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Equinor (EQNR), Petoro Optimize Operations With Asset Swap Deal

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Equinor ASA (EQNR - Free Report) , the Norwegian state-owned energy giant, entered into a value-neutral asset swap agreement with Petoro, aiming to harmonize their equity interests in the Haltenbanken area on the Norwegian Continental Shelf (NCS).

Details of the Swap

As part of this agreement, Equinor will increase its ownership in the Heidrun field and the Noatun discovery while decreasing its stakes in the Tyrihans field, the Johan Castberg field, and the Carmen and Beta discoveries. Currently, Equinor holds a 13% equity interest in the Heidrun field, whereas Petoro has a significant 57.8% stake. Conversely, Equinor's ownership in Tyrihans stands at 58.8%, with Petoro holding no equity in that field.

Kjetil Hove, Equinor’s executive vice president for Exploration and Production Norway, stated that the company plans to keep developing and creating value on the Norwegian continental shelf, aiming to sustain high production with reduced emissions by 2035. He emphasized that having aligned ownership around major production hubs is crucial for achieving long-term value creation.

Post-Transaction Ownership Structure

Upon completion of the transaction, Equinor will own 34.4% of Heidrun and 36.3% of Tyrihans, while Petoro will hold 36.4% of Heidrun and 22.5% of Tyrihans. Equinor’s stake in Johan Castberg will be 46.3%. This agreement, effective from Jan 1, 2025, is subject to regulatory approvals and the approval of the Norwegian Parliament.

Strategic Benefits

Hove highlighted that although the swap is value-neutral, the alignment of ownership in the Halten area will eventually create additional value for all parties involved. He noted that balanced partnerships will streamline commercial agreements, reduce operating costs, and speed up new developments, leading to increased production at a lower price.

Field Details and Future Plans

Heidrun and Tyrihans are two of the largest producing fields in the Halten area in the Norwegian Sea. The Heidrun field, in particular, is noted for its long-remaining life on the NCS. Equinor revised its cost estimate for the Johan Castberg project in the Barents Sea last year, with the new estimate reaching $7.4 billion due to rising industry costs. The production start-up for Johan Castberg is slated for the fourth quarter of 2024.

In addition to these field developments, Equinor is actively pursuing decarbonization efforts, targeting a reduction of carbon emissions from the Norwegian Continental Shelf by 160,000 tons of carbon dioxide per year through the use of onshore power.

Zacks Rank & Key Picks

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

Investors interested in the energy sector may look at some better-ranked stocks like SM Energy Company (SM - Free Report) , Marathon Petroleum Corporation (MPC - Free Report) and Hess Corporation (HES - Free Report) . While SM Energy and Marathon Petroleum sport a Zacks Rank #1 (Strong Buy), Hess carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is set to expand its oil-centered operations in the coming years with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments can create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 earnings per share (EPS) is pegged at $6.60. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety, and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders. 

The Zacks Consensus Estimate for MPC’s 2024 EPS is pegged at $19.53. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Hess operates primarily in two areas — the Bakken shale and the Stabroek project offshore Guyana. It is currently in the process of being acquired by supermajor Chevron in an all-stock deal worth $53 billion. HES currently has a Growth Score of B.

The Zacks Consensus Estimate for 2024 and 2025 EPS is pegged at $9.54 and $11.15, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

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