Danske Bank: Equinor – Provides more ambitious renewables capex and shareholder distribution outlook

Equinor (MW) has updated several of its targets ahead of its CMD today. Equinor announces that it will accelerate its ambitions to reach zero emissions by 2050, now targeting 40% reduction by 2035. This will be met by dedicating over 50% of its capex towards renewables by 2030 (excl. project finance). We see this as a step in the right direction, but also note the long lead time before renewable capex is stepped up, and also flag that this only relates to Equinor’s own emissions. I.e. not the emissions coming from the usage of its products. Equinor is also updating its financial guidance, pointing to a free cash flow (excl. shareholder distributions) of USD5.8bn a year in 2021-2026 (an implicit upgrade compared to the USD3.5bn realised in 20). The new FCF forecast is based on an oil price of USD60/bbl). Finally, Equinor raises its quarterly dividend payment to USD568m from USD489m. In addition, Equinor announced a USD500m share buy back program for 2021 and annual USD1.2bn from 2022. This program will be contingent on an oil price above USD50/bbl and Equinor keeping net debt to capital employed below 30% (was 32% at end 2020). Overall, we see todays announcements as mixed, with the higher shareholder distributions being balanced by good underlying earnings. Overall credit neutral.