Equinor's US Foray Costly, Undisciplined: Report
Equinor's optimistic US upstream foray cost it $9.2bn in impairments as it failed to apply proper oversight, the Norwegian state-controlled producer learned from an independent report published October 9. Equinor's board commissioned the review, by state authorised accountant Eli Moe-Helgesen from PwC, in June.
The oil-price collapse in 2014 exposed the weakness in Equinor's mergers an acquisitions strategy, it found.
“We have received a thorough and critical report. Equinor has recorded large financial losses in the US. These were mainly driven by an ambitious growth strategy and investments that were based on overly optimistic price assumptions. In addition, rapid growth for a period led to significant control problems," Equinor board chairman Jon Erik Reinharden said in a statement.
"The report also confirms that comprehensive improvement efforts were launched when the extent of the challenges were identified in 2014. We have a good foundation on which to follow up the recommendations in the report, and this job has already started,” he said.
Onshore acquisitions in the period from 2008 to 2011 were based on overly optimistic price assumptions and were not robust when prices fell from 2014. This has led to large losses, and impairments in the onshore business of $9.2bn as of the end of 2019.
The report also describes how Equinor experienced serious challenges in business support functions such as production revenue accounting, land management and procurement in the onshore business.
The review is based on over 120 interviews and documentation going back to 2005. Relevant findings from the internal audit reports of Equinor’s US and international business have been addressed and closed, except for certain specific issues where improvements are still ongoing. The review team has identified areas that can be further strengthened: within strategy and business development; governance, risk and internal control; and leadership and culture.