Too little control – E24

The case is being updated.

In June, Equinor’s board of directors commissioned a committee to review the company’s operations in the United States, following DN’s revelation that the company has lost NOK 200 billion in the country over the past 20 years.

On Friday morning, the committee chaired by PwC State Chartered Accountant Eli Moe-Helgesen will present the report at a press conference.

– We have pointed out clear weaknesses and deficiencies in internal control over time. Since the US acquisitions, a lot has changed at Equinor, but we also see that there is still room for improvement. Therefore, we have given some recommendations, which they have in common that they relate to how Equinor makes acquisitions and integrates new units outside of the main business, says Moe-Helgesen in a comment.

The committee provides Equinor recommendations in the areas of strategy and business development, business management, risk management and internal control, and management and culture.

These top findings are listed in relation to Equinor’s ground operations in the United States:

• Equinor’s growth strategy led to a very scant focus on creating and controlling value. Activity in the land business increased faster than major support systems could handle.
• The company’s monitoring should have been more robust and did not sufficiently reflect the risk image of this business.
• Management had limited experience in ground operations in the United States and there was a lack of continuity in key roles. This had a negative impact on the monitoring and operation of this business by the company.
• Since 2014, extensive improvement measures have been implemented, which were also reported to the board. This has contributed to a significant improvement in internal control in the United States today.

Sætre: – Difficult reading for many

Board Chairman Jon Erik Reinhardsen emphasizes that the board has received a comprehensive and critical report.

– We have had large financial losses as a result of investments in the US This is mainly due to an ambitious growth strategy and optimistic price assumptions. In addition, rapid growth over a period posed major control challenges, Reinhardsen says in a press release.

– The board and management should have seen and faced the challenge before, and it is now the responsibility of the board and management to make sure we learn from this. At the same time, it is positive that the report confirms that comprehensive improvement measures were implemented when the challenges were met in 2014, continues the chairman of the board, emphasizing that it provides a good basis for following up on the recommendations provided in the report.

CEO Eldar Sætre also says in the announcement that the findings will be taken very seriously.

– This report is difficult to read for many. We made investments that were not strong when the market changed, and we should have identified the control challenges in the onshore business earlier. Our job now is to learn and follow up on the recommendations to ensure that we are not in the same situation again, says Sætre.

Various critical issues

Equinor has experienced a number of unpleasant cases in the last six months:

This summer, American problems led the Minister of Oil and Energy, Tina Bru, to demand that Equinor meet annually with the ministry to thoroughly review the content of the company’s annual report.

Bought expensive in the US.

Equinor acquired the business in the United States during a period of high oil prices and expectations of continued high prices.

– When this price outlook was reversed in 2014, the company had to write off the value of these assets. Such write-offs may be reversed if the price outlook shifts in a positive direction, Oil and Energy Minister Tina Bru (H) wrote to the Storting in May.

Information on Equinor’s total loss in the US of $ 20.4 billion is found in a footnote on page 288 of last year’s annual report, under the item “contextual level information. group ».

According to CEO Eldar Sætre, “there has been no secret” about this, but according to Minister Tina Bru, it was the media coverage that made the ministry aware of the extent of the losses.

– I welcome this report, Bru said when Equinor announced that they had requested a report on the US business.

Equinor has now begun to report on US operations separately in its quarterly reports. Both analysts and unions in the oil industry have long been calling for it.

In the first half of 2020, Equinor’s US operations returned an adjusted result of minus $ 330 million, after posting values ​​of just over $ 1 billion due to the weaker oil price outlook.