Investment Thesis
In the past, investors generally focused less on CSR (Corporate Social Responsibility), and more on maximizing profits. However, there are big changes taking place, as the world’s largest asset managers have over the last few months made it very clear, that CSR will be one cornerstone in their investment decision process.
Larry Fink of BlackRock (BLK), in his 2018 letter to CEOs made this very clear. Norway’s SWF, also the world’s largest, last week announced that they would exit oil & gas exploration stocks. In the short term, this may put some pressure on prices, but the long-term outcome should be more engagement by the industry in order to comply and excel in the reduction of harmful consequences to the environment.
Equinor (NYSE:EQNR) of Norway is a class leader in the implementation and development of activities which limits their environmental impact.
Does this mean the company is less profitable?
Latest Financial Results
On 6th of February 2019, EQNR presented their 4th quarter and full year results. Like most of their peers results were positive.
The group’s profit for the last quarter came in at $4.39 billion before taxes. This was 10.9% higher than the 4th quarter of 2017. However, after taxes, the profit shrank to just $1.54 billion. In other words, $2.8 billion was paid in taxes over the last quarter. This gives an effective tax rate of 64.9%, and must surely be the highest tax rate of any oil and energy company.
On the debt side, throughout 2018, EQNR managed to reduce net debt to equity ratio from 29% to as low as 22.2%.
Their organic free cash flow for 2018 was $6.3 billion, after taking into account paying out $2.67 billion in a dividend.
It is also worth noting that all the cost-cutting which has been
