Danske Bank: Equinor – Q1 21 first impression

Equinor (UW): Out with a strong Q1 21 report. Driven by the sharply higher oil and gas price this quarter Equinor’s revenues improve 16% y/y. This was partly held back by 3% y/y lower entitlement production to 2.014mboe due to lower production sharing agreements with some host countries. Equinor’s continued cost focus ensured that its strong top line cascaded down to earnings, with clean EBITDA improving 94% y/y to USD7.8bn. The result alsocame in slightly better than market expectations. Equinor had lower capex q/q and released working capital, which ensured a strong FCF number which in turn drove down net debt 23% q/q to USD15bn. We now see adj. FFO to NIBD at 68% up from 38% q/q and RCF to NIBD 47% up from 27% q/q. These metrics are now back in a territory that looks comfortable for both Moody’s and S&P’s. The former also revised Equinor’s ‘Aa2’ outlook to neutral from negative earlier this year. Equinor maintains its FY outlook. Overall, this looks like a credit positive report at first glance.