Equinor ASA EQNR, a Norwegian energy firm, has mentioned that it plans to cut back on its investments in renewable energy till 2030. The announcement followed shortly after EQNR acquired a 9.8% stake in Ørsted, a Danish wind energy group. In October, the company had announced its decision to acquire a stake in Ørsted for $2.5 billion. Equinor also noted that it plans to increase the acquired stake to 10%. The deal is contingent upon regulatory approval.

Addition to EQNR’s Renewables Portfolio

The company stated that the acquisition would add to its renewable portfolio, allowing it to move one step closer to achieving its target of installing a renewable capacity of 12-16 GW by 2030. Notably, the acquisition would add a net generation capacity of 1.7 gigawatts (GW), contributing toward its 2030 target.

Equinor mentioned that the deal offers a cost-effective opportunity for the company to participate in offshore wind projects without having to develop them. This presents a major upside, per Equinor, as it is a more profitable way for the company to reach its renewables target. Further, this approach should enable EQNR to spend less on capital while reaching its target.

Investor Concerns Over Shifting Focus to Renewables

Renewable energy projects require a huge amount of investment, and the rapid transition from oil and gas toward renewables might weigh down on the profitability of energy firms. Many energy giants, such as BP and Shell, have scaled down their ambitious transition strategy due to investor pressure over maintaining profitability. Equinor’s decision to purchase a stake in Ørsted also came as a surprise to investors. However, EQNR believes that this transaction would enable the company to move closer to its targeted renewable portfolio while maintaining a disciplined approach to capex management.

EQNR’s Q3 Results and Updated Outlook

Equinor recently reported third-quarter results, which showed a year-over-year decline in revenues. The company also announced a reduction in its organic capex from its previously guided range of $13 billion. EQNR now expects organic capex for 2024 to be in the range of $12-$13 billion. This includes an investment cut in its Polish and Brazilianonshore renewable projects. The company has retained its 2024 outlook for oil and gas output. EQNR has scaled down its renewables output growth from 70% to 50% due to a delay in the Dogger Bank A wind project located off the British coast.

EQNR’s Zacks Rank and Key Picks

Currently, EQNR carries a Zacks Rank #3 (Hold).