Norwegian energy group Equinor made a record adjusted pre-tax profit of $75bn last year thanks to all-time high natural gas prices, helping it to emerge as one of the biggest winners of the energy crisis as the country replaced Russia as Europe’s largest supplier.
The state-controlled group paid $42.8bn in tax related to its operations on the Norwegian continental shelf where it is by far the largest producer, providing a huge windfall for Oslo equivalent to more than $7,900 for every person in the country.
Norway has won praise in Europe for helping avert gas shortages by maximising output in the past 18 months as Russia slashed exports. It is the biggest supplier to the UK and Germany.
But Equinor’s huge profits and the taxes flowing to the Norwegian state have also drawn scrutiny at a time when consumers face record energy bills.
Anders Opedal, Equinor’s chief executive, said the company had “responded to the energy crisis and contributed to energy security” adding that it would increase returns to shareholders to an expected $17bn this year, citing its strong earnings, outlook and balance sheet.
Opedal said the company would increase its cash dividend to $0.30 a share for the last three months of the year from $0.20 a share in the third quarter and introduce an “extraordinary cash dividend” of $0.60. It also plans to buy back $6bn of shares in 2023.
Its shares were up 6.5 per cent on Wednesday morning.
Energy majors such as BP, Shell and ExxonMobil have all reported record earnings for the year and are expected to end 2022 with combined post-tax earnings of more than $200bn.
Equinor has a much higher effective tax rate than rivals of more than 70 per cent because of its dominance of production in Norway, where oil and gas earnings have a combined marginal tax rate of 78 per cent
That compares with an effective global tax rate for BP and Shell of about 34 per cent.
Norway’s tax administrator last month estimated its total tax take from oil and gas production in 2022 will reach $89.5bn, or more than $16,500 per head of population. The EU’s total public spending per capita in 2021/22 averaged just over €14,000 ($15,000), according to the EU Parliament. The UK’s total public spending per capita in 2021/22 was £11,897 ($14,300), according to HM Treasury.
This year may be more challenging for Equinor because natural gas prices have fallen sharply in recent months, though they remain high by historical standards. TTF, the European gas benchmark, has fallen from a peak above €300 per megawatt hour in August to about €54 today.
Biraj Borkhataria, at RBC Capital Markets, said the company was keen to flag to investors that it was prioritising returns: the proposed $17bn of payouts this year is equivalent to just under a fifth of the company’s total market capitalisation.
“This is likely to be well ahead of market expectations, and signals a strong message to the market on intentions to pay out to shareholders,” said Borkhataria.
The $75bn annual pre-tax earnings smashed the group’s previous record of $36.2bn in 2008 when oil prices reached record highs of more than $140 a barrel.
Adjusted earnings for the year after tax were $22.7bn, up from $10bn in 2021.
Equinor reported pre-tax adjusted earnings of $15.1bn in the final three months of the year, beating analyst estimates of $14.4bn.
