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Equinor (EQNR)
:EQNR
Risk Overview Q4, 2021
Risk Distribution
26% Production
23% Macro & Political
17% Finance & Corporate
17% Legal & Regulatory
9% Tech & Innovation
9% Ability to Sell
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Equinor ASA Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q4, 2021
Main Risk Category
Production
With 9 Risks
Production
With 9 Risks
Number of Disclosed Risks
35
-4
From last reportS&P 500 Average: 31
35
-4
From last reportS&P 500 Average: 31
Recent Changes
2Risks added
6Risks removed
14Risks changed
Since Dec 2021
2Risks added
6Risks removed
14Risks changed
Since Dec 2021
Number of Risk Changed
14
+10
From last reportS&P 500 Average: 3
14
+10
From last reportS&P 500 Average: 3
See the risk highlights of Equinor ASA in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 35
Production
Total Risks: 9/35 (26%)Above Sector Average
Manufacturing5 | 14.3%
Manufacturing - Risk 1
Failure to discover, acquire and develop additional reserves, will result in material decline of reserves andproduction from current levels.Changed
Manufacturing - Risk 2
For Equinor to build a material renewable business,covering also low carbon solutions such as hydrogen and carbon capture and storage (CCS), being competitive and getting access toattractive acreage and opportunities at the right terms are key. Future conditions along with risks and uncertainties in power, hydrogenand carbon markets as well as internal factors will influence our ability to achieve our ambitions relating to renewable energy.Changed
Risks related to changes in policies, laws and regulations:Policy makers in many modern electricity markets provide both direct andindirect support to renewables aimed at helping the renewable industry to grow and mature. The framework for low carbon solutionsremains relatively immature while such solutions require material levels of investment. Potential regulatory changes, and new policymeasures related to support regimes represent both threats and opportunities for Equinor. However, regulatory stability andpredictability are key concerns in this area.Market and technology risks: Technology development, such as for wind turbines, hydrogen production and carbon capture, is adriving force to ensure financial viability of Equinor’s investments. Important risk factors are Equinor’s understanding of the markets,market future development, and our ability to reduce costs and capitalize on technology improvements.Financial and reputational impact: Strong competition for assets may lead to diminishing returns within the renewable and low carbonindustries and hamper the transition into a broader energy company. Competitive auctions/tenders where prices do not allowabsorption of higher costs may increase the exposure to inflation risk. This is also relevant for assets where the costs and/or incomehave been locked in before the final investment decision.Although renewables and low carbon solutions are generally perceived to be important means to meet climate challenges, theseindustries may also entail impact on local communities and habitats. Accordingly, growth is also expected to be accompanied bygreater scrutiny from other industries and the society at large. Increasing criticism and push-back from environmental non-governmental organisations and equivalents could lead to a negative perception of the renewable and low carbon industries which inturn could lead to less access to attractive business opportunities.Organisational risk factors: Equinor’s ambition of growth within the renewable and low carbon solutions domains highlights the needfor robust processes and fit-for-purpose management systems to ensure a solid growth foundation. Providing the renewable and lowcarbon domains with a management system that is easy to adopt, implement, use and understand as well as ensuring sufficientcapability in the organization will be crucial to the future success of a broader energy company. This implies uncertainty and risks withregards to continuously developing renewable and low carbon competence, having a disciplined capital allocation, ensuring enoughcapacity and management focus on delivering a sustainable and fit for purpose growth
Manufacturing - Risk 3
The profitability of Equinor’s oil, gas and power production in remote areas may be affected byinfrastructure constraintsEquinor’s ability to commercially exploit discovered petroleum resources depends, among other factors, on infrastructure to transportoil, petroleum products and gas to potential buyers at a commercial price. Oil and petroleum products are transported by vessels, railor pipelines to potential customers/refineries, petrochemical plants or storage facilities, and natural gas is transported to processingplants and end users by pipeline or vessels (for liquefied natural gas). Equinor’s ability to commercially exploit renewable opportunitiesdepends on available infrastructure to transmit electric power to potential buyers at a commercial price. Electricity is transmittedthrough power transmission and distribution lines. Equinor must secure access to a power system with sufficient capacity to transmitthe electric power to the customers. Equinor may be unsuccessful in its efforts to secure transportation, transmission and markets for all its potential production
Manufacturing - Risk 4
Equinor is exposed to a wide range of health, safety and environmental risks that could result insignificant losses.Exploration, project development, operation and transportation related to oil and natural gas, as well as development and operation ofrenewable energy production, can be hazardous. In addition, Equinor’s activities and operations are affected by external factors likedifficult geographies, climate zones and environmentally sensitive regions.Risk factors that could affect health, safety and the environment include human performance, operational failures, detrimentalsubstances, subsurface behaviour, technical integrity failures, vessel collisions, natural disasters, adverse weather conditions,epidemics or pandemics, structural and organisational changes and other occurrences. Furthermore, non-compliance with ourmanagement system could influence the potential for negative effects. These risk factors could result in disruptions of our operationsand could, among other things, lead to blowouts, structural collapses, loss of containment of hydrocarbons or other hazardousmaterials, fires, explosions and water contamination that cause harm to people, loss of life or environmental damage. In particular, allmodes of transportation of hydrocarbons - including road, sea or pipeline - are susceptible to a loss of containment of hydrocarbonsand other hazardous materials and represent a significant risk to people and the environment.As operations are subject to inherent uncertainty, it is not possible to guarantee that the management system or other policies andprocedures will be able to identify all aspects of health, safety and environmental risks. It is also not possible to say with certainty thatall activities will be carried out in accordance with these systems.For a further description of Equinor’s health and safety results, including certain incidents in 2021, see section 2.14 Safety, security and sustainability.
Manufacturing - Risk 5
Equinor is exposed to risks as a result of its use of hydraulic fracturingEquinor's US operations use hydraulic fracturing which is subject to a range of applicable federal, state and local laws, including thosediscussed under the heading “Legal, Regulatory and Compliance Risks”. A case of subsurface migration of hydraulic fracturing fluidsor a case of spillage or mishandling of hydraulic fracturing fluids during these activities could subject Equinor to civil and/or criminalliability and the possibility of incurring substantial costs, including for environmental remediation. In addition, various states and localgovernments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing through additional permitrequirements, operational restrictions, disclosure requirements and temporary or permanent bans. Changes to the applicableregulatory regimes could make it more difficult to complete oil and natural gas wells in shale formations, cause operational delays,increase costs of regulatory compliance or in exploration and production, which could adversely affect Equinor's US onshore business and the demand for its fracturing services.
Employment / Personnel1 | 2.9%
Employment / Personnel - Risk 1
Equinor may not be able to secure the right level of workforce competence and capacity.Supply Chain1 | 2.9%
Supply Chain - Risk 1
Many of Equinor’s activities are conducted through joint arrangements and with contractorsand sub-contractors which may limit Equinor’s influence and control over the performance of such operations. This exposes Equinor tofinancial, operational, safety, security, and compliance risks as well as reputational risks and risks related to ethics, integrity, andsustainability, if the operators, partners or contractors fail to fulfil their responsibilitiesChanged
Costs2 | 5.7%
Costs - Risk 1
Fluctuating prices of oil and/or natural gas impact our financial performance. Generally, Equinor will nothave control over the factors that affect the prices of oil and natural gasCosts - Risk 2
Equinor’s insurance coverage may not provide adequate protection from losses.Equinor maintains insurance coverage that includes coverage for physical damage to its properties, third-party liability, workers’compensation and employers’ liability, general liability, sudden pollution, and other coverage. Equinor’s insurance coverage includesdeductibles that must be met prior to recovery and is subject to caps, exclusions, and limitations. There is no assurance that suchcoverage will adequately protect Equinor against liability from all potential consequences and damages. The fire at Hammerfest LNGin September 2020, leading to a financial loss for the group related to physical damage, postponement of production, and gas trading,illustrates that insurance may not completely protect the group from significant financial impact following an insurable loss. The Equinor group also often retains parts of its insurable risks in a wholly owned captive insurance company, so insurance recoveryoutside of the Equinor group may sometimes be limited.Uninsured losses could have a material adverse effect on Equinor’s financial position.
Macro & Political
Total Risks: 8/35 (23%)Above Sector Average
Economy & Political Environment4 | 11.4%
Economy & Political Environment - Risk 1
Equinor’s operations are subject to dynamic political and legal factors in the countries in which it operates.Economy & Political Environment - Risk 2
Equinor’s activities may be affected by international sanctions and trade restrictionsIn 2021, as in previous years, there were several changes to sanctions and international trade restrictions. Equinor seeks to complywith these where they are applicable. Equinor’s diverse portfolio of projects worldwide could expose its business and financial affairsto political and economic risks, including operations in markets or sectors targeted by sanctions and international trade restrictions.Sanctions and trade restrictions are complex, unpredictable and are often implemented on short notice. Equinor’s business portfolio isevolving and will constantly be subject to review. Given the use of trade restrictions by, amongst others, the US, UK and EU, it ispossible that Equinor will decide to take part in new business activity in markets or sectors where sanctions and trade restrictions areparticularly relevant.While Equinor remains committed to do business in compliance with sanctions and trade restrictions and takes steps to ensure, to theextent possible, compliance therewith, there can be no assurance that no Equinor entity, officer, director, employee or agent is not inviolation of such sanctions and trade restrictions. Any such violation, even if minor in monetary terms, could result in substantial civiland/or criminal penalties and could materially adversely affect Equinor’s business and results of operations or financial condition.The following discusses Equinor’s interests in certain jurisdictions: For a discussion of Equinor’s intent to exit its business activities in Russia, see “International, political, social and economic factors”above. In addition, Equinor is monitoring and remains committed to comply with Norwegian, EU, UK, US and any other applicabletrade restrictions and sanctions targeting Russian sectors, entities and persons, including Rosneft.Equinor holds a 51% interest in a gas license offshore Venezuela. Since 2017, various international sanctions and trade controls havetargeted certain Venezuelan individuals as well as the Government of Venezuela. The international sanctions and trade controls inplace restrict to a large extent the way Equinor can conduct its business in Venezuela, and could, alone or in combination with otherfactors, further negatively impact Equinor’s position and ability to continue its business in Venezuela.Disclosure Pursuant to Section 13(r) of the Exchange ActEquinor is providing the following disclosure pursuant to Section 13(r) of the Exchange Act. Equinor is a party to agreements with theNational Iranian Oil Company (NIOC), namely, a Development Service Contract for South Pars Gas Phases 6, 7 & 8 (offshore part),an Exploration Service Contract for the Anaran Block and an Exploration Service Contract for the Khorramabad Block, which arelocated in Iran. Equinor’s operational obligations under these agreements have terminated and the licences have been abandoned.The cost recovery programme for these contracts was completed in 2012, except for the recovery of tax and obligations to the SocialSecurity Organization (SSO).From 2013 to November 2018, after closing Equinor’s office in Iran, Equinor’s activity was focused on a final settlement with theIranian tax and SSO authorities relating to the above-mentioned agreements.In a letter from the US State Department of 1 November 2010, Equinor was informed that it was not considered to be a company ofconcern based on its previous Iran-related activities.Equinor has an intention to settle historic obligations in Iran while remaining compliant with applicable sanctions and trade restrictionsagainst Iran. Since November 2018 Equinor has not conducted any activity in Iran, nor has it been able to resolve tax claims from theIranian authorities. No payments were made to Iranian authorities during 2021.
Economy & Political Environment - Risk 3
Equinor has interests in regions where political, social and economic instability could adversely affect Equinor’s business.Equinor has assets and operations in several countries and regions around the globe where negative political, social and economicdevelopments could occur. These developments and related security threats require continuous monitoring. Political instability, civilstrife, strikes, insurrections, acts of terrorism and acts of war, adverse and hostile actions against Equinor’s staff, its facilities, itstransportation systems and its digital infrastructure (cyberattacks) may cause harm to people and disrupt or curtail Equinor’soperations and business opportunities, lead to a decline in production and otherwise adversely affect Equinor’s business, operations,results and financial condition. Similarly, Equinor’s response to such situations could lead to claims from partners and relevantstakeholders, litigation, and litigation-related costs.Equinor holds an interest in one offshore and several onshore oil and gas projects in Russia. Some of these projects result from astrategic cooperation with Rosneft Oil Company (Rosneft) initiated in 2012. In each of these projects, Rosneft holds the majorityinterest. One of the projects is in Arctic offshore and deepwater area. As of 31 December 2021, Equinor had USD 1.2 billion in non- current assets in Russia.On 28 February 2022 Equinor announced that it will stop new investments into its Russian businesses andwill start the process of exiting its joint ventures in Russia. It is expected that this decision will impact the book value of Equinor’sRussian assets and lead to impairment. It is impossible to predict the timing and terms of such exit of Equinor’s interests in Russia orthe prices for which such interests may potentially be sold, all of which may be affected, among other factors, by trade restrictions andsanctions or other steps taken by governmental authorities or any other relevant persons. Such prices could be significantly below thebook values of the assets divested and there is a risk that Equinor will not be able to recover any value from such assets.Equinor also has investments in Argentina where revised foreign exchange and price regulations could adversely affect Equinor's business
Economy & Political Environment - Risk 4
A transition to a lower carbon economy will affect Equinor’s businessand entails risks related to policy, legal, regulatory, market, technology developments as well as reputational impactChanged
Risks related to changes in policies, laws and regulations: Equinor expects, and is preparing for, regulatory changes and policymeasures targeted at reducing greenhouse gas emissions. Stricter climate regulations and policies could impact Equinor's financialoutlook, including the value of its assets, whether directly through changes in taxation, other costs to operations and projects, andaccess to acreage, or indirectly through changes in consumer behaviour or technology developments.Equinor expects greenhouse gas emission costs to increase from current levels and to have a wider geographical range than today.Equinor applies a default minimum carbon price in investment analysis starting at 58 USD per tonne in 2022, increasing towards 100USD per tonne by 2030. In countries where the actual or predicted carbon price is higher than our default at any point in time, Equinorapplies the actual or expected cost, such as in Norway where both a CO2 tax and the EU Emission Trading System (EU ETS) apply.The new EU Green Deal, EU Taxonomy and climate-related regulations and carbon pricing in specific countries imply more futureuncertainty. Climate-related policy changes may also reduce access to prospective geographical areas for exploration and futureproduction. Disruptive policy changes may not be ruled out, possibly triggered by severe weather events affecting public perceptionand policy making.Market and technology risks: A transition to a low carbon economy contributes to uncertainty over future demand and prices for oiland gas as described in the section “Oil and natural gas price”. Such price sensitivities of the project portfolio are described in section2.14 Safety, security and sustainability. Increased demand for and improved cost competitiveness of renewable energy, andinnovation and technology changes supporting the further development and use of renewable energy and low-carbon technologies,represent both threats and opportunities for Equinor.Reputational impact: Increased concern over climate change could lead to increased expectations on fossil fuel producers, as well asa more negative perception of the oil and gas industry. This could lead to increased litigation-related costs and poor reputation couldaffect our license to operate as well as our ability to attract and retain talent and key competences.All of these risks could lead to an increased cost of capital. For example, certain lenders have recently indicated that they will direct orrestrict their lending activities based on environmental parameters.Equinor’s net zero path and climate related ambitions are a response to challenges related to climate change and the energytransition. There is no assurance that Equinor’s climate related ambitions will be achieved. The achievement of the mid- and long-termclimate ambitions depends, in part, on broader societal shifts in consumer demands and technological advancements, each of whichare beyond Equinor’s control. Should society’s demands and technological innovation not shift in parallel with Equinor’s pursuit ofsignificant greenhouse gas emission reductions, Equinor’s ability to meet its climate ambitions will be impaired.
International Operations1 | 2.9%
International Operations - Risk 1
Equinor is engaged in global activities that involve several technical, commercial and country-specific risks.Natural and Human Disruptions2 | 5.7%
Natural and Human Disruptions - Risk 1
Changes in physical climate parameters could impact Equinor’s facility design and operationsChanged
Natural and Human Disruptions - Risk 2
Equinor’s operations and workforce have and continue to be impacted by the global Covid-19 pandemic. Thecontinuation or a resurgence of the pandemic, or the outbreak of other epidemics or pandemics, could precipitate or aggravate theother risk factors identified in this report and materially impact Equinor’s operations and financial conditionChanged
In 2021, the Covid-19 pandemic showed signs of being less severe. However, there continues to be uncertainty around the durationand extent of the impact of the Covid-19 pandemic. Equinor’s operations and workforce, including projects under development, haveand continue to be impacted by the global Covid-19 pandemic. Quarantine rules, travel restrictions, workforce shortage, supply chaindisruptions and Covid-19 prevention and mitigation controls, such as social distancing requirements and reduced utilisation of offshorebeds, have resulted in lower activity levels on certain sites, causing delays, cost increases and disruption of further work. As aconsequence, the start-up of projects (Njord future, Johan Castberg and Peregrino phase 2) have been postponed. In addition, certainof our suppliers and customers have and continue to be impacted by the spread of the pandemic, and the efforts to contain it, andmay as a result explore invoking contractual clauses such as those involving force majeure. There can be no assurance that theongoing Covid-19 pandemic, new variants, and efforts to contain the virus will not materially impact our operations or financialcondition.The changes in market risk and economic circumstances from the Covid-19 pandemic will continue to impact Equinor’s assumptionsabout the future and related sources of estimation uncertainty. The unprecedented nature of such market conditions could causecurrent management estimates and assumptions to be challenged in hindsight.The continuation or a resurgence of the pandemic, or outbreak of other pandemics or epidemics, could precipitate or aggravate theother risk factors identified in this report. Such occurrences could further adversely affect Equinor’s business, financial condition,liquidity, results of operations and profitability, including in ways not currently known or considered by us to present significant risks. The effect of any infection control measures may also impact project execution.
Capital Markets1 | 2.9%
Capital Markets - Risk 1
Equinor’s business is exposed to foreign exchange rate fluctuations that could adversely affect the results of Equinor’s operationsFinance & Corporate
Total Risks: 6/35 (17%)Above Sector Average
Share Price & Shareholder Rights1 | 2.9%
Share Price & Shareholder Rights - Risk 1
he interests of Equinor’s majority shareholder, the Norwegian State, may not always be alignedwith the interests of Equinor’s other shareholders, and this may affect Equinor’s activities, including its decisions relating to the NCS.Changed
Accounting & Financial Operations1 | 2.9%
Accounting & Financial Operations - Risk 1
Crude oil and natural gas reserves are based on estimates and Equinor’sfuture production, revenues and expenditures with respect to its reserves may differ from these estimates.Changed
Debt & Financing2 | 5.7%
Debt & Financing - Risk 1
Equinor is exposed to liquidity and interest rate risksDebt & Financing - Risk 2
Equinor is exposed to financial riskThe main factors influencing Equinor’s operational and financial results include oil/condensate and natural gas prices and trends in theexchange rates between mainly the USD, EUR, GBP and NOK; Equinor’s oil and natural gas entitlement production volumes (which inturn depend on entitlement volumes under PSAs where applicable) and available petroleum reserves, and Equinor’s own, as well asits partners’, expertise and cooperation in recovering oil and natural gas from those reserves; and changes in Equinor’s portfolio ofassets due to acquisitions and disposals.Equinor’s operational and financial results also are affected by trends in the international oil industry, including possible actions bygovernments and other regulatory authorities in the jurisdictions in which Equinor operates, possible or continued actions by membersof the Organization of Petroleum Exporting Countries (OPEC) and/or other producing nations that affect price levels and volumes,refining margins, the cost of oilfield services, supplies and equipment, competition for exploration opportunities and operatorships andderegulation of the natural gas markets, all of which may cause substantial changes to existing market structures and to the overalllevel and volatility of prices and price differentials.The following table shows the yearly averages for quoted Brent Blend crude oil prices, natural gas average sales prices, refiningreference margins and the USD/NOK exchange rates for 2021 and 2020.Yearly averages20212020Average Brent oil price (USD/bbl)70.741.7Average invoiced gas prices - Europe (USD/mmBtu)14.63.6Refining reference margin (USD/bbl)4.01.5USD/NOK average daily exchange rate8.68.8 The illustration shows the indicative full-year effect on the financial result for 2022 given certain changes in the oil/condensate price,natural gas contract prices and the USD/NOK exchange rate. The estimated price sensitivity of Equinor’s financial results to each ofthe factors has been estimated based on the assumption that all other factors remain unchanged. The estimated indicative effects ofthe negative changes in these factors are not expected to be materially asymmetric to the effects shown in the illustration.Significant downward adjustments of Equinor’s commodity price assumptions could result in impairments on certain producing anddevelopment assets in the portfolio. See note 11 Property, plant and equipment to the Consolidated financial statements for sensitivityanalysis related to impairments.Fluctuating foreign exchange rates can also have a significant impact on the operating results. Equinor’s revenues and cash flows aremainly denominated in or driven by USD, while a large portion of the operating expenses, capital expenditures and income taxespayable accrue in NOK. In general, an increase in the value of USD in relation to NOK can be expected to increase Equinor’s reportednet operating income.Historically, Equinor’s revenues have largely been generated by the production of oil and natural gas on the NCS. Norway imposes a78% marginal tax rate on income from offshore oil and natural gas activities (a symmetrical tax system). Equinor’s earnings volatility ismoderated as a result of its significant proportion of Norwegian offshore income that is subject to the 78% tax rate in profitable periodsand the significant tax assets generated by its Norwegian offshore operations in any loss-making periods. For further information, seesection 2.9 Corporate Taxation of Equinor.Currently, the majority of dividends received by Equinor ASA are from Norwegian companies. Dividends received from Norwegiancompanies and from similar companies’ resident in the EEA for tax purposes, in which the recipient holds more than 90 % of theshares and votes, are fully exempt from tax. For other dividends, 3% of the dividends received are subject to the standard income taxrate of 22%, giving an effective tax rate of 0.66%. Dividends from companies resident in low-tax jurisdictions in the EEA that are notable to demonstrate that they are genuinely established and carry on genuine economic business activity within the EEA anddividends from companies in low-tax jurisdictions and portfolio investments below 10% outside the EEA will be subject to the standardincome tax rate of 22% based on the full amounts received.See also note 6 Financial risk management to the Consolidated financial statements.
Corporate Activity and Growth2 | 5.7%
Corporate Activity and Growth - Risk 1
Equinor may not achieve its strategic objectives of successfully exploiting profitable opportunitiesChanged
Corporate Activity and Growth - Risk 2
The implementation of the new corporate structure in 2021 and its continuedimplementation may pose a risk for upholding safe and secure operationsChanged
The changes to Equinor’s corporate structure were decided and implemented to further strengthen Equinor’s ability to deliver on ourstrategy of always safe, high value and low carbon. The ongoing implementation process of these changes may divert managementand employee attention from tasks and responsibilities with a potential, negative impact on our ability to uphold safe and secure operations.
Legal & Regulatory
Total Risks: 6/35 (17%)Above Sector Average
Regulation5 | 14.3%
Regulation - Risk 1
Failure to deliver on expectations from the Parliament and the Ministry of Trade, Industryand Fisheries (MTIF), and failure to deliver on societal and political expectations in general could impact the manner which the Norwegian State exercises its ownership of the company.Changed
Regulation - Risk 2
Non-compliance with anti-bribery, anti-corruption and other applicable laws or failure to meet Equinor’s ethical requirements, including the Human Rights policy,has the potential to expose Equinor to legal liability, lead to a loss of business, loss of investor confidence, damage our reputation andour social license to operate, as well as erode shareholder value. It could also lead to an adverse effect on the human rights of various right-holdersChanged
Equinor is a global company with a presence and/or suppliers and other business partners in many parts of the world – includingwhere corruption and bribery represents a high risk and where the human rights situation is challenging. Such risks often exist incombination with weak legal institutions and lack of transparency. Governments routinely play a significant role in the energy sector,through ownership of resources, participation, licensing, and local content which leads to a high level of interaction with public officials.Equinor is subject to anti-corruption and bribery laws in multiple jurisdictions, including the Norwegian Penal code, the US ForeignCorrupt Practices Act and the UK Bribery Act. A violation of such applicable anti-corruption or bribery laws could expose Equinor toinvestigations from multiple authorities and may lead to criminal and/or civil liability with substantial fines. Incidents of noncompliancewith applicable anti-corruption and bribery laws and regulations and the Equinor Code of Conduct could be damaging to Equinor’sreputation, competitive position, and shareholder value. Similarly, failure to uphold our Human Rights policy may damage ourreputation and social license to operate. Similarly, failure to identify or address potential adverse human rights impacts in line with ourHuman Rights policy, e.g., in parts of our supply chains, could damage our reputation, and weaken our social license to operate.Throughout 2021, the organization monitored potential increased risks or changed risk picture with respect to Equinor’s ethics andcompliance standards due to the Covid-19 situation. Continuation or a resurgence of the pandemic could continue to impact and/orpotentially increase our ethics and compliance risks in ways not currently known or considered by us
Regulation - Risk 3
Equinor conducts business in many countries and its products aremarketed and traded worldwide. Equinor is exposed to risk of supervision, review and sanctions for violations of laws and regulationsat the supranational, national and local level. These include, among others, laws and regulations relating to financial reporting,taxation, bribery and corruption, securities and commodities trading, fraud, competition and antitrust, safety and the environment,labour and employment practices and data privacy rules.Changed
Violations of applicable laws and regulations may lead to legal liability, substantial fines, claims for damages, criminal sanctions andother sanctions for noncompliance.Equinor is subject to supervision by the Norwegian Petroleum Supervisor (PSA), which supervises all aspects of Equinor’s operations,from exploration drilling through development and operation, to cessation and removal. Its regulatory authority covers the whole NCSincluding offshore-wind as well as petroleum-related plants on land in Norway. As its business grows internationally, Equinor maybecome subject to supervision or be required to report to other regulators, and such supervision could result in audit reports, ordersand investigations.Equinor is listed on both the Oslo Børs and New York Stock Exchange (NYSE) and is a reporting company under the rules andregulations of the US Securities and Exchange Commission (the SEC). Equinor is required to comply with the continuing obligations ofthese regulatory authorities, and violation of these obligations may result in legal liability, the imposition of fines and other sanctions.Equinor is also subject to financial review from financial supervisory authorities such as the Norwegian Financial Supervisory Authority(FSA) and the SEC. Reviews performed by these authorities could result in changes to previously published financial statements andfuture accounting practices. In addition, failure of external reporting to report data accurately and in compliance with applicablestandards could result in regulatory action, legal liability and damage to Equinor’s reputation. Also, any identification of a materialweakness in internal controls over financial reporting could cause investors to lose confidence in reported financial information and potentially impact the share price.
Regulation - Risk 4
The Norwegian State governs the management of NCS hydrocarbon resources through legislation, such as the Norwegian Petroleum Act, tax law and safety and environmental lawsand regulations. The Norwegian State awards licences for exploration, development projects, production, transportation, andapplications for production rates for individual fields. The Petroleum Act provides that if important public interests are at stake, theNorwegian State may instruct operators on the NCS to reduce petroleum productionAdded
The Norwegian State has a direct participation in petroleum activities through the State's direct financial interest (SDFI). In theproduction licenses in which the SDFI holds an interest, the Norwegian State has the power to direct petroleum licenses’ actions incertain circumstances. See also section 2.9.If the Norwegian State were to change laws, regulations, policies, or practices relating to energy or to the oil and gas industry(including in response to environmental, social or governance concerns), or take additional action under its activities on the NCS,Equinor’s international and/or NCS exploration, development and production activities, and the results of its operations, could be affected.
Regulation - Risk 5
Compliance with health, safety and environmental laws and regulationsthat apply to Equinor’s activities and operations could materially increase Equinor’s costs. The enactment of, or changes to, such lawsand regulations could increase such costs or create compliance challengesAdded
Equinor incurs, and expects to continue to incur, substantial capital, operating, maintenance and remediation costs relating tocompliance with increasingly complex laws and regulations for the protection of the environment and human health and safety, as wellas in response to concerns relating to climate change, including:?higher prices on greenhouse gas emissions;?costs of preventing, controlling, eliminating or reducing certain types of emissions to air and discharges to the sea;?remediation of environmental contamination and adverse impacts caused by Equinor’s activities;?decommissioning obligations and related costs; and?compensation of costs related to persons and/or entities claiming damages as a result of Equinor’s activities. In particular, Equinor’s activities are increasingly subject to statutory strict liability in respect of losses or damage suffered as a resultof pollution caused by spills or discharges of petroleum from petroleum facilities.Equinor’s investments in US onshore producing assets are subject to evolving regulations that could affect these operations and theirprofitability. In the United States, Federal agencies have taken steps to rescind, delay, or revise regulations seen as overlyburdensome to the upstream oil and gas sector, including methane emission controls. To the extent new or revised regulationsimpose additional compliance or data gathering requirements, Equinor could incur higher operating costs.Compliance with laws, regulations and obligations relating to climate change and other health, safety and environmental laws andregulations could result in substantial capital expenditure, reduced profitability as a result of changes in operating costs, and adverseeffects on revenue generation and strategic growth opportunities. However, more stringent climate change regulations could alsorepresent business opportunities for Equinor. For more information about climate change related to legal and regulatory risks, see therisks described under the heading “Climate change and transition to a lower carbon economy” in “Risks related to our business,strategy and operations” in this section
Taxation & Government Incentives1 | 2.9%
Taxation & Government Incentives - Risk 1
Equinor is exposed to potentially adverse changes in the tax regimes of each jurisdiction in which Equinor operatesTech & Innovation
Total Risks: 3/35 (9%)Above Sector Average
Innovation / R&D1 | 2.9%
Innovation / R&D - Risk 1
Equinor’s development projects and production operations involve uncertaintiesand operating risks which could prevent Equinor from realising profits and cause substantial lossesCyber Security1 | 2.9%
Cyber Security - Risk 1
Equinor is exposed to security threats that could have a materially adverse effect on Equinor's results of operations and financial condition.Technology1 | 2.9%
Technology - Risk 1
Equinor's crisis management systems may prove inadequate.Ability to Sell
Total Risks: 3/35 (9%)Above Sector Average
Competition1 | 2.9%
Competition - Risk 1
Equinor encounters competition from other companies in all areas of its operations. Equinor could beadversely affected if competitors move faster or in other directions in the development and deployment of new technologies and products.Changed
Sales & Marketing1 | 2.9%
Sales & Marketing - Risk 1
Equinor is exposed to risks relating to trading and supply activities.Brand / Reputation1 | 2.9%
Brand / Reputation - Risk 1
Equinor’s reputation is an important asset. Erosion of the reputation could adversely affect Equinor’s brand, social license to operate, and business opportunity set.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.