– The board said yes where we should say no – E24

The case is being updated …

The debate has broken out about Equinor’s (formerly Statoil) investment in the US and the heavy losses the company has had to bear on investments.

The debate really flared this year after Dagens Næringsliv not only summarized the loss, but also documented a lack of internal control and high costs.

On Tuesday he was summoned for a hearing and statement. It is not in charge of the Control and Constitution Commission, but of the Energy and Environment Commission.

“There was a discussion about whether the case should be sent to the control committee or to the industry committee, which has all the other state holdings,” said Ketil Kjenseth (V), when he opened the hearing and noted that the energy committee does not have a secretariat set up to handle an investigation. or control issues.

He emphasized that the consultation will be about the state monitoring of the property in Equinor.

– This is not a case of control over the large Equinor losses on the mainland in the US, where the gold card was drawn. State ownership is exercised at the general meeting, Kjenseth continued.

On Thursday of last week, it was announced that the committee had decided that the hearing should be closed. One of the arguments to close the hearing was that sensitive information could come out of the stock market. The decision was the subject of strong criticism.

On Monday, the committee turned around and decided that the hearing should be open to the public anyway.

– The board said yes where we should say no

Former board chairman Svein Rennemo explained in his post why Equinor, then Statoil, wanted to land in the United States.

Rennemo was chairman of the board from 2008 to 2015 and noted that the fall in bookings on the Norwegian shelf beyond the 2000s made people look outside the country.

– We were concerned about profitable growth in reserves and production. Balance between international investment and the Norwegian continental shelf, and a competitive dividend, Rennemo said.

– The United States seemed to be the most important available area at the time, but the strategy was also broader. The management was quite similar to that of other oil and gas companies in the world at the time, and it also had broad support among shareholders.

Belief in the Norwegian continental shelf was weak and willingness to invest was low, but demand for oil and gas was increasing, thanks in part to strong economic growth in Asia. In light of this, investors wanted growth in reserves and production, former CEO Helge Lund supplemented in his role and continued:

– At Equinor, development was the other way around and we had to take action

Subsequently, several important discoveries have been made on the Norwegian shelf, including the giant Johan Sverdrup field, which has changed this picture.

One of the main acquisitions that was made was Brigham Explorer, which was dedicated to the extraction of shale on United States land.

– The board said yes where we should say no, Rennemo said, adding that the acquisition has “hurt the company.”

Helge Lund noted that both good and bad acquisitions have been made over the years:

– We should not have done the oil sands acquisition (in Canada, journal.anm.) In 2006, but the Peregrino acquisition in Brazil gave us a basis for growth, Lund said and went on to say the following about investing in land in United States:

– In retrospect, it is clear that we take too great a risk (…) but there is also the risk of standing still. We have delivered first-class shareholder returns in the industry.

Losses have risen to around 190 billion

Current board chair Jon Reinhardsen at Equinor was the first to speak at the hearing.

He spoke about how the company has a dialogue with the state on an equal footing with other owners, and that the state does not receive more information than other owners.

Reinhardsen also noted that losses have increased compared to the $ 21.5 billion reported in the October PWC report.

The 21.5 billion dollars apply for the period 2009 to 2019. If the dollar exchange rate is used at the relevant moments, the loss corresponds to around 161 billion crowns.

– It’s very serious. The loss in the United States so far this year is $ 3 billion, of which write-offs amount to $ 2.4 billion, Reinhardsen said.

The loss therefore amounts to $ 24.5 billion. If you take the original loss of NOK 161 billion and add this year’s loss (at the current krone exchange rate), the total loss increases to around NOK 190 billion.

P.S! If you use the current dollar exchange rate on the entire historical loss of the United States until today, you get a sum of crowns that increases from 205 to 234.1 billion dollars.

– It is clear that investment in the United States, especially on land, has not delivered the results that were planned, Reinhardsen said, noting that much higher oil prices were expected throughout the oil industry during the acquisitions than the result.

Lars Haltbrekken (SV) asked if the company could be exposed to more losses abroad, given that it did not reach the price of oil in the US acquisitions.

– Today we have no indication that we have such exposure in other countries, Reinhardsen said, noting that Equinor recently lowered the oil price assumptions on which it is based.

He added that both add a carbon price of $ 55 per tonne and that they also test projects and assets against a greater variation in oil prices.

While Equinor has lost $ 24.5 billion in the US so far, Helge Lund noted that it has also had some gains:

– We sold assets for 23 billion dollars when the price of oil was high, prices that can hardly be obtained today. We recorded profits of $ 12 billion on these sales.

Equinor changed accounting policies

The hearing at the Storting on Tuesday follows Oil and Energy Minister Tina Bru’s report on the matter at the Storting in June.

Subsequently, Equinor has published an assessment report prepared by PWC on the US investment. Recently resigned CEO Eldar Sætre made no secret of the seriousness of the case when the report was presented:

– For me and us at Equinor, this report is a tough and demanding read, Sætre said at a press conference in October and continued:

– Although most of what the report writes is familiar, it is still a very unpleasant read. Provides an overview of a number of unfortunate circumstances and unfounded business choices.

The company has long been criticized for not displaying US investment numbers well enough, and this year it has changed. Finanstilsynet was also among those who thought Equinor should provide more detailed figures on investment in the US, as it made up a large part of both international investment and Equinor in general.

Starting this summer, the US operations will be separated as a separate segment in the accounts. Equinor also recently announced that starting next year they will also report renewable investment as a separate segment.