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Equinor (EQNR) Halts Rosebank Sale Amid UK Election Uncertainty

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Equinor ASA (EQNR - Free Report) , the Norwegian state-owned energy giant, has decided to suspend its efforts to sell a stake in the Rosebank oil development in the UK North Sea, per a Reuters report. This decision followed the fiscal uncertainties surrounding the upcoming election in the UK next month.

Per the report, prime minister Rishi Sunak's announcement last month of a snap election on Jul 4 has led to uncertainty, with the opposition Labour party currently leading in the polls against Sunak's Conservative party. This political shift has created a volatile environment for major business decisions in the energy sector.

In November last year, Equinor initiated the sale process for a portion of its $3.8 billion Rosebank project. However, the company recently decided to suspend the sale due to concerns about the future taxation policies in the North Sea oil basin. This move reflects the broader apprehension within the industry regarding potential regulatory and fiscal changes.

According to the same report, an Equinor spokesperson refused to comment on the suspension.

The Rosebank project, aimed at developing one of the last significant oil reservoirs in the North Sea, has faced significant opposition from climate activists who argue against continued fossil fuel production.

The Labour party's recently published manifesto added to the uncertainty. It outlines plans to halt new oil and gas exploration licences and increase the existing windfall tax on oil and gas companies by 3 percentage points. This windfall tax, introduced in 2022 following the surge in energy prices due to Russia's invasion of Ukraine, currently stands at 35% and is set to run until 2029, taking the total tax burden on producers to a hefty 75%, one of the highest globally.

Additionally, Labour has pledged to abolish the investment allowance, which exempts most profits reinvested in oil and gas production. This policy shift has created a murky future for the industry, prompting a wait-and-see approach from stakeholders.

Currently, Equinor holds an 80% stake in Rosebank, with Ithaca Energy owning the remaining 20%. The British government had approved the development of Rosebank last September, marking a significant step forward for the project.

However, the outcome of the forthcoming election is likely to have substantial implications for the oil and gas industry in the U.K., particularly for projects like Rosebank. Equinor's suspension of the stake sale emphasizes the industry's cautious approach amid the unpredictable political and fiscal landscape.

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 Archrock Inc. (AROC - Free Report) , Sunoco LP (SUN - Free Report) and SM Energy Company (SM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

The Zacks Consensus Estimate for AROC’s 2024 EPS is pegged at $1.07. The company has a Zacks Style Score of A for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $7.29 and $7.17, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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 should create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.63. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 in the past 30 days.

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