He owes the state nine billion – E24

On Thursday at 4pm, the Equinor Annual General Meeting will begin at the Equinor Business Center in Stavanger.

Shareholders will then eliminate approximately 81 million shares after the winter share buyback program. This also means that Equinor must donate NOK 1 billion to the state.

It occurs while the oil industry is in crisis and after Equinor has taken drastic measures to cut costs. Oil prices have risen a bit from the bottom in March, but have still halved since the New Year, when it stood at $ 66 a barrel.

Equinor has cut dividends and investments, and has completed a share buyback program that should have cost up to NOK 46 billion.

But even though these buybacks have been completed, there remains a solid invoice for Equinor of NOK 9 billion.

Although the bill is in the midst of a crisis, it is not unexpected, according to chief information officer Bård Glad Pedersen.

– We have taken this into account when managing the current market situation, Pedersen tells E24.

Bought shares this winter

The reason the bill comes in now is an agreement Equinor made with the state last year. The company would repurchase as many shares of its largest owner as the company bought from other owners during the winter.

The state owns 67 percent of Equinor, and to maintain this ratio, Equinor must also repurchase and dispose of the state’s shares.

Since Equinor bought around 26.7 million shares on the market this winter, the company now has to buy back 54.3 million shares from the state.

Don’t get discount

In the winter round of rebuys, Equinor paid an average of NOK 170.88 for the shares. The state should have the same, adjusted for dividends paid and some interest compensation.

Therefore, Equinor does not receive any discount even though the share price has dropped to NOK 140 during the crown crisis. When the stock price hit its lowest point in March, it was well below NOK 100.

IN notice For this year’s general meeting, Equinor writes that the company will pay the state NOK 9.12 billion after the buybacks.

The amount is adjusted for dividends paid and accrued interest, so that around NOK 150 million is deducted.

– This has been a planned part of the first tranche of the buyback, and part of the evaluation when the decision was made, says Pedersen.

– Not favorable

Investment economist Mads Johannesen at Nordnet believes Equinor’s management would have liked to have released this expense, but notes that Equinor still has very strong finances.

– It is not advantageous. No one could have predicted that this buyback program would have such dramatic consequences in 2020. Looking in the rearview mirror, Eldar Sætre probably would have liked this too, Johannesen tells E24.

– On the other hand, Equinor has been good at reducing its debt ratio, and they are still doing it today. They have a solid credit rating and have just raised NOK 52 billion in the bond market. So far, they have prepared well for the recession we are in now, says Johannesen.

Get less on dividends

Despite Equinor’s strong transfer to the state after the buybacks, the state tends to raise less money from the oil giant over time.

Equinor’s reduction of dividends from 27 cents per share to nine cents per share will give the state approximately NOK 4 billion less per quarter than if the dividend had been maintained.

Unless dividends and exchange rates change a lot, the state is likely to receive just over NOK 2 billion in dividends from Equinor per quarter this year.

This is one of many examples of how important the oil industry is to the Norwegian economy.

– This is a consequence of geopolitical development. Norway is a small and open economy that depends on global growth. Oil and gas are one of Norway’s most important sources of income, and it is probably also an important reason why central bank governor Øystein Olsen has now reduced interest rates to zero, Johannesen says.