Unlocking the Potential of Norway’s Energy Giant
Despite a tumultuous year, Norwegian energy major Equinor (NYSE: EQNR) remains a compelling investment opportunity. With a stock price drop of 19.5% year to date, Equinor has underperformed its peers, including ExxonMobil, Chevron, TotalEnergies, Shell, BP, and Eni. However, the company continues to generate robust earnings and return a substantial amount of capital to shareholders.
A Majority-State-Owned Energy Company
As a majority-state-owned international energy company, Equinor is heavily influenced by Norway’s energy policy. With 75% of the company owned by the Norwegian state and private owners, Equinor has a unique advantage in the region. The company has been drilling the Norwegian Continental Shelf (NCS) for decades and has diversified its upstream portfolio, although Norwegian exploration and production efforts still account for 85% of its total oil and gas operating income.
Unlocking New Opportunities
Technological advancements have unlocked new opportunities along the NCS, making it unnecessary for Equinor to diversify its oil and gas portfolio extensively. The Johan Sverdrup oil field, for instance, has become the third-largest oil field along the NCS, representing a significant portion of Norway’s oil production. In its third-quarter earnings call, Equinor reported that Johan Sverdrup has produced over 1 billion barrels of oil in five years, generating $80 billion in revenue.
Investing in Renewable Energy
Equinor has been investing heavily in renewable energy, making measured investments in oil and gas. The company plans to have 12-16 gigawatts of installed renewable capacity by 2030. Renewable power generation reached 677 GWh in the third quarter of 2024, up from 373 GWh in the same quarter last year. Additionally, Equinor completed the Northern Lights carbon capture, transport, and storage facility in September and acquired a 9.8% minority stake in Danish wind giant Orsted in October.
Returning Capital to Shareholders
Despite the company’s focus on renewable energy, Equinor expects to return $14 billion to shareholders through dividends and buybacks in 2024. Over the last three years, Equinor has reduced its outstanding share count by 15.3%, an impressive pace of stock repurchases. However, the company has announced that this period of massive capital returns will come to an end in 2025, with a planned capital return program of $8-10 billion.
Why Equinor Stands Out
Equinor is an attractive investment opportunity due to its dirt-cheap price-to-earnings ratio of 7.8, massive dividend yield, and highly efficient oil and gas portfolio. The company’s decision to invest in Orsted relieves pressure to develop its own renewable energy projects, and the opening of Northern Lights showcases its diverse renewable energy portfolio. With its strong fundamentals and commitment to sustainability, Equinor is a great buy for investors looking for a high-yield value stock.
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