliminary consideration
 
USD 1.2 billion,
 
including USD 0.1 billion
 
in interim period adjustments
 
,
 
with remaining
cash consideration
 
after the prepayment in 2020
 
paid at closing.
 
On 9 February 2021,
 
Equinor has agreed to divest
 
its interests in the Bakken
 
field in the US states of
 
North Dakota and Montana
 
to
Grayson Mill Energy,
 
backed by EnCap Investments,
 
for a total consideration
 
of around USD 900 million.
 
The effective date of the
transaction is 1 January
 
2021. Closing is subject
 
to the satisfaction of
 
customary conditio
 
ns, including authority approvals.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
44
Supplementary disclosures
 
 
Operational data
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
Operational data
2020
2019
Change
Prices
44.2
43.0
63.3
(30%)
Average Brent oil price (USD/bbl)
41.7
64.3
(35%)
42.1
39.6
59.3
(29%)
E&P Norway average liquids price
 
(USD/bbl)
37.4
57.4
(35%)
41.3
39.1
56.1
(26%)
E&P International average liquids price
 
(USD/bbl)
38.1
59.1
(35%)
34.5
32.2
48.0
(28%)
E&P USA average liquids price (USD/bbl)
31.3
48.4
(35%)
40.6
38.3
56.5
(28%)
Group average liquids price (USD/bbl)
 
[1]
36.5
56.0
(35%)
367
349
516
(29%)
Group average liquids price (NOK/bbl)
 
[1]
343
493
(30%)
3.88
1.45
3.88
0%
E&P Norway average internal gas
 
price (USD/mmbtu) [9]
2.26
4.46
(49%)
1.34
1.13
1.82
(26%)
E&P USA average internal gas price
 
(USD/mmbtu) [9]
1.32
2.34
(44%)
5.04
2.72
5.31
(5%)
Average invoiced gas prices - Europe
 
(USD/mmbtu) [8]
3.58
5.79
(38%)
1.99
1.53
2.23
(11%)
Average invoiced gas prices - North
 
America (USD/mmbtu) [8]
1.72
2.43
(29%)
0.4
(0.1)
3.0
(87%)
Refining reference margin (USD/bbl)
 
[2]
1.5
4.1
(64%)
Entitlement production (mboe per day)
616
619
619
(0%)
E&P Norway entitlement liquids production
630
535
18%
222
220
273
(19%)
E&P International entitlement liquids
 
production
236
267
(12%)
145
151
185
(22%)
E&P USA entitlement liquids production
163
181
(10%)
983
991
1,077
(9%)
Group entitlement liquids production
1,029
983
5%
698
654
727
(4%)
E&P Norway entitlement gas production
685
700
(2%)
45
35
64
(30%)
E&P International entitlement gas
 
production
42
50
(17%)
187
185
188
(1%)
E&P USA entitlement gas production
181
178
2%
930
874
979
(5%)
Group entitlement gas production
908
928
(2%)
1,912
1,865
2,056
(7%)
Total entitlement
 
liquids and gas production [3]
1,938
1,911
1%
Equity production (mboe per day)
616
619
619
(0%)
E&P Norway equity liquids production
630
535
18%
286
283
350
(18%)
E&P International equity liquids
 
production
303
354
(14%)
166
173
214
(22%)
E&P USA equity liquids production
187
210
(11%)
1,068
1,076
1,182
(10%)
Group equity liquids production
1,120
1,099
2%
698
654
727
(4%)
E&P Norway equity gas production
685
700
(2%)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
45
53
40
65
(18%)
E&P International equity gas production
49
62
(21%)
224
224
223
0%
E&P USA equity gas production
216
213
1%
975
918
1,015
(4%)
Group equity gas production
950
975
(3%)
2,043
1,994
2,198
(7%)
Total equity
 
liquids and gas production [4]
2,070
2,074
(0%)
NES power production
480
319
476
1%
Power generation (GWh)
1,662
1,754
(5%)
Exchange rates
Quarters
Change
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
Exchange rates
2020
2019
Change
0.1108
0.1095
0.1097
1%
NOK/USD average daily exchange rate
0.1064
0.1136
(6%)
0.1172
0.1055
0.1139
3%
NOK/USD period-end exchange
 
rate
0.1172
0.1139
3%
9.0279
9.1321
9.1177
(1%)
USD/NOK average daily exchange rate
9.4006
8.8037
7%
8.5326
9.4814
8.7803
(3%)
USD/NOK period-end exchange
 
rate
8.5326
8.7803
(3%)
1.1920
1.1685
1.1071
8%
EUR/USD average daily exchange
 
rate
1.1405
1.1192
2%
1.2271
1.1708
1.1234
9%
EUR/USD period-end exchange rate
1.2271
1.1234
9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
46
Health, safety and the
 
environment
Full year
Full year
Health, safety and the environment
2020
2019
Injury/incident frequency
Total recordable
 
injury frequency (TRIF)
2.3
2.5
Serious Incident Frequency (SIF)
0.5
0.6
Oil spills
Accidental oil spills (number of)
135
219
Accidental oil spills (cubic metres)
162
8,983
Full year
Full year
Climate
2020
2019
Upstream CO2 intensity (kg CO2/boe)
1)
8.0
9.5
 
1) Total
 
scope 1 emissions
 
of CO2 (kg CO2) from exploration
 
and production, divided by
 
total production (boe).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
47
Reconciliation of net operating income/(loss) to
 
adjusted earnings
 
The table specifies
 
the adjustments made to
 
each of the profit and loss
 
line item included in the
 
net operating income/(loss)
 
subtotal.
Items impacting net operating income/(loss) in the fourth
quarter of 2020
Equinor
group
Exploration
&
Production
Norway
 
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
 
(in USD million)
Net operating income/(loss)
(989)
1,803
(1,376)
(559)
(480)
(378)
Total revenues
 
and other income
240
15
(41)
-
265
1
Changes in fair value of derivatives
(50)
-
-
-
(50)
-
Periodisation of inventory hedging effect
315
-
-
-
315
-
Impairment from associated companies
1
-
-
-
-
1
Over-/underlift
(24)
17
(41)
-
-
-
Gain/loss on sale of assets
(3)
(3)
-
-
-
-
Purchases [net of inventory variation]
234
-
-
-
(69)
303
Operational storage effects
(69)
-
-
-
(69)
-
Eliminations
303
-
-
-
-
303
Operating and administrative expenses
 
(28)
(18)
(29)
18
(2)
3
Over-/underlift
(53)
(18)
(35)
-
-
-
Other adjustments
1
-
1
(0)
-
-
Gain/loss on sale of assets
21
-
-
18
-
3
Provisions
3
-
5
-
(2)
0
Depreciation, amortisation and net
 
impairment losses
983
41
72
211
638
22
Impairment
983
41
72
211
638
22
Exploration expenses
317
-
160
158
-
-
Impairment
315
-
157
158
-
-
Provisions
3
-
3
-
-
-
Sum of adjustments to net operating
 
income/(loss)
1,746
38
161
387
832
329
Adjusted earnings/(loss) [5]
756
1,841
(1,215)
(172)
352
(49)
Tax on adjusted
 
earnings
(1,310)
(1,133)
38
(0)
(215)
1
Adjusted earnings/(loss) after tax
 
[5]
(554)
707
(1,178)
(172)
137
(48)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
48
Items impacting net operating income/(loss) in the fourth
quarter of 2019
Equinor
group
Exploration &
Production
Norway
Exploration &
Production
International*
Exploration
& Production
USA*
Marketing,
Midstream &
Processing
Other
(in USD million)
Net operating income/(loss)
1,516
1,476
53
7
360
(382)
Total revenues
 
and other income
168
(12)
77
(0)
291
(189)
Changes in fair value of derivatives
102
(9)
-
-
111
-
Periodisation of inventory hedging effect
180
-
-
-
180
-
Impairment
23
-
-
-
-
23
Over-/underlift
74
(3)
77
(0)
-
-
Gain/loss on sale of assets
(212)
-
-
-
-
(212)
Purchases [net of inventory variation]
556
-
-
-
(36)
591
Operational storage effects
(36)
-
-
-
(36)
-
Eliminations
591
-
-
-
-
591
Operating and administrative expenses
 
(91)
(10)
(36)
47
(92)
-
Over-/underlift
(46)
(10)
(36)
(0)
-
-
Gain/loss on sale of assets
27
-
-
27
-
-
Provisions
(72)
-
-
20
(92)
-
Depreciation, amortisation and net
 
impairment losses
1,359
1,284
55
-
-
20
Impairment
1,359
1,284
55
-
-
20
Exploration expenses
43
-
43
-
-
-
Impairment
43
-
43
-
-
-
Sum of adjustments to net operating
 
income/(loss)
2,034
1,262
140
47
164
422
Adjusted earnings/(loss) [5]
3,550
2,738
192
54
524
41
Tax on adjusted
 
earnings
(2,364)
(1,979)
(112)
(0)
(233)
(41)
Adjusted earnings/(loss) after tax
 
[5]
1,186
759
79
55
291
1
* Restated to reflect change to segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
49
Items impacting net operating income/(loss) in the full
 
year
of 2020
Equinor
group
Exploration
&
Production
Norway
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
(3,423)
3,097
(3,565)
(3,512)
359
198
Total revenues
 
and other income
90
68
(194)
-
213
3
Changes in fair value of derivatives
2
6
-
-
(5)
-
Periodisation of inventory hedging effect
224
-
-
-
224
-
Impairment from associated companies
3
-
-
-
-
3
Over-/underlift
(130)
64
(194)
-
-
-
Gain/loss on sale of assets
(9)
(3)
-
-
(6)
-
Purchases [net of inventory variation]
(168)
-
-
-
127
(296)
Operational storage effects
127
-
-
-
127
-
Eliminations
(296)
-
-
-
-
(296)
Operating and administrative expenses
 
378
(39)
127
50
245
(4)
Over-/underlift
70
(39)
108
-
-
-
Other adjustments
1
-
1
(0)
-
-
Gain/loss on sale of assets
23
-
-
20
-
3
Provisions
285
-
17
30
245
(7)
Depreciation, amortisation and net
 
impairment losses
5,715
1,260
1,426
1,938
1,060
32
Impairment
5,934
1,260
1,473
2,109
1,060
32
Reversal of impairment
(218)
-
(47)
(171)
-
-
Exploration expenses
1,345
5
511
829
-
-
Impairment
1,397
5
508
885
-
-
Reversal of impairment
(63)
-
-
(63)
-
-
Provisions
11
-
4
7
-
-
Sum of adjustments to net operating
 
income/(loss)
7,361
1,294
1,870
2,816
1,645
(265)
Adjusted earnings/(loss) [5]
3,938
4,391
(1,695)
(696)
2,004
(67)
Tax on adjusted
 
earnings
(3,014)
(2,397)
347
(0)
(1,187)
223
Adjusted earnings/(loss) after tax
 
[5]
924
1,994
(1,348)
(696)
817
156
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
50
Items impacting net operating income/(loss) in the full
 
year
of 2019
Equinor
group
Exploration
&
Production
Norway
Exploration
& Production
International*
Exploration
&
Production
USA*
Marketing,
Midstream
&
Processing
Other
(in USD million)
Net operating income/(loss)
9,299
9,631
1,471
(2,271)
1,004
(537)
Total revenues
 
and other income
(1,022)
(881)
45
(10)
33
(209)
Changes in fair value of derivatives
(291)
(18)
-
-
(273)
-
Periodisation of inventory hedging effect
306
-
-
-
306
-
Impairment
23
-
-
-
-
23
Over-/underlift
166
114
62
(10)
-
-
Gain/loss on sale of assets
(1,227)
(977)
(17)
-
-
(232)
Purchases [net of inventory variation]
508
-
-
-
(121)
628
Operational storage effects
(121)
-
-
-
(121)
-
Eliminations
628
-
-
-
-
628
Operating and administrative expenses
619
9
62
130
418
-
Over-/underlift
(32)
(33)
(2)
3
-
-
Change in accounting policy
1)
123
42
63
18
-
-
Gain/loss on sale of assets
43
-
-
43
-
-
Provisions
485
-
-
66
418
-
Depreciation, amortisation and net
 
impairment losses
3,429
1,284
(5)
1,924
206
20
Impairment
3,549
1,284
115
1,924
206
20
Reversal of impairment
(120)
-
(120)
-
-
-
Exploration expenses
651
-
43
608
-
-
Impairment
651
-
43
608
-
-
Sum of adjustments to net operating
 
income/(loss)
4,185
412
145
2,652
537
439
Adjusted earnings/(loss) [5]
13,484
10,043
1,616
381
1,541
(98)
Tax on adjusted
 
earnings
(8,559)
(7,200)
(633)
(0)
(729)
2
Adjusted earnings/(loss) after tax
 
[5]
4,925
2,844
982
382
813
(96)
* Restated to reflect change to segment
1) Change in accounting policy for lifting
 
imbalances.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
51
Items impacting net operating income/(loss) in the third
quarter of 2020
Equinor
group
Exploration
&
Production
Norway
 
Exploration
&
Production
Internationa
l
Exploration
&
Production
USA
Marketing,
Midstream
&
Processing
Other
 
(in USD million)
Net operating income/(loss)
(2,019)
431
(1,328)
(1,606)
551
(67)
Total revenues
 
and other income
(431)
(59)
(20)
-
(352)
0
Changes in fair value of derivatives
(37)
-
-
-
(37)
-
Periodisation of inventory hedging effect
(315)
-
-
-
(315)
-
Over-/underlift
(79)
(59)
(20)
-
-
-
Purchases [net of inventory variation]
104
-
-
-
(2)
107
Operational storage effects
(2)
-
-
-
(2)
-
Eliminations
107
-
-
-
-
107
Operating and administrative expenses
 
189
36
67
29
64
(7)
Over-/underlift
90
36
54
-
-
-
Gain/loss on sale of assets
(1)
-
-
(1)
-
-
Provisions
100
-
12
30
64
(7)
Depreciation, amortisation and net
 
impairment losses
2,353
360
992
990
-
10
Impairment
2,524
360
992
1,162
-
10
Reversal of Impairment
(171)
-
(0)
(171)
-
-
Exploration expenses
583
5
185
393
-
-
Impairment
638
5
183
449
-
-
Reversal of Impairment
(63)
-
-
(63)
-
-
Provisions
8
-
2
7
-
-
Sum of adjustments to net operating
 
income/(loss)
2,799
342
1,224
1,413
(289)
110
Adjusted earnings/(loss) [5]
780
773
(104)
(193)
262
43
Tax on adjusted
 
earnings
(509)
(358)
87
0
(240)
2
Adjusted earnings/(loss) after tax
 
[5]
271
414
(17)
(193)
22
45
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
52
Adjusted earnings after
 
tax by reporting segment
Quarters
Q4 2020
Q3 2020
Q4 2019*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
1,841
(1,133)
707
773
(358)
414
2,738
(1,979)
759
E&P International
(1,215)
38
(1,178)
(104)
87
(17)
192
(112)
79
E&P USA
(172)
(0)
(172)
(193)
0
(193)
54
(0)
55
MMP
352
(215)
137
262
(240)
22
524
(233)
291
Other
(49)
1
(48)
43
2
45
41
(40)
1
Total Equinor
 
consolidation
756
(1,310)
(554)
780
(509)
271
3,550
(2,364)
1,186
Effective tax rates on adjusted
earnings
173.2%
65.3%
66.6%
* E&P International and E&P USA have
 
been restated to reflect change to segments
 
 
Full year
2020
2019*
(in USD million)
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
Adjusted
earnings
Tax on
adjusted
earnings
Adjusted
earnings
after tax
E&P Norway
4,391
(2,397)
1,994
10,043
(7,200)
2,844
E&P International
(1,695)
347
(1,348)
1,616
(633)
982
E&P USA
(696)
(0)
(696)
381
(0)
382
MMP
2,004
(1,187)
817
1,541
(729)
813
Other
(67)
223
156
(98)
2
(96)
Total Equinor
 
consolidation
3,938
(3,014)
924
13,484
(8,559)
4,925
Effective tax rates on adjusted
 
earnings
76.5%
63.5%
* E&P International and E&P USA have
 
been restated to reflect change to segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
53
Reconciliation of adjusted
 
earnings after tax
 
to net income
Quarters
Reconciliation of adjusted earnings after tax to net income
 
Full year
Q4 2020
Q3 2020
Q4 2019
(in USD million)
2020
2019
(989)
(2,019)
1,516
Net operating income/(loss)
A
(3,423)
9,299
844
(72)
1,258
Income tax less tax on net financial
 
items
B
1,552
7,611
(1,834)
(1,947)
257
Net operating income after tax
C = A-B
(4,975)
1,688
1,746
2,799
2,034
Items impacting net operating income
1)
D
7,361
4,185
466
582
1,106
Tax on items
 
impacting net operating income
 
E
1,462
948
(554)
271
1,186
Adjusted earnings after tax [5]
F = C+D-E
924
4,925
(410)
(201)
(495)
Net financial items
G
(836)
(7)
(171)
23
8
Tax on net
 
financial items
H
315
170
(2,416)
(2,124)
(230)
Net income/(loss)
I = C+G+H
(5,496)
1,851
1) Represents the total adjustments to
 
net operating income made to
 
arrive at adjusted earnings (i.e. adjusted
 
purchases, adjusted operating
and administrative expenses, adjusted
 
depreciation, amortisation and
 
impairment expenses and adjusted
 
exploration expenses, each of which
are presented and reconciled to the
 
relevant related IFRS figure for
 
the periods presented in this
 
report).
 
 
Adjusted earnings Marketing,
 
Midstream & Processing
 
(MMP) break down
Quarters
Change
Adjusted earnings break down
Full year
Q4 2020
Q3 2020
Q4 2019
Q4 on Q4
(in USD million)
2020
2019
Change
226
292
262
(14%)
Natural Gas Europe
1,199
801
50%
22
7
35
(39%)
Natural Gas US
10
(27)
N/A
107
38
96
12%
Liquids
891
538
66%
(3)
(75)
131
N/A
Other
(96)
229
N/A
352
262
524
(33%)
Adjusted earnings MMP
2,004
1,541
30%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
54
Adjusted exploration expenses
Quarters
Change
Adjusted exploration expenses
Full year
Q4 2020
Q3 2020
Q4 2019*
Q4 on Q4
(in USD million)
2020
2019*
Change
101
142
180
(44%)
E&P Norway exploration expenditures
470
617
(24%)
94
143
242
(61%)
E&P International exploration expenditures
692
821
(16%)
25
65
57
(56%)
E&P USA exploration expenditures
211
147
43%
220
349
479
(54%)
1)
Group exploration expenditures
1,371
1,584
(13%)
2)
969
87
61
>100%
Expensed, previously capitalised
 
exploration expenditures
1,169
120
>100%
65
(125)
(103)
N/A
Capitalised share of current period's
 
exploration activity
(394)
(507)
(22%)
315
575
43
>100%
Impairment (reversal of impairment)
1,337
657
>100%
1,569
886
480
>100%
Exploration expenses according
 
to IFRS
3,483
1,854
88%
(317)
(583)
(43)
>100%
Items impacting net operating income/(loss)
3)
(1,345)
(651)
>100%
1,252
302
437
>100%
Adjusted exploration expenses
2,138
1,203
78%
* E&P International and E&P USA have
 
been restated to reflect change to segments
1) 20 wells with activity with 8 completed
 
in the fourth quarter of 2020
 
compared to 26 wells with 10 completed
 
in the fourth quarter of 2019.
2) 46 wells with activity with 34 completed
 
in 2020 compared to 58
 
wells with 42 completed in 2019.
3) For items impacting net operating
 
income/(loss), see Reconciliation
 
of net operating income/(loss)
 
to adjusted earnings in
 
the
Supplementary disclosures.
 
 
Calculated ROACE
Calculated ROACE based on Adjusted earnings after tax and capital
 
employed [5]
31 December
 
(in USD million, except percentages)
2020
2019
Adjusted earnings after tax (A)
924
4,925
Average capital employed (B)
51,823
54,637
Calculated ROACE based on Adjusted
 
earnings after tax and capital
 
employed (A/B)
1.8%
9.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
55
Calculation of capital employed
 
and net debt to capital
 
employed ratio
 
The table below reconciles
 
the net interest-bearing
 
debt adjusted, the capital
 
employed, the net debt to
 
capital employed ratio
adjusted including lease
 
liabilities and the net debt
 
to capital employed adjusted
 
ratio with the most directly
 
comparable financial
measure or measures
 
calculated in accordance
 
with IFRS.
 
 
Calculation of capital employed and net debt to capital employed
 
ratio
At 31
December
 
At 30
September
 
At 31
December
 
(in USD million)
2020
2020
2019
Shareholders' equity
33,873
34,084
41,139
Non-controlling interests
19
24
20
Total equity
 
A
33,892
34,108
41,159
Current finance debt
5,777
5,277
4,087
Non-current finance debt
32,338
32,193
24,945
Gross interest-bearing debt
B
38,115
37,471
29,032
Cash and cash equivalents
6,757
7,844
5,177
Current financial investments
11,865
10,563
7,426
Cash and cash equivalents and financial
 
investment
 
C
18,621
18,407
12,604
Net interest-bearing debt [10]
B1 = B-C
19,493
19,064
16,429
Other interest-bearing elements
 
1)
627
669
791
Normalisation for cash-build up
 
before tax payment (50% of Tax
 
Payment)
 
2)
-
259
-
Net interest-bearing debt adjusted normalised
 
for tax payment, including lease
 
liabilities
[5]
B2
20,121
19,992
17,219
Lease liabilities
4,405
4,218
4,339
Net interest-bearing debt adjusted [5]
B3
15,716
15,774
12,880
Calculation of capital employed [5]
Capital employed
A+B1
53,385
53,172
57,588
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
56
Capital employed adjusted, including
 
lease liabilities
A+B2
54,012
54,100
58,378
Capital employed adjusted
A+B3
49,608
49,883
54,039
Calculated net debt to capital employed
 
[5]
Net debt to capital employed
(B1)/(A+B1)
36.5%
35.9%
28.5%
Net debt to capital employed adjusted,
 
including lease liabilities
(B2)/(A+B2)
37.3%
37.0%
29.5%
Net debt to capital employed adjusted
(B3)/(A+B3)
31.7%
31.6%
23.8%
1) Cash
 
and cash equivalents
 
adjustments regarding collateral
 
deposits classified as cash
 
and cash equivalents
 
in the Consolidated
balance sheet but considered
 
as non-cash in the non
 
-GAAP calculations as well
 
as financial investments
 
in Equinor Insurance
AS classified as current
 
financial investments.
2) Adjustment
 
to net interest-bearing debt
 
for cash build-up in the first
 
quarter and the third quarter
 
before tax payment on 1
 
April
and 1 October.
 
This is to exclude 50% of
 
the cash build-up to h
 
ave a more even allocation
 
of tax payments between
 
the four
quarters and hence
 
a more representative net
 
interest-bearing debt.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equinor fourth quarter 2020
 
57
Net adjusted financial
 
items 2020
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instrument
s
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the fourth quarter of 2020
(in USD million)
 
Financial items according to IFRS
379
(491)
27
(326)
(410)
(171)
(581)
 
Foreign exchange (FX) impacts (incl.
 
derivatives)
19
491
0
0
510
2
0
Interest rate (IR) derivatives
0
0
(27)
0
(27)
0
0
Fair value adjustment financial investments
 
and other
(272)
0
0
0
(272)
0
0
Subtotal
(253)
491
(27)
0
211
2
212
Adjusted financial items
126
0
0
(326)
(200)
(170)
(369)
 
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instruments
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the full year of 2020
(in USD million)
 
Financial items according to IFRS
754
(646)
448
(1,392)
(836)
315
(521)
 
Foreign exchange (FX) impacts (incl.
 
derivatives)
(10)
646
-
-
636
-
-
Interest rate (IR) derivatives
-
-
(448)
-
(448)
-
-
Fair value adjustment financial investment
 
and other
(282)
-
-
-
(282)
-
-
Subtotal
(292)
646
(448)
-
(93)
-
(93)
Adjusted financial items
 
462
-
-
(1,392)
(929)
315
(614)
 
 
Net adjusted financial
 
items 2019
Interest
income
and other
financial
items
Net
foreign
exchange
gains
(losses)
Gains
(losses)
derivative
financial
instrument
s
Interest
and other
finance
expenses
Net before
tax
Estimated
tax effect
Net after
tax
Net adjusted financial items in the fourth quarter of 2019
(in USD million)
Financial items according to IFRS
210
23
(308)
(421)
(495)
8
(487)
 
Foreign exchange (FX) impacts (incl.
 
derivatives)
1
(23)
0
0
(22)
0
0
Interest rate (IR) derivatives
0
0
308
0
308
0
0
Fair value adjustment financial investment
(44)
0
0
0
(44)
0
0
Adjusted financial items excluding FX
 
and IR derivatives
167
0
0
(421)
(254)
8
(246)
 
 
Equinor fourth quarter 2020
 
58
USE AND RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
Non-GAAP financial
 
measures are defined as numerical
 
measures that either exclude
 
or include amounts or
 
certain accounting items
that are not excluded
 
or included in the comparable
 
measures calculated and
 
presented in accordance with
 
GAAP (i.e. IFRS).
 
 
Management considers
 
adjusted earnings and adjusted
 
earnings after tax together
 
with other non-GAAP financial
 
measures as
defined below,
 
to provide a better indication
 
of the underlying operational
 
and financial performance
 
in the period (excluding
financing), and therefore
 
better facilitate comparison
 
s
 
between periods.
 
 
The following financia
 
l
 
measures may be considered
 
non-GAAP financial
 
measures:
 
 
Adjusted earnings
 
are based on net
 
operating income/(loss)
 
and adjusts for certain
 
items affecting the income
 
for the period in
order to separate
 
out effects that management
 
considers may not be
 
well correlated to Equinor’s
 
underlying operational
performance in the
 
individual reporting period.
 
Management considers
 
adjusted earnings to be
 
a supplemental measure
 
to
Equinor’s IFRS measures,
 
which provides an indication
 
of Equinor’s underlying operational
 
performance in the peri
 
od and
facilitates an alternative
 
understanding of operational
 
trends between the
 
periods. Adjusted earnings
 
include adjusted revenues
and other income, adjusted
 
purchases, adjusted operating
 
expenses and selling,
 
general and administrative
 
expenses, adjusted
depreciation expenses
 
and adjusted exploration
 
expenses
 
Adjusted earnings after
 
tax
 
– equals the sum of net
 
operating income/(loss)
 
less income tax in business
 
areas and adjustments
to operating income
 
taking the applicable marginal
 
tax into consideration.
 
Adjusted earnings after
 
tax excludes net financial
 
items
and the associated
 
tax effects on net financial
 
items. It is based on adjusted
 
earnings less the tax effects
 
on all elements included
in adjusted earnings
 
(or calculated tax on operating
 
income and on each
 
of the adjusting items using an
 
estimated marginal tax
rate). In addition,
 
tax effect related to
 
tax exposure items
 
not related to the
 
individual reporting period
 
is excluded from adjusted
earnings after tax. Management
 
considers adjusted earnings
 
after tax, which reflects
 
a normalised tax charge associated
 
with its
operational performance
 
excluding the impact of
 
financing, to be a supplemental
 
measure to Equinor’s net
 
income. Certain net
USD denominated financial
 
positions are held by group
 
companies that have
 
a USD functional curr
 
ency that is different
 
from the
currency in which the
 
taxable income is measured.
 
As currency exchange rates
 
change between periods,
 
the basis for measuring
net financial items for
 
IFRS will change disproportionally
 
with taxable income which
 
includes exchange gains
 
and losses from
translating the net USD denominated
 
financial positions into
 
the currency of the applicable
 
tax return. Therefore,
 
the effective tax
rate may be significantly
 
higher or lower than
 
the statutory tax rate for
 
any given period.
 
Adjusted taxes included
 
in adjusted
earnings after tax should
 
not be considered indicative
 
of the amount of cu
 
rrent or total tax expense (or
 
taxes payable) for the
period
 
Adjusted earnings and
 
adjusted earnings after tax
 
should be considered
 
additional measures rather
 
than substitutes for net operating
income/(loss) and net
 
income/(loss),
 
which are the most directly
 
comparable IFRS measures.
 
There are material limitations
associated with the
 
use of adjusted earnings and
 
adjusted earnings after
 
tax compared with the IFRS measures
 
as such non-GAAP
measures do not
 
include all the items of
 
revenues/gains or expenses/losses
 
of Equinor that are needed
 
to evaluate its profitability
 
on
an overall basis.
 
Adjusted earnings and adjusted
 
earnings after tax are
 
only intended to be indicative
 
of the underlying developments
in trends of our on-going
 
operations for the production,
 
manufacturing and
 
marketing of our products
 
and exclude pre-and post-tax
impacts of net financial
 
items. Equinor reflects
 
such underlying development
 
in our operations by eliminating
 
the effects of certain
items that may not be
 
directly associated
 
with the period's operations
 
or financing. However,
 
for that reason, adjusted
 
earnings and
adjusted earnings after
 
tax are not complete measures
 
of profitability.
 
These measures should therefore
 
not be used in isolation.
 
 
 
Return
 
on average capital employed
 
after tax (ROACE)
 
– this measure
 
provides useful information
 
for both the group and
investors about performance
 
during the period under
 
evaluation. Equinor uses
 
ROACE to measure the return
 
on capital employed,
regardless of whether
 
the financing is through
 
equity or debt. The use
 
of ROACE should not
 
be viewed as an alternative
 
to income
before financial items,
 
income taxes and minority
 
interest, or to net income,
 
which are measures calculated
 
in accordance with
GAAP or ratios based
 
on these figures. For
 
a reconciliation for adjusted
 
earnings after tax, see Reconciliation
 
of net operating
income/(loss) to adjusted
 
earnings as presented
 
earlier in this report
 
Capital employed adjusted
 
this measure is defined
 
as Equinor's total equity (including
 
non-controlling interests)
 
and net
interest-bearing debt
 
adjusted
 
 
Net interest-bearing debt adjusted
 
– this measure is
 
defined as Equinor's interest
 
bearing financial liabilities
 
less cash and cash
equivalents and current
 
financial investments, adjusted
 
for collateral deposits
 
and balances held by
 
Equinor's captive insurance
company and balances
 
related to the SDFI
 
Net debt to capital employed
,
Net debt to capital
 
employed adjusted, including
 
lease liabilities
and
 
Net debt to capital
employed ratio adjusted
– Following implementation
 
of IFRS 16 Equinor present
 
s
 
a “net debt to capital employed
 
adjusted”
excluding lease liabilities
 
from the gross interest
 
-bearing debt.
 
Comparable numbers
 
are presented in
 
the table Calculation of
capital employed
 
and net debt to capita
 
l
 
employed ratio in the report
 
include Finance lease according
 
to IAS17, adjusted for
marketing instruction
 
agreement
 
Organic capital expenditures
– Capital expenditures,
 
defined as Additions to PP&E,
 
intangibles and
 
equity accounted
investments in note
 
2 Segments to the Condensed
 
financial interim statements
 
,
 
amounted to USD 2.8 billion
 
in the fourth quarter
of 2020. Organic
 
capital expenditures are
 
capital expenditures excluding
 
acquisitions, recognised
 
lease assets (RoU assets)
 
and
other investments with
 
significant different cash
 
flow pattern. In the fourth
 
quarter of 2020, a total of USD 0.9
 
billion are excluded
in the organic capital
 
expenditures. Forward
 
-looking organic capital expenditures
 
included in this report are not
 
reconcilable to its
 
 
Equinor fourth quarter 2020
 
59
most directly comparable
 
IFRS measure without
 
unreasonable effo
 
rts, because the amounts
 
excluded from such IFRS measure
 
to
determine organic capital
 
expenditures cannot be
 
predicted with reasonable
 
certainty
 
Free cash flow for
 
the fourth quarter 2020
 
includes the following line
 
items in the Consolidated
 
statement of cash flows:
 
Cash
flows provided by operating
 
activities before taxes
 
paid and working capital
 
items (USD 3.8
 
billion), taxes paid (negative
 
USD 0.4
billion),
 
cash used in business combinations
 
(USD 0.0 billion), capital
 
expenditures and investments
 
(negative USD 2.5 billion),
(increase)/decrease
 
in other items interest-bearing
 
(USD 0.2
 
billion), proceeds from
 
sale of assets and businesses
 
(USD 0.5
billion), dividend paid
 
(negative USD 0.3
 
billion) and share buy
 
-back (USD 0.0 billion),
 
resulting in a free cash
 
flow of USD 1.4
billion in the fourth quarter
 
of 2020
 
Free cash flow for
 
the full year of 2020
 
includes the following line
 
items in the Consolidated
 
statement of cash flows:
 
Cash flows
provided by operating
 
activities before taxes
 
paid and working capital
 
items (USD 14.0 billion), taxes
 
paid (negative USD 3.1
billion), cash used in
 
business combinations
 
(USD 0.0
 
billion), capital expend
 
itures and investments (negative
 
USD 8.5 billion),
(increase)/decrease
 
in other items interest-bearing
 
(USD 0.2
 
billion),
 
proceeds from sale of assets
 
and businesses, including
 
USD
0.3 billion received
 
from the Lundin divestment
 
included in (increase)/decrease
 
in financial investments
 
(USD 0.8 billion), dividend
paid (negative USD 2.3
 
billion) and share buy
 
-back (negative USD 1.1
 
billion), resulting in
 
a free cash flow of USD 0
 
.1 billion in the
full year of 2020
 
Adjusted earnings
adjust for the following
 
items:
 
 
Changes in fair value of
 
derivatives:
 
Certain gas contracts
 
are, due to pricing or delivery
 
conditions, deemed to
 
contain
embedded derivatives,
 
required to be carried
 
at fair value. Also, certain
 
transactions related to
 
historical divestments
 
include
contingent consideration,
 
are carried at fair value.
 
The accounting impacts
 
of changes in fair value
 
of the aforementioned
 
are
excluded from adjusted
 
earnings. In addition,
 
adjustments are also made
 
for changes in the unrealised
 
fair value of derivatives
 
related to some natural
 
gas trading contracts. Due
 
to the nature of these
 
gas sales contracts, these
 
are classified as financial
derivatives to be
 
measured at fair value at the
 
balance sheet date. Unrealised
 
gains and losses on these
 
contracts reflect the
value of the difference
 
between current market
 
gas prices and the actual
 
prices to be realised under
 
the gas sales contracts.
 
Only
realised gains and losses
 
on these contracts are
 
reflected in adjusted
 
earnings. This presentati
 
on best reflects the
 
underlying
performance of the
 
business as it replaces the
 
effect of temporary timing
 
differences associated
 
with the re-measurements
 
of the
derivatives to fair value
 
at the balance sheet date
 
with actual realised gains and
 
losses for the period
 
Periodisation of inventory
 
hedging effect:
Commercial storage is hedged
 
in the paper market and
 
is accounted for using the
lower of cost or market
 
price. If market prices increase
 
above cost price, the inventory
 
will not reflect this increase
 
in value. There
will be a loss on the
 
derivative hedging the inventory
 
since the derivatives
 
always reflect changes
 
in the market price. An
adjustment is made
 
to reflect the unrealised
 
market increase of the commercial
 
storage. As a result, loss
 
on derivatives is
matched by a similar
 
adjustment for the exposure
 
being managed. If market
 
prices decrease below cost
 
price, the write-down of
the inventory and
 
the derivative effect
 
in the IFRS income statement
 
will offset each other
 
and no adjustment is
 
made
 
 
Over/underlift
: Over/underlift is
 
accounted for using the
 
sales method and therefore
 
revenues were reflected
 
in the period the
product was sold
 
rather than in the period
 
it was produced. The
 
over/underlift position
 
depended on a number
 
of factors related to
our lifting programme
 
and the way it corresponded
 
to our entitlement share
 
of production. The effect
 
on income for the period
 
is
therefore adjusted,
 
to show estimated revenues
 
and associated costs
 
based upon the production
 
for the period to reflect
operational perform
 
ance and comparability
 
with peers. Following the
 
first quarter of 2019, Equinor
 
changed the accounting
 
policy
for lifting imbalances.
 
Adjusted earnings now include
 
the over/underlift adjustment
 
The
operational storage
is not hedged and
 
is not part of the trading portfolio.
 
Cost of goods sold
 
is measured based
 
on the
FIFO (first-in, first-out)
 
method, and includes
 
realised gains or losses
 
that arise due to changes in
 
market prices. These gains
 
or
losses will fluctuate
 
from one period to another
 
and are not considered part
 
of the underlying operation
 
s
 
for the period
 
Impairment and reversal
 
of impairment
are excluded from adjusted
 
earnings since they
 
affect the economics
 
of an asset for
the lifetime of that asset,
 
not only the period in
 
which it is impaired or
 
the impairment is reversed.
 
Impairment and reversal of
impairment can impact
 
both the exploration expenses
 
and the depreciation,
 
amortisation and impairment
 
line items
 
Gain or loss from sales
 
of assets
is eliminated from the me
 
asure since the gain or loss
 
does not give an indication
 
of future
performance or periodic
 
performance; such
 
a gain or loss is related
 
to the cumulative value creation
 
from the time the asset is
acquired until it is sold
 
Eliminations (Internal
 
unrealised profit on inventories)
:
 
Volumes derived
 
from equity oil inventory will
 
vary depending on
several factors and
 
inventory strategies, i.e.
 
level of crude oil in inventory,
 
equity oil used in the refining
 
process and level of in-
transit cargoes. Internal
 
profit related to volumes
 
sold between entities
 
within the group, and still
 
in inventory at period end,
 
is
eliminated according to
 
IFRS (write down to production
 
cost). The proportion
 
of realised versus unrealised
 
gain will fluctuate from
one period to another
 
due to inventory strategies
 
and consequently impact
 
net operating income
 
/(loss).
 
Write-down to production
cost is not assessed
 
to be a part of the underlying
 
operational performance,
 
and elimination of internal
 
profit related to equity
volumes is excluded
 
in adjusted earnings
 
Other items of income and
 
expense
are adjusted when the
 
impacts on income in the period
 
are not reflective of
 
Equinor’s
underlying operational
 
performance in the reporting
 
period. Such items
 
may be unusual or infrequent
 
transactions but they may
also include transactions
 
that are significant which
 
would not necessarily
 
qualify as either unusual
 
or infrequent. Other
 
items are
carefully assessed
 
and can include transactions
 
such as provisions related
 
to reorganisation, early retirement,
 
etc.
 
Change in accounting policy
 
are adjusted
 
when the impacts on income
 
in the period are unusual or
 
infrequent, and not
reflective of Equinor’s underlying
 
operational performance
 
in the reporting period
 
For more information
 
on our use of non-GAAP financial
 
measures, see section 5.2
 
Use and reconciliation
 
of non-GAAP financial
measures in Equinor's
 
2019 Annual Report and
 
Form 20-F.
 
 
 
Equinor fourth quarter 2020
 
60
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", “intend”,
 
"expect", "believe", "likely",
 
"may", "outlook", "plan", "strategy",
 
"will", "guidance",
“targets”, and similar
 
expressions to identify
 
forward-looking statements.
 
Forward-looking statements
 
include all statements other
 
than
statements of historical
 
fact, including, among others,
 
statements regarding
 
Equinor’s plans, intentions,
 
aims, ambitions and
expectations, includi
 
ng with respect to the Covid
 
-19 pandemic including its
 
impacts, consequences
 
and risks; Equinor’s response
 
to
the Covid-19 pandemic,
 
including measures to protect
 
people, operations and
 
value creation, operating
 
costs and assumptions;
 
the
commitment to dev
 
elop as a broad energy company;
 
the ambition to be a
 
net-zero energy company
 
by 2050; future financial
performance, including
 
cash flow and liquidity; accounting
 
policies; production
 
cuts, including their
 
impact on the level
 
and timing of
Equinor’s production;
 
plans to develop fields;
 
the climate action plan
 
announced by the Norwegian
 
government; market outlook
 
and
future economic projections
 
and assumptions, including commodity
 
price assumptions; organic
 
capital expenditures through
 
2022;
intention to optimis
 
e
 
and mature its portfolio;
 
estimates regarding exploration
 
activity levels; ambition
 
to keep unit of production cost
 
in
the top quartile of its
 
peer group; scheduled
 
maintenance activity and
 
the effects on equity
 
production thereof;
 
completion and results
of acquisitions and
 
disposals; expected amount
 
and timing of dividend
 
payments; and provisions
 
and contingent liabilities.
 
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 eve
 
nts 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, in particular
 
in light of recent significant
 
oil price volatility
triggered, among other
 
things, by the changing dynamic
 
among OPEC+ members
 
and the uncertainty regarding
 
demand created by
the Covid-19 pandemic;
 
the impact of Covid-19;
 
levels and calculations of
 
reserves and material
 
differences from reserves
 
estimates;
unsuccessful drilling;
 
operational problems;
 
health, safety and environmental
 
risks; natural disasters,
 
adverse weather conditions,
climate change, and
 
other changes to business
 
conditions; the effects
 
of climate change; regulations
 
on hydraulic fracturing; security
breaches, including breaches
 
of our digital infrastructure
 
(cybersecurity); ineffectiveness
 
of crisis management systems;
 
the actions of
counterparties and
 
competitors; the development
 
and use of new technology,
 
particularly in the renewable
 
energy sector; inability
 
to
meet strategic object
 
ives; the difficulties involving
 
transportation infrastructure;
 
political and social stability
 
and economic growth
 
in
relevant areas of
 
the world; an inability
 
to attract and retain personnel;
 
inadequate insurance
 
coverage; changes or uncertainty
 
in or
non-compliance with
 
laws and governmental regulations;
 
the actions of the Norwegian
 
state as majority shareholder;
 
failure to meet
our ethical and social
 
standards; the political
 
and economic policies
 
of Norway and other oil-producing
 
countries; non-complianc
 
e
 
with
international trade sanctions;
 
the actions of field partners;
 
adverse changes in
 
tax regimes; exchange
 
rate and interest rate
fluctuations; factors
 
relating to trading, supply and
 
financial risk; general
 
economic conditions; 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,
 
2019, filed with the U.S. Securities
 
and Exchange
 
Commission
(including section 2.11
 
Risk review - Risk factors
 
thereof). Equinor’s 2019 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 assume 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.
 
We use certain
 
terms in this document,
 
such as “resource” and
 
“resources” that the SEC’s rules
 
prohibit us from including in
 
our filings
with the SEC. U.S. investors
 
are urged to closely consider
 
the disclosures in our Form 20
 
-F, SEC File
 
No. 1-15200. This
 
form is
available on our website
 
or by calling 1-800-SEC-0330
 
or logging on to www.sec.gov.
 
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 the forward-looking statements.
 
Unless we are required
 
by law to update
these statements, we
 
will not necessarily update
 
any of these statements
 
after the date of this
 
report, either to make
 
them conform to
actual results or changes
 
in our expectations.
 
 
 
Equinor fourth quarter 2020
 
61
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 licence. 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.
These are
non-GAAP figures.
 
See Use and reconciliat
 
ion of non-GAAP financial
 
measures in the report
 
for more details. For
ROACE, see table Calculated
 
ROACE in the Supplementary
 
disclosures for more
 
details.
 
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
 
sells the State's natural
 
gas production in its own name,
 
but for the
Norwegian State's
 
account and risk as well
 
as related expenditures
 
are refunded by the State.
 
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. The
growth percentage
 
is based on historical
 
production numbers, adjusted
 
for portfolio measures.
 
8.
The group's
average invoiced gas prices
in