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Equinor's Norwegian oil output drops 5% on year in Q2 despite Sverdrup

Highlights

Heavy North Sea maintenance dents output

Oil output reductions offset by higher gas output

Affirms 2% full-year output growth target

Norway's Equinor suffered a 5% year-on-year drop in its Norwegian oil output to 604,000 b/d in the second quarter, with additional steeper reductions overseas, as maintenance dented its ability to capture higher oil prices, a results statement July 28 showed.

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The fall in oil output levels came despite increases at the company's flagship 2.7 billion-barrel Johan Sverdrup field, suggesting sizeable reductions elsewhere in its portfolio. The Norwegian Petroleum Directorate has reported the country's oil and gas industry suffered technical problems as well as a significant maintenance impact in June, though without specifying the companies involved.

Equinor, Norway's largest producer, also reported a 20% drop in its US oil output to 138,000 b/d, reflecting asset sales as it scales back its US onshore presence, and a 10% drop in oil output elsewhere overseas to 212,000 b/d, reflecting the effect of production sharing contracts and technical problems in Brazil.

Overall, the company's oil output across its portfolio dropped 9% year-on-year to 954,000 b/d.

Equinor said its Norwegian oil and gas assets generally had been affected by planned maintenance turnarounds and expected natural decline, as well as a shutdown at the Hammerfest LNG terminal, which suffered fire damage in September 2020.

The North Sea oil and gas industry has been undertaking higher-than-normal levels of maintenance as it catches up on work postponed due to the pandemic.

Gas lift

Equinor's reduced oil production was offset by increases in its gas production, which was up 4% on the year at 891,000 b/d of oil equivalent, as it pumped more to take advantage of higher European gas prices.

Its combined oil and gas production globally was down 3% on the year at 1.85 million boe/d. However, the company reiterated its plans to increase its overall production by 2% in the full-year and made no change to its long term guidance for 3% annual average production growth in 2020-26.

While some projects had been set back by the pandemic, "Solid operational performance and continued focus on value creation have enabled us to capture additional value from higher commodity prices," CEO Anders Opedal said, noting progress on a number of investment projects.

The company reported continued financial recovery, with earnings of $1.94 billion, compared with a $251 million loss a year earlier. Adjusted earnings were $1.6 billion, up from $646 million a year earlier. It also sharply lowered its debt gearing to 16.4% and commenced a share buyback program on July 28.