Equinor (EQNR) Q4 Earnings Lag Estimates, Revenues Up Y/Y

Equinor ASA (NYSE:EQNR) recently reported fourth-quarter 2018 adjusted earnings of 46 cents per ADR, missing the Zacks Consensus Estimate of 52 cents. Negative operational storage effect of $272 million as well as reduced processing margins resulted in the earnings lag. However, the bottom line improved from the year-earlier adjusted earnings of 39 cents, driven by higher liquids and gas prices, along with increased production.

Net operating income surged 30% year over year to $6,745 million in the fourth quarter of 2018.

Moreover, total revenues surged 31.1% from the year-ago period to $22,438 million.

Notably, the company proposed a dividend hike of 13% to 26 cents per ADR in fourth-quarter 2018.

Operational Performance

In the reported quarter, total equity production of liquids and gas was 2,170 thousand barrels of oil equivalent per day (Mboe/d), up 2% from 2,134 Mboe/d in the year-ago period. The uptick can be attributed to production from new onshore wells in the United States and new fields coming online. Total entitlement production of liquids and gas increased 3% from the prior-year quarter to 2,020 Mboe/d.

Through 2018, the company made nine commercial discoveries, while completing 24 exploration wells. Adjusted exploration expenses in the quarter were $417 million compared with $274 million in the fourth quarter of 2017. Markedly, Equinor’s reserve replacement ratio was recorded at 213% in 2018.

Total natural gas sales volume was recorded at 15.4 billion meters in the fourth quarter of 2018.

Capital Expenditure

Capital expenditure and investments were recorded at $2,990 million in the past three months of 2018, lower than $3,398 million in the comparable period of 2017.

Capital expenditure and investments in full-year 2018 came in at $11,367 million.

Financials

Cash flow from operations amounted to $4,200 million in the reported quarter compared with $1,720 million in the prior-year period.

At the end of the fourth quarter of 2018, Equinor had $7,556 million in cash and cash equivalents. The company maintained a strong capital structure during the quarter. Net debt to capital employed at the end of the quarter was 22.2%.

Guidance

Equinor projects organic capital expenditure of $11 billion in 2019. Organic production over the 2019-2025 period is expected to witness a CAGR of about 3%. The company expects equity production in 2019 to be in line with 2018 levels. Total exploration activity level is expected at around $1.7 billion. First-quarter 2019 production is expected to be 15 Mboe/d lower than a year ago owing to scheduled maintenance activities.

Zacks Rank & Stocks to Consider

Currently, Equinor has a Zacks Rank #5 (Strong Sell). Investors interested in the energy sector can opt for some better-ranked stocks as given below:

YPF Sociedad Anonima (NYSE:YPF) is a Buenos Aires, Argentina-based integrated energy company. Its bottom line for 2018 is expected to increase more than 27% year over year. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Calgary, Canada-based Gran Tierra Energy Inc. (NYSE:GTE) is an oil and gas exploration and production company. Its bottom line for 2018 is expected to increase more than 300% year over year. It delivered average positive earnings surprise of more than 24% in the trailing four quarters. The stock currently has a Zacks Rank #2.

El Dorado, AR-based Murphy USA Inc. (NYSE:MUSA) is a refining and marketing company. Its bottom line for the quarter ending Mar 30, 2019 is expected to increase more than 190% year over year. The stock currently has a Zacks Rank #2.

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