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How Much Can Equinor Exploit Europe’s Energy Crisis?


  • Soaring energy prices in Europe lead to revenue explosion
  • Green shift to stay competitive requires CAPEX ramp-up
  • Strong years ahead lead to attractive dividend yields

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Equinor’s revenue breakdown 2020

Share price and volume remain bullish

  • Over the past year, the stock price saw a strong rally, up 50% YTD
    • The 50DMA line stayed above the 200DMA throughout the whole period
    • Therefore, the price signal remains bullish
  • The Volume RSI has stayed slightly above the 50%-line, which is a positive sign as well

Soaring energy prices in Europe lead to revenue explosion

  • The economic recovery created strong demand for energy while supply experiences bottlenecks
    • Gas skyrocketed by almost 500% YoY
    • Oil price has risen by more than 85% YoY
  • On top of that, maintenance issues in major gas plants in Norway and unwillingness of Russia to increase supply worsened the situation

What’s actually going on in Europe?

  • The EU ambitiously cut back traditional fuels without enough alternatives
  • Renewable energy investments are increasing but too slow to compensate for the supply gap in the near-term future
    • Therefore, you can call the current energy crisis self-inflicted
    • The EU must now import oil and gas from other countries, increasing its dependency

Europe’s unrealistic pace of green transition causing slowdown

  • Natural gas and coal production are down by 53% and 32% respectively in the past 10 years
    • Most European countries have already closed their coal plants and started to phase out fossil fuels
  • Renewables have grown by 34% and are now the No.1 energy source in the EU
    • However, the production level is still far from enough to match demand

As a result, there is a huge gap between demand and supply

  • Lower production while demand for energy has surged increasing the gap further over time
    • Hence, the EU is now heavily dependent on imports
  • The structural energy problem is unlikely to be resolved soon
    • Hence, I expect Enquinor to benefit much longer from higher prices

Green shift to stay competitive requires CAPEX ramp-up

  • Equinor started to diversify its portfolio away from oil & gas
    • Increasing pressure in Europe to shift green faster requires energy companies to adapt immediately
    • Being state-owned should help for a smooth shift
  • As of 2021, it has a renewable energy capacity of 1.6 MW
    • Until 2030, the capacity is expected to grow more than 8x to 13+ GW

Concentrated production enabled less heavy investments

  • Equinor was able to reduce CAPEX over time as it concentrated its oil & gas production
    • In 2021, in produced in 15 countries compared to 30 countries in 2017
  • This number might fall further as the company reduced exploration efforts to 10 out of the 15 countries, where its is currently producing

Expect rising CAPEX

  • In 2021, renewable CAPEX made up 12% of its total CAPEX, compared to 4% in 2020
  • With a US$23bn allocation to realize its renewable energy growth plan, CAPEX should rise much faster
    • Getting the CAPEX forecast right is crucial for determining the value of a company in a capital-intensive industry

Strong years ahead lead to attractive dividend yields

  • In 2019, Equinor introduced its share buyback program
  • With the enhanced outlook, the management aims to increase the program to an annual $1.2bn in buybacks, enhancing returns
  • I also expect a strong increase in dividends over next 3 years
    • The dividend yield could grow to a remarkable 4%+ in 23E

FVMR Scorecard – Equinor

  • A stock’s attractiveness relative to stocks in that country or region
  • Attractiveness is based on four elements
    • Fundamentals, Valuation, Momentum, and Risk (FVMR)
  • Scale from 1 (Best) to 10 (Worst)

Consensus sees small upside

  • Most analysts stays at HOLD recommendation for now
    • 4 analysts even issued a STRONG SELL (which they rarely do)
  • Consensus expects two strong years in terms of revenue but then a drop in 23E due to normalization of commodity prices
    • Equinor is engaged in a highly volatile industry

Get financial statements and assumptions in the full report

P&L – Equinor

  • Elevated profit level of the next two years is solely driven by higher oil and gas prices
    • Equinor did not aggressively expand its production

Balance sheet – Equinor

  • Net fixed assets continue to decline as the company further narrows its production to a few locations
    • It’s part of its strategy to concentrate production to highly profitable areas
    • Still, I expect rising NFA in 23E onward due to renewable energy expansion
  • The company slightly increased its LT-debt over the pandemic
    • However, I expect that part of its elevated profits can be used to repay debt over time

Ratios – Equinor

  • After making a loss in 2020, the company is likely to see a record net margin in 21E
    • Still, don’t expect the company to be able to maintain such a margin over the long run
    • Oil and gas prices can change directions easily
  • Its low cash conversion cycle helps the company to manage its working capital efficiently

Long-term share price performance potential

Free cash flow – Equinor

  • Equinor faces higher CAPEX over the next few years in line with its plans to slightly increase oil & gas production and to realize its renewable energy targets

Value estimate – Equinor

  • The ongoing energy crisis in Europe should support a higher price level than usual
    • I expect the company to record high revenue over the next 3 years
    • However, afterward, I forecast a decline in revenue than should also normalize profits

World Class Benchmarking Scorecard – Equinor

  • Identifies a company’s competitive position relative to global peers
  • Combined, composite rank of profitability and growth, called “Profitable Growth”
  • Scale from 1 (Best) to 10 (Worst)

Key risk is a slowing economy

  • Potential economic slowdown could lead to a rapid decline in energy prices
  • Unexpected weather damages of gas and oil plants
  • Failure to realize fast shift to green energy


  • Revenue explosion is solely energy price-driven, while production is stable
  • Falling energy prices could lead to negative market sentiment
  • Attractive dividend yield and repurchases might not be enough to compensate a potential fall

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