Equinor 3Q24 results | Climate Transition Analysis
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Equinor’s 3Q24 results were headlined by its decision to acquire up to a 10% stake in offshore wind developer Ørsted, boosting its renewables portfolio at a relatively low cost. However, the company continues to face challenges in achieving profitability in renewables, while setbacks in blue hydrogen raise concerns about the outlook for its Low Carbon Solutions business.
Our view
Equinor’s 3Q24 results confirm the challenges we anticipated with its renewable energy generation targets. The company has downgraded its guidance again, now just 50% growth for FY24 (~2.9 TWh), down from the original guidance of over 4 TWh. While renewables ambitions remain significant, the company continues to lag behind peers in delivering both earnings and capacity. To date, Equinor is the only major that has not reported a profit in low-carbon.
The Ørsted acquisition is advantageous, adding 1GW to Equinor’s renewables portfolio and highlighting M&A as a pathway for advancing its offshore wind strategy. From a decarbonisation perspective, as a minority shareholder, it is yet to be seen if this will lead to more new capital directed towards low carbon. The deal also introduces biomass heat and power plants into Equinor’s mix. Progress on Empire Wind is encouraging, now moving towards financial close after substantial impairments in US offshore wind last year.
While these developments are promising, Equinor’s transition strategy still lags behind its peers. Net Carbon Intensity (NCI) progress remains limited (-1% of the -20% target by FY30), and the lack of clear disclosures on Low Carbon Solutions raises concerns. With nearly half of Equinor’s 40% NCI target by FY35 reliant on this business, especially given blue hydrogen setbacks, greater clarity is needed on how it will deliver on long-term goals.
Priority questions ahead of 2025:
1) Quantification of levers to achieve Net Carbon Intensity (NCI) targets:
How much will renewables contribute to FY30 NCI target reductions? Equinor’s decarbonisation strategy appears fundamentally dependent on netting strategies like CCS. We estimate nearly half of the company’s 40% NCI target by FY35 hinges on CCS – more information is needed on how Equinor will ensure this reliance doesn’t risk transition if unsuccessful.
2) Increases in low-carbon investment:
How much capex is allocated to Renewables & Low carbon solutions? Equinor does not disclose capex for Low carbon solutions (part of midstream, marketing and processing segment). Investors lack transparency to track progress, especially with CCS likely forming a significant portion of low-carbon investment.
How does Equinor plan to build a competitive and profitable renewables business? Equinor is currently the only major not reporting a profit in low-carbon. The company should detail its path to profitability to close the gap with peers.
Key findings
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Equinor’ 3Q results saw group capex down at 2% to $3.1bn with Exploration & Production capex down 4%. Low-carbon capex surged 87% to $361m, primarily driven by offshore wind projects in the US and UK ($301m). Full-year capex guidance has been lowered to $12-13bn, down from $13bn, reflecting project timing, onshore renewables adjustments, and currency impacts.
Oil and gas production dipped 1% YoY to 1.98 Mboe/d, with full-year guidance holding steady at 2.05 Mboe/d.
Earnings after tax dropped 25% to $2bn, with a 46% fall in international and US E&P earnings and a 36% decline in Midstream due to weaker refining margins and increased low-carbon costs. Equinor’s renewables segment remains unprofitable, posting a $99m loss in 3Q24, broadly in line with 3Q23 (-$97m).
YTD scope 1 & 2 emissions are down 5% to 8.2 MtCO2e.
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Earlier this month, Equinor announced a $2.5bn acquisition of a 9.8% stake in Ørsted, expected to reach 10% post-approval. We see this as an advantageous move for Equinor; at $2,500/kW for added capacity ($1,400/kW including FID/awarded projects), it's well below the $3,000-4,000/kW average capital costs in the US/Europe (IEA). Equinor views this as a countercyclical investment, taking advantage of industry challenges to secure lower valuations, while also reducing future capex to advance its 2030 renewable targets.
The acquisition will have the following impact on Equinor’s renewables portfolio and targets:
The deal adds 1GW of capacity, plus ~750MW of FID/awarded projects. We estimate an annual contribution of 3.1 TWh in net renewable generation.
Looking ahead, Equinor aims for 12-16 GW of net renewables by FY30 and over 65 TWh by FY35. Ørsted’s 35-38 GW FY30 target translates to ~3 GW of net capacity for Equinor.
3Q24 results saw renewable production rising 82% YoY in 3Q24 to 677 GWh, bringing FY24 YTD production to 2.1 TWh. Equinor has downgraded its full-year generation target for the second time, now aiming for 50% growth on FY23 (~2.9 TWh) due to delays at the Dogger Bank offshore wind project, which is expected to reach full capacity by 2H25. Last quarter, the target was reduced to 70% growth (~3.3 TWh), down from the initial goal of doubling generation (~4 TWh).
One year after posting a $300m impairment, Equinor is now progressing towards financial close on the Empire Wind project. The company secured a new price contract of $155/MWh, up from $118, and completed permitting. Financial close is expected in the coming weeks.
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3Q24 saw Equinor withdraw from its blue hydrogen pipeline project between Norway and Germany, raising concerns about its ability to meet its 15-40 TWh ‘decarbonised energy’ target by FY35, which includes renewable hydrogen, hydrogen with CCS, and power with CCS. The company’s ambition to develop 3-5 major industrial clusters for clean hydrogen and capture 10% of the European market share by FY35 is also in question.
Equinor stated that hydrogen progress is slowing and it is re-evaluating its approach to blue hydrogen in Europe, citing the lack of an economic framework, sufficient customer base, and a functioning market. This highlights broader challenges for blue hydrogen globally, as seen with Exxon’s Baytown project in the US, which faces similar hurdles without federal tax support.
The Ørsted acquisition adds ~530 MW of net heat and power capacity (~60% from biomass), expanding Equinor’s portfolio into biofuels. However, it remains unclear how much this will contribute toward its 'decarbonised energy' or 'renewables' targets.
