Can U.S. Oil Companies Follow Equinor’s Renewable Path?

Norway is blessed with abundant resources of wind (and hydropower), but Equinor has also made renewable investments in the U.S., UK, Germany, Poland, Brazil, and Argentina. So its renewable investments are diversified by both type and geography.

To be clear, Equinor is still primarily an oil and gas company. Although Equinor’s renewable contribution to earnings has gotten a lot of positive coverage, some perspective is in order.

Equinor still produced 2.2 million barrels of oil equivalent per day (mboe/d) in the first quarter of this year. That’s a level consistent with the company’s daily production in recent years. (For perspective, ExxonMobil’s daily production is about 3.8 million mboe/d).

In fact, a deeper dive into the company’s earnings show that the exploration and production (E&P) segments generated $4.1 billion of pretax earnings, versus $1.3 billion for renewables. But the E&P segment is heavily taxed. The $4.1 billion of pretax earnings only resulted in $1.3 billion of after-tax earnings. The renewable segment, by contrast, paid almost no taxes on its earnings.

So, Equinor’s experience may not be directly transferrable to a U.S. oil or gas company. Equinor’s success in growing its renewable earnings is largely a function of the Norwegian government and the company having interests that are aligned. That’s not the case everywhere, so other oil and gas companies will have a more challenging time replicating Equinor’s results.

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