On Friday, Bernstein SocGen Group maintained a positive outlook on shares of Equinor (EQNR:NO) (NYSE: EQNR), reiterating an Outperform rating with a price target of NOK340.00. The firm's analyst highlighted the recent agreement between Equinor and Shell (LON:SHEL) to merge their UK offshore Oil & Gas portfolios. This strategic move aims to create a new UK-focused Exploration & Production (E&P) company, expected to leverage financial and operational synergies.
Despite a relatively subdued response from the market to the announcement, the analyst believes the deal is cash accretive for Equinor and could be undervalued by investors. Currently trading near its 52-week low with a P/E ratio of 7.28, the stock appears undervalued based on InvestingPro's Fair Value analysis.
The transaction is anticipated to advance cash flow for the company, which already maintains a strong 10.62% dividend yield and has consistently paid dividends for 23 consecutive years, although Equinor has not yet disclosed the dividend it anticipates from the new self-funded entity starting from its first year.
The analyst pointed out that following the partnership with Shell, which also bolsters Equinor’s position in the US onshore gas market this year, an upgrade to Equinor’s mid-term cash flow outlook is likely at the 2025 Capital Markets Update.
In February 2024, Equinor forecasted an average Funds From Operations (FFO) greater than $20 billion per annum from its Oil & Gas operations and trading for the period of 2025-27. This projection is based on specific energy price assumptions including a $75 per barrel Brent crude oil price from 2024, a European gas price of $13/MMBtu for 2024-25, and $9/MMBtu thereafter, with a consistent $3.5/MMBtu for the Henry Hub.
The analyst concluded by affirming the Outperform rating for Equinor, noting that the valuation does not yet incorporate the announced deal with Shell. The collaboration is set to enhance Equinor's portfolio and potentially contribute to a more optimistic cash flow outlook for the company in the coming years.
With strong fundamentals, including a current ratio of 1.49 and more cash than debt on its balance sheet, Equinor demonstrates robust financial health that supports its strategic initiatives.
In other recent news, Equinor ASA (NYSE:EQNR) has been making significant strides in the energy sector. The company recently reported strong financial results for Q3 2023, with an adjusted operating income of $6.9 billion and an IFRS net income of $2.3 billion.
Equinor's year-to-date cash flow from operations after tax reached $14 billion. The company also made strategic moves, including acquiring a 9.8% stake in Ørsted to strengthen its offshore wind portfolio and declaring a total capital distribution of $14 billion for the year.
Equinor was upgraded from Neutral to Buy by Redburn-Atlantic, driven by the anticipation of rising gas prices in Europe. The firm sees Equinor as a major beneficiary of potential increases in international gas prices, and it has increased the company's fiscal year 2025 earnings forecast by 14%. Equinor is also expected to distribute about 25% of its market capitalization in dividends over fiscal years 2025 and 2026, supported by a robust balance sheet.
In other developments, Equinor, along with other energy companies, has been taking precautions against tropical storm Rafael in the Gulf of Mexico. The company has shut down production and planned to complete the evacuation of its facilities. These are some of the recent developments surrounding the company.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.