Key Moments
- Bank of America shifted its rating on Equinor (NYSE: EQNR) (OL: EQNR) to Neutral as the stock trades close to its unchanged price objective of NOK260.
- BofA reduced its post-2025 estimates, citing valuation that already implies long-term Brent prices near $70 per barrel and limited scope for a further re-rating.
- The bank now expects a total cash yield of about 8% and sees no upside to Equinor’s cash return profile before 2028.
Rating Cut on Valuation Concerns
Investing.com — Bank of America downgraded Norwegian energy group Equinor (NYSE: EQNR) (OL: EQNR) to Neutral, arguing that the shares offer limited additional upside now that they are trading close to the bank’s price objective of 260 Norwegian crowns.
The bank adjusted its longer-dated projections and stated that the current valuation already embeds assumptions for long-term Brent crude prices of around $70 per barrel, which it said restricts room for a higher valuation multiple.
“We cut our 2026+ estimates and rating to Neutral – with limited share price upside to our (unchanged) PO of NOK260,” analysts led by Christopher Kuplent said in a note.
Revised Oil Price Assumptions and Estimates
Bank of America’s updated modeling for 2026 incorporates oil price assumptions below prevailing futures levels. According to the analysts, these new inputs are also below the company’s own guidance and do not suggest further upside versus current market expectations.
“Our updated estimates for 2026 assume below-strip oil prices: We sit below company guidance and see no more consensus upside,” he noted.
Cash Returns Constrained by Higher Gearing
The downgrade also reflects a more cautious stance on shareholder payouts after 2025 concluded with leverage above the bank’s expectations. Bank of America highlighted that working capital movements combined with higher-than-anticipated capital expenditures drove net debt more than $3 billion above its prior forecasts.
As a result, BofA lowered its assumptions for share repurchases to the communicated $1.5 billion annual run-rate. On this basis, the analysts see Equinor’s overall cash yield at roughly 8%, which they view as broadly comparable with sector peers.
| Metric / Assumption | BofA View |
|---|---|
| Rating | Neutral |
| Price Objective (PO) | NOK260 |
| Implied long-term Brent price in valuation | Near $70 per barrel |
| Net debt vs BofA forecast | More than $3 billion higher |
| Annual share buyback assumption | $1.5 billion run-rate |
| Estimated total cash yield | Around 8% |
| Oil price needed to fund 2026–27 payouts organically | Above $65 per barrel |
Limited Near-Term Flexibility on Shareholder Distributions
Bank of America indicated that Equinor’s guidance for operating cash flow and capital expenditures for 2026 is broadly aligned with consensus estimates. Even so, the analysts see little capacity to increase shareholder distributions in the short term.
They calculate that covering dividends and share repurchases from internal cash generation over 2026–27 would require oil prices to average above $65 per barrel.
Capital Allocation Questions Ahead of June Update
Looking ahead to Equinor’s planned capital markets update in June, Bank of America expects that questions around long-term capital deployment will remain in focus. A particular area of uncertainty, the analysts said, is how the company intends to manage its 10% holding in Orsted.
“We believe questions about the long-term role of Equinor’s 10% stake in Orsted will remain unanswered (at least) until its capital markets update in June,” the team wrote.
Against the backdrop of their assumption for declining oil and gas prices over time, the analysts concluded that there is “no upside to Equinor’s cash return outlook before 2028.”
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