From my 10 picks for the 3 energy crises Special Report on my subscription see JubakAM.Com.
My picks for The Scramble crisis: Pick #7: Equinox (EQNR)
Picking an oil stock for the energy future seems, well, counter-intuitive. Isn’t oil the energy past? Yes, indeed, but when? And how fast will natural gas and LNG peak? And when will energy production from renewables accelerate so much that stock prices have to pay attention? These are all complicated questions and getting the correct timing of the energy future is really difficult right now as investors look out beyond five years to what I’m calling the Scramble stage of the energy crisis. Especially with the possibility of a sudden global rush to head off catastrophic increases in temperature. Economies and financial markets don’t make the best decisions in a panic.
Equinor is a way to hedge all those uncertainties–while collecting a 5.9% dividend.
Oil and gas–with a focus on production from the Norwegian Continental Shelf–will drive cash flow at the company forth foreseeable future. Equinor’s hydrocarbon strategy focuses on investing in its highest-quality assets while divesting smaller, noncore areas. New projects coming on stream by 2035 break even below $40/barrel and pay back in under 2.5 years on average, says Equinor, and deliver over 10% volume growth from 2024-27. Volumes are set to grow through 2027, before peaking.
One of the advantages of Equinox’s focus on the Norwegian Continental Shelf is that production from that region is of a relatively low carbon intensity, and the carbon from production there is offset by Equinox’s investments in offshore wind, carbon storage, and hydrogen projects. Equinor has made a commitment to net zero emissions by 2050. After acquiring a 10% stake in wind power company Ørsted at the end of 2024, Equinor’s renewable net installed capacity reached 2.4 gigawatts. The firm plans to increase it to 10-12 GW by 2030, down from its previous 12-16 GW target. Central to its strategy is offshore wind, which accounts for most of the 4.5 GW currently under development.
Capital will also go toward carbon transportation and storage, like its Northern Lights project, and clean hydrogen projects, where Equinor aims to leverage its expertise to develop its project pipeline and become an industry leader. The world’s first CO2 shipment arrived at the Northern Lights project this summer, carrying 7,500 metric tons of liquefied CO2 from a Norwegian cement factory that otherwise would have gone into the atmosphere.
The project’s backers–Shell, Equinor and TotalEnergies, along with the Norwegian government–say their facility could pump 5 million metric tons of carbon dioxide underground each year, or about a tenth of Norway’s annual emissions. If the world reaches a panicked realization that it needs short-term carbon solutions–no matter their cost or technology limitations–Equinor will be positioned at the front of that spending.
Capital spending at the company will rise to $13 billion in 2025, up from $12 billion in 2024 and stay at that level on average through 2027. (This is a downward revision from the previous $14 billion-$15 billion range and reflects a 50% reduction in capital expenditures expected in renewables and low-carbon solutions.)
After cutting the dividend to $0.09 from $0.27 in early 2020, Equinor has raised it several times, now to $0.37 per share, with a commitment to raise it by $0.02 per year over the long term. The $0.35/share extraordinary dividend ended in 2024.
Equinor resumed share repurchases in 2021. It plans to repurchase $5 billion in 2025, bringing total buybacks to $11 billion for 2024-25, the midpoint of its $10 billion-$12 billion target. Of that, $1.2 billion is annual long-term buyback, the rest extraordinary and performance-linked.
In 2025, Equinor aims to return $9 billion to shareholders via dividends and repurchases. This works out to a 12% total yield.
I’ve owned Equinox in my Dividend Portfolio since March 27, 2024. The positions down 10% since inception. Tomorrow I will also add a position in Equinox to my Jubak Picks Portfolio.
