Norwegian energy company and LNG player Equinor has set forth a cost reduction plan to fight the effects of the COVID-19 outbreak.
The company noted on Wednesday it has updated its outlook for 2020, cutting capex from $10-11 million to $8.5 million, a 20 percent reduction. It also aims to slash its exploration activity for 2020 from around $1.4 billion to $1 billion and will reduce operating costs for 2020 by around $700 million to original estimates.
Reductions in organic capex are driven by a strict process of prioritization where the flexibility of cost and schedule for sanctioned and non-sanctioned projects have been reviewed, Equinor said.
Within US onshore activities, drilling and completion activities are being halted to produce the volumes at a later period, reducing investments significantly for 2020.
These cost reductions come in addition to the already announced suspension of buy-back under the share buy-back program until further notice.
The second tranche of around $675 million, including the Norwegian State share, intended to be launched from around May 18 to October 28, 2020, will not be executed as previously planned.
The company noted that over the past years it has made improvements to ensure company robustness. In 2014, Equinor needed an average oil price of around $100 per barrel to be organic cash flow neutral before capital distribution.
With the measures now being implemented, Equinor can be organic cash flow neutral before capital distribution in 2020 with an average oil price around $25 per barrel for the remaining part of the year.
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