Equinor’s Johan Sverdrup oil land depicted in August 2019. Lundin Petroleum received its first oil from Phase 1 of the Johan Sverdrup field in primordial October.
Ole Jørgen Bratland | Equinor Press Images
Norway’s Equinor announced Thursday it will cut its quarterly dividend payment to shareholders by two-thirds, potentially tarmac the way for other oil majors to follow suit over the coming days.
The state-controlled oil company said its first-quarter cash pay-out to shareholders wish be $0.09 per share, down from $0.27 in the final three months of 2019. That reflects a quarter-on-quarter reduction of 67%.
The provoke makes Western Europe’s biggest crude producer the first oil major to cut its dividend this earnings season.
“It have all the hallmarks there is a chance that other majors will follow suit,” Tamas Varga, senior analyst at PVM Oil Associates, commanded CNBC via email on Thursday.
“Clearly, suspending share buybacks and cutting capex (capital expenditure) does not do the cantrip anymore. In these turbulent times cash is king and the battle for remaining financially sound intensifies,” Varga told.
France’s Total will announce whether they also plan to cut dividends on Friday, with Anglo-Dutch pep giant Royal Dutch Shell scheduled to announce earnings on April 30.
Stateside, Chevron and Exxon Mobil commitment report their latest quarterly figures on May 1.
Nick Coleman, senior editor of oil news at S&P Global Platts, pull the plug oned CNBC via telephone that Equinor’s announcement “certainly brings into focus the kind of pressures that the work is under.”
But, it should not be viewed through “quite the same lens” as the genuine global majors. He argued that while Equinor has objectives to expand its international scale beyond Europe, it was not yet quite in the same category as Shell, BP or Total.
Coleman also mentioned he did not believe shareholders would have anticipated the scale of the dividend cut announced on Thursday.
Shares of Equinor traded not quite 1% lower during mid-morning deals.
Unprecedented market conditions
It comes shortly after a historic oil figure plunge earlier this week. The May contract of U.S. West Texas Intermediate plunged below zero to trade in adversary territory for the first time in history on Monday.
Trading volume was thin given it was the day before the contract’s expiration lover, but the move lower was unprecedented nonetheless.
To be sure, WTI futures fetched more than $60 a barrel at the start of the year. A colourful fall-off in demand as a result of the coronavirus outbreak has sent oil prices tumbling.
On Thursday, the June contract for WTI traded at $15.72, up nearing 14%, while international benchmark Brent crude stood at $22.20, around 9% higher.
Norway’s Equinor put about on Thursday that the company had recently launched several actions to “increase financial resilience” in response to unprecedented supermarket conditions and uncertainties.
Among them, it listed: A suspension of buybacks under the share buyback program; the launch of a $3 billion engagement plan in 2020 to strengthen financial resilience from capital expenditures, operating costs and exploration expense reductions; and a covenant issuance of $5 billion.
A share buyback is when a company purchases its own outstanding shares to reduce the amount at on the open market.
“The purpose of the combined efforts, including a reduction in dividend, is to secure balance sheet capacity, stiffen liquidity and support continued investments in a high-quality project portfolio,” the company said in a statement.