(Bloomberg) -- Equinor ASA became the first major oil company to cut its dividend amid an historic market rout.
The move by Norway’s biggest crude producer may be a signal of what’s to come from others in the industry, including Royal Dutch Shell Plc and Chevron Corp. They’ve already slashed investments and buybacks, but have so far steered clear of the dividends that shareholders are counting on.
Equinor’s decision reflects “unprecedented market conditions and uncertainties,” it said in a statement on Thursday. The stock dropped as much as 2.4% in early Oslo trading, lagging a 1.5% increase in the European Stoxx 600 Oil & Gas index.
Since Big Oil announced some initial measures to cope with a market slump driven by the coronavirus pandemic, the situation has worsened. Oil in the U.S. traded at negative prices for the first time ever amid massive oversupply. North Sea’s Brent benchmark dropped to more than 20-year lows.
Equinor cut its dividend for the first quarter to 9 cents from 27 cents for the previous three months, marking the first reduction since the company started quarterly payments in 2014 (aside from a so-called scrip program that paid investors in new shares during the previous market slump).
Making a straight cut without offering a scrip option “was a bit surprising, but very reasonable,” SpareBank 1 Markets analyst Teodor Sveen Nilsen said in a note to clients. He reduced his estimate for Equinor’s dividend for the rest of the year.
The company has already suspended its share-buyback program and launched a $3 billion plan to cut investments and costs, including exploration. It also sold bonds for $5 billion this month.
Such “forceful actions” are intended “to strengthen our liquidity and financial resilience under the current circumstances,” said Chief Executive Officer Eldar Saetre. “In this extraordinary market situation, we have now also decided to reduce the cash dividend for the first quarter.”
Equinor is now able to break even before capital distribution with oil prices of $25 a barrel, it repeated. Brent traded at about $21 a barrel on Thursday in London.
Equinor will publish its first-quarter report on May 7.
To contact the reporter on this story:
Mikael Holter in Oslo at mholter2@bloomberg.net
To contact the editor responsible for this story:
Tasneem Hanfi Brögger at tbrogger@bloomberg.net
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