Equinor (Sell, TP: NOK200.00) - Limited value creation
Following Equinor’s 10% equity investment in Ørsted, we have dived deeper into the rationale, economics, and outcome of similar past transactions. We find that Equinor has tended to swap its shareholding for direct ownership in various assets. That said, we estimate its endeavours in Lundin and Scatec failed to create value for shareholders, with investment IRRs at or below the cost of capital. Finally, we believe a spin-off and hypothetical joint venture of Ørsted and Equinor’s renewable business appears unlikely near-term and could end up being value-destructive for shareholders. We reiterate our SELL and NOK200 target price.Equinor is engaged in oil and gas exploration and production activities. Co. is primarily focused on exploration, development and production of oil and gas on the Norwegian continental shelf (NCS). Co.'s operations are organized into four segments. The Development and Production Norway and Development and Production International segments explore, develop, produce and extract crude oil, natural gas and natural gas liquids. The Marketing, Processing and Renewable Energy segment markets, trades, transports and processes oil and natural gas and renewable energy. The Other segment consists of global well and project delivery, research and develpoment, and business development.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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