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Equinor (EQNR) Buys Stake in Standard Lithium's Two Projects

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Equinor ASA (EQNR - Free Report) has announced a major investment in lithium, the critical mineral powering the electric vehicle (“EV”) revolution. The company has acquired a 45% share in two lithium project companies based in Southwest Arkansas and East Texas, previously managed by Standard Lithium Ltd.

Per the deal, Equinor will pay Standard Lithium $30 million to cover past expenses related to the projects proportional to the acquired interest. Moreover, Equinor has committed to carrying $33 million in capital expenditure for Standard Lithium, which will help advance the projects toward a final investment decision. If this decision is affirmative, Standard Lithium stands to receive up to $70 million in milestone payments from Equinor.

Lithium serves as a crucial component in the production of batteries for electric vehicles, cell phones and laptops. The projects in which Equinor has invested utilize the Direct Lithium Extraction (“DLE”) technology. This method is celebrated for its lower environmental footprint than conventional lithium mining techniques, aligning with global efforts toward more sustainable resource extraction.

Following this acquisition, Standard Lithium and Equinor will own 55% and 45% of the project companies, respectively, with Standard Lithium continuing as the operator. Equinor will lend its expertise in subsurface and project execution to support the operational activities, enhancing the projects' efficiency and sustainability.

Equinor's investment in these lithium projects not only diversifies its portfolio but also positions the company as a significant player in the supply chain for essential minerals required for the energy transition. This strategic move signals Equinor's commitment to supporting global efforts in reducing carbon emissions and fostering a sustainable future.

The partnership between Standard Lithium and Equinor reflects a growing recognition among traditional energy companies of the need to adapt to changing energy landscapes. As the world increasingly turns to electric vehicles and renewable energy solutions, securing a supply of critical minerals like lithium is becoming a cornerstone of energy strategies worldwide.

This investment is part of a broader trend among traditional energy players who are diversifying their portfolios to include energy transition minerals crucial for the production of EVs and battery storage systems. The trend gained significant attention following Exxon Mobil Corporation’s (XOM - Free Report) entry into the lithium production segment late last year.

ExxonMobil initiated lithium drilling operations in Arkansas with the goal of establishing itself as a prominent supplier of lithium for EV battery manufacturers in the United States by 2030. The company planned to commence lithium production in Arkansas, targeting a minimum production of 10,000 metric tons per year by 2026. This initial production is approximately sufficient to manufacture 100,000 EV batteries.

Zacks Ranks & Stocks to Consider

Equinor currently carries a Zacks Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked companies mentioned below. These three companies presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy Company (SM - Free Report) is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition, and production of oil and gas in North America.

The Zacks Consensus Estimate for SM’s 2024 and 2025 EPS is pegged at $6.46 and $7.35, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Hess Corporation (HES - Free Report) is a leading oil and natural gas exploration and production company. The company’s oil and gas proved reserves increased last year by more than 8% year over year.

The Zacks Consensus Estimate for HES’s 2024 and 2025 EPS is pegged at $9.17 and $11.08, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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