Nora Buli and Nerijus Adomaitis

OSLO (Reuters). -Norway’s Equinor reported its best quarterly results in nine years Wednesday. This was due to a global energy crunch, which pushed Europe’s prices up to new records and drove the value of derivatives contracts skyrocketing.

Company stated that it plans to increase share buybacks significantly in the next months and maintain a quarterly dividend rate of $0.18 each share.

From $780m a year earlier, the adjusted earnings before taxes rose to $9.77billion in the July-September quarter. This is more than the $8.4billion predicted by Equinor’s poll of 25 analysts.

Anders Opedal, Chief Executive Officer of the company said that the volatility and current level of European gas prices “underlines the market uncertainty.”

Equinor plays an important role in Europe as a reliable source of energy. We have made steps to boost our gas exports to meet the demand.

Norway, which produces around 4,000,000 barrels per day of equivalent oil in western Europe, is the largest producer of oil and gas. According to Norwegian data, 22% of all gas used in Europe was supplied by Norway last year.

Equinor said that it intends to increase European pipeline gas exports by increasing production from the Oseberg, Troll, and Oseberg areas as well as by reducing gas injections which are normally used for oil pumping.

In the third quarter of 2018, global gas prices rose strongly. Europe’s benchmark TTF TTF front-month contract increased threefold to approximately 90 Euros per megawatthour (MWh). This was due to growing demand, low storage levels and worries about Russian supply before winter heating season.

In early October, the gas price spiked https://www.reuters.com/article/power-prices-europe-idINL1N2R10AQ again, hitting a record https://www.reuters.com/article/europe-gas-idINL8N2R21XB of 155 euros per MWh before easing to 89 euros on Tuesday. North Sea prices have risen 67% to $86 per barrel, a record for this time in three years.

DEIVATIVE GAINS & LOSSES

Equinor said earnings rose from $262 million to $2.19Billion in Equinor’s marketing and midstream processing unit (MMP). This was due to a rise in European gas derivatives.

Equinor sells the majority of its gas in a spot or short-term basis, but it also offers a smaller share that is based on longer-dated indexes. MMP uses financial contracts to alter the price exposure in order to profit from stronger spot and front month pricing.

Equinor stated that the mark-to market gains made by such contracts during the third quarter would be followed in part by losses in MMP segments when these volumes are delivered to long-term contracts.

According to MMP, the company claimed that the decision to make derivatives was a good move for the group. However, it created volatility within the segment.

SpareBank 1 Markets analyst Teodor Veen-Nilsen advised investors to be cautious about the one-off nature MMP gain gains.

In a note to clients, he stated that MMP’s profitability was a dark box with little visibility.

The analyst said Equinor could still outperform peer shares by around 2-4% Wednesday.

1 BILLION BUYBACK

The rising energy costs have led to an increase in electricity prices throughout Europe and around the globe. This has had a major impact on households as well as businesses. Companies were forced to close factories due to loss of profits, which has caused more shortages within supply chains.

Equinor intends to purchase back shares valued at $1 billion in the following three months. This is an increase on its earlier plan of purchasing $300 million shares.

The company also had plans to purchase up to $300,000,000 worth of shares over the past three months but spent only $99 million.

Equinor has increased its capital expenditures for 2021 from $9 billion to $10billion previously to $8.0billion. However, it is expected that the 2021-2022 average will remain between $9 billion-10 billion.

The company maintained its plan to invest around $12 billion annually in 2023, 2024.

Equinor’s shares are up 60.6% since the beginning of this year. The Oslo Bourse will reopen trading at 0700 GMT.