Norwegian oil and gas major Equinor has revealed an action plan to battle the impacts of the coronavirus and low commodity prices under which it will reduce its spending for 2020 by $3 billion.
Equinor said on Wednesday that it could be organic cash flow neutral before capital distribution in 2020 with an average oil price around $25 per barrel for the remaining part of the year.
As part of the action plan, the Norwegian company will reduce organic capex for 2020 from $10-11 billion to around $8.5 billion, a reduction of around 20 percent, reduce exploration activity for the year from $1.4 billion to around $1 billion, and reduce operating costs by around $700 million compared to original estimates.
According to the company, reductions in organic capex are driven by a strict process of prioritization where the flexibility of cost and schedule for sanctioned and non-sanctioned projects have been reviewed.
Within US onshore activities, drilling and completion activities are being halted to produce the volumes at a later period, reducing investments significantly for 2020.
These cost reductions come in addition to the already announced suspension of buy-back under the share buy-back program until further notice. The second tranche of around $675 million, including the Norwegian State share, intended to be launched from around May 18 to October 28, will not be executed as previously planned.
Equinor president and CEO, Eldar Sætre, said: “Equinor is in a strong financial position to handle market volatility and uncertainty. Our strategy remains firm, and we are now taking actions to further strengthen our resilience in this situation with the spread of the coronavirus and low commodity prices.
“We have implemented measures to reduce the risk of spreading the coronavirus and have so far been able to maintain production at all our fields. Safe operations remain our first priority in this situation.”
Equinor noted that it had significantly improved over the past several years and that it needed an average oil price of $100 to be organic cash flow neutral back in 2014. Now, the oil price needs to be at a quarter of what was needed in 2014 for Equinor organic cash flow neutral.
Equinor has already made temporary changes to the corporate executive committee to respond to the coronavirus outbreak.
It is also worth reminding that one person tested positive on the coronavirus on Equinor’s Martin Linge field located offshore Norway.
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