Equinor Q1 2024 Update: 10%-Yielding Cash Cow

Core Viewpoint - The Russian invasion of Ukraine in 2022 positioned Equinor ASA as a leading natural gas supplier to Europe, resulting in a record year despite declining natural gas prices in recent quarters [1]. Company Profile - Equinor ASA, formerly known as Statoil ASA, is an energy company involved in the exploration, production, transportation, refining, and marketing of petroleum and other energy forms, headquartered in Stavanger, Norway [2]. Operational Segments - Equinor's operations are divided into several segments: Exploration & Production Norway, Exploration & Production International, Exploration & Production USA, Marketing, Midstream & Processing, and Renewables [4]. Asset Distribution - Norway accounts for 49% of Equinor's assets, followed by the U.S. at approximately 19%, Brazil at 16%, and the UK at 8%. Notably, the UK and Brazil saw significant asset increases of 49% and 15% respectively in 2023 [4]. Capital Expenditure Plans - Management plans to invest approximately $13 billion in CapEx for 2024, increasing to $14 billion to $15 billion from 2025 to 2027, focusing on renewable energy projects [5]. Earnings Overview - In Q1 2024, Equinor reported total equity production of 2,164 mboe/day, an increase from 2,130 mboe/day in Q1 2023, driven by enhanced capacity at Johan Sverdrup and new wells [6]. - Adjusted operating income for Q1 2024 was $7.53 billion, with a net income of $2.57 billion. Despite price declines, adjusted earnings for 2023 reached $36 billion, marking the second-best result in the company's history [7]. Financial Performance - Q1 2024 revenues decreased by 14.10% to $25.09 billion, with net income down 46.28% to $2.67 billion compared to Q1 2023. The diluted EPS fell by 42.77% to $0.91 [8]. - Operating cash flow before taxes was $9.69 billion, with total CapEx of $3.36 billion for the quarter [7]. Dividend Information - Equinor declared a basic dividend of $0.35 and an extraordinary dividend of $0.35 for Q1 2024, resulting in a total yield of 10% [10]. - The company has a 5-year dividend growth rate of 47.5%, with significant increases of 224% and 50% in 2022 and 2023 respectively [10]. Debt and Liquidity - As of March 31, 2024, Equinor had over $37 billion in cash and cash equivalents, with a net debt to capital employed ratio of negative 20% [18]. - The assets/debt ratio stood at 6.23X, indicating solid financial health despite a slight decrease from previous quarters [19]. Performance Comparison - Equinor's stock performance has lagged behind the oil majors and the S&P 500 over the past year, although it has shown improvement in the recent quarter [20]. Analyst Ratings - TD Cohen resumed coverage on Equinor with a Hold rating and raised the price target from $28.00 to $30.00, indicating a potential upside from the current price of $27.98 [21]. Valuation Metrics - Equinor's trailing P/E ratio is 8.61, which is lower than the industry average, while its forward P/E is slightly higher than average. The Price/Book ratio is 2.2X compared to the industry average of 1.5X [22].