Equinor Downgraded: Analyst Highlights Faster Balance Sheet Re-leveraging And Modest 2024 Distributions

RBC Capital Markets analyst Biraj Borkhataria downgraded Equinor ASA EQNR to Sector Perform from Outperform and cut the price target to NOK390 from NOK350.

The analyst says that EQNR looks set to re-lever its balance sheet faster than expected, suggesting more modest than anticipated 2024 distributions amid a subdued macro outlook and a lower commodity deck.

Also Read: Energy Giant Equinor's Q3 Earnings: Revenue & Profits Tumble Significantly On Weak Gas Production

Notably, Borkhataria updated the oil deck to $82.5/bbl Brent in 2024 (vs. $90/bbl earlier).

Also, the analyst expects potential negative earnings revisions for the company.

As per the analyst's updated oil deck estimates, Equinor will offer a single-digit FCF yield, with further pressure into 2025 due to lagged tax payments. 

Also Read: Energy Sector Stocks Flush With Cash Amid Oil's Bear Market: Is There A Buy Signal In Sight?

Borkhataria expects shareholder distribution to step down, projecting ~$13.3 billion in 2024, reflecting a smaller special dividend and a share buyback of $5 billion (vs. $6 billion this year). 

Consequently, the analyst estimates EBIT of $33.5 billion for FY24 and $29.4 billion for FY25, both around 10% below consensus. 

Also Read: Equinor's Massive Gas Pact: Long-Term Deal With Germany's SEFE, Plus Hydrogen Partnership

Price Action: EQNR shares are trading lower by 0.49% at $31.56 on the last check Tuesday. 

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