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* Profit before tax $9.77 bln vs forecast $8.4 bln
* Benefits from soaring gas prices in Europe
* Boosts share buyback plan
* Earnings boost from derivatives will be reversed later
(Adds detail, analyst, updates share)
By Nerijus Adomaitis and Nora Buli
OSLO, Oct 27 (Reuters) - Norway's Equinor posted
its strongest quarterly result in nine years on Wednesday,
driven by a global energy supply crunch that pushed Europe's
natural gas prices to record highs and sent the value of
derivative contracts soaring.
Equinor has the largest exposure to spot gas prices among
big oil companies and its results come ahead of those due from
Shell this week and BP next.
Equinor said it would sharply increase its share buybacks in
coming months while maintaining a quarterly dividend level of
$0.18 per share.
Adjusted earnings before tax rose to $9.77 billion in the
July-September quarter from $780 million, exceeding the $8.4
billion predicted in a poll of 25 analysts compiled by Equinor.
"The current unprecedented level and volatility in European
gas prices underlines the uncertainty in the market," CEO Anders
Opedal said in a statement.
Norway is western Europe's largest oil and gas producer,
pumping around 4 million barrels of oil equivalent per day. Last
year, it supplied 22% of the gas consumed in the European Union,
Norwegian government data showed.
Equinor has said it would seek to boost pipeline gas exports
to Europe by increasing production from the Troll and Oseberg
fields, as well as from reducing gas injections normally used to
pump oil.
"We have turned every valve to see if we can produce and
export more gas," Opedal said, adding that one field, Gina Krog,
had found ways to do so with only a marginal negative impact on
its simultaneous oil output.
The confluence of factors driving global gas prices was
unlikely to be permanent however, Opedal said.
"This makes for higher revenues for Equinor but is also a
reminder how commodities prices swing," he told a news
conference. "We have not changed our long-term price
projections."
Equinor is benefiting from Europe's flexible gas market
after the European Union forced gas producers years ago to shift
away https://www.reuters.com/business/energy/norway-russia-reap-rewards-europes-flexible-gas-market-2021-09-24
from steady, long-term contracts.
The increased energy cost has led to soaring electricity
prices across much of Europe and the world, hitting households
as well as companies which have been forced to shut factories,
triggering further supply chain shortages.
Global gas prices rose sharply in the third quarter, with
Europe's benchmark TTF front-month contract increasing threefold
to around 90 euros per megawatt hour (MWh), below average
storage levels and concerns over Russian supply ahead of the
winter heating season.
In early October, the gas price spiked https://www.reuters.com/article/power-prices-europe-idINL1N2R10AQ
again, hitting a record https://www.reuters.com/article/europe-gas-idINL8N2R21XB
of 155 euros per MWh before easing to 89 euros on Tuesday. The
price of North Sea crude oil meanwhile has risen 67% this year
to a three-year high of $86 per barrel.
DERIVATIVE GAINS AND LOSSES
Earnings at Equinor's marketing, midstream and processing
(MMP) unit rose to $2.19 billion from $262 million, boosted by
derivatives contracts related to European gas, the company said.
Equinor sells most of its gas on a short-term, or spot,
basis but also sells a small share based on longer-dated
indices. For the latter, MMP has used financial contracts to
benefit from strong spot and front-month pricing.
The mark-to-market gains from such contracts in the third
quarter will be followed by losses in the MMP segment when those
volumes are delivered under the long-term contracts, Equinor
reiterated in its earnings report.
"The decision to take derivative positions has been
beneficial to the group but created volatility in this segment,"
the company said in reference to the MMP unit.
The one-off nature of the MMP gains should be a note of
caution for investors, SpareBank 1 Markets analyst Teodor
Sveen-Nilsen said.
Higher profits will also mean higher taxes in the fourth
quarter, the company said.
The increase "removes some of the gas shine" from the stock,
wrote analysts at Citi, who have a 'sell' recommendation on the
stock.
Shares in Equinor were down 2.4% at 0910 GMT, lagging an
Oslo benchmark index down 1.2%, with the benchmark
Brent crude down 1.1%.
BUYBACK OF $1 BILLION
Equinor plans to buy back shares worth $1 billion in the
next three months, up from a plan of $300 million.
Two thirds will be bought from the Norwegian government, its
largest stakeholder, ensuring the state maintains an unchanged
stake of 67%.
In the previous quarter it had planned to buy up to $300
million in shares. It spent $99 million on the market and has
committed to buy the rest from the government's holdings.
Equinor revised its capital spending for 2021 to $8.0
billion from a range of $9 billion to $10 billion seen
previously.
It kept its plans to spend around $12 billion per year in
2023 and 2024.
(Reporting by Nerijus Adomaitis and Nora Buli; editing by
Subhranshu Sahu and Jason Neely)
