RBC Capital Markets on Thursday adjusted its view on Equinor ASA, upgrading the Norwegian energy company to "sector perform" from "underperform" and lifting its price target to NOK420 from NOK360. The change reflects a revised outlook for European gas underpinned by extended outages at Qatar LNG facilities and a tightening of storage levels across the region.
The broker also altered its valuation methodology, moving away from a sole reliance on EV/DACF and adopting a 50/50 mix of normalized EV/DACF and a sum-of-the-parts framework. This shift reflects RBC's intent to blend cash-flow based metrics with asset-level valuation considerations.
Outlook for gas and its impact
RBC said that Qatar LNG outages persisting longer than previously expected, together with winter pricing that has provided limited incentive to refill storage, are factors supporting elevated European gas prices through 2026 and into 2027. The bank quantified Equinor's exposure to gas-price moves, estimating that a NOK1 per mmbtu change in European gas prices alters Equinor's 2027 operating cash flow by roughly 2%, ranking it among the most gas-sensitive companies in its European coverage.
Despite the upgrade, RBC trimmed its earnings per share forecasts for Equinor. The 2026 EPS forecast was reduced to NOK4.16 from NOK4.75, a cut of 12.4%. The 2027 estimate was lowered to NOK4.45 from NOK5.29, a decline of 15.8%. These downgrades were driven by a weaker commodity price deck in RBC's model: the bank lowered its 2026 Brent assumption to NOK80 per barrel from NOK89 per barrel and cut its 2026 European gas price assumption to NOK14.2 per mmbtu from NOK15.7 per mmbtu.
Relative valuation and cash flow metrics
On forward EV/DACF multiples, Equinor trades at 4.3 times for 2026 and 4.5 times for 2027, compared with sector peers at 4.6 and 4.7 times, respectively. RBC also highlighted free cash flow yield differentials: Equinor's yields are 10.7% and 9.8% for 2026 and 2027, while peers are at 11.6% and 10.1% under the broker's calculations.
Project-level considerations and production outlook
Following BP's exit from the Bay Du Nord offshore project, Equinor now holds 100% interest in a capital-intensive, long-cycle development that carries a reported budget of approximately NOK10 billion. RBC said it would be prudent for Equinor to farm down that stake ahead of a final investment decision, reflecting the project's scale and capital requirements.
Production volumes are projected to plateau at 2.2 to 2.3 million barrels of oil equivalent per day by the end of the decade. RBC's 2026 production growth forecast of 4.4% runs ahead of Equinor's company guidance of 3%.
Balance sheet flexibility and stakes in other companies
Under forward curve pricing, RBC expects Equinor's gearing to decline to around 11% by year-end, which the bank said would provide flexibility on the balance sheet for selective acquisitions. Regarding Equinor's holdings in Ørsted, RBC said the company is more likely to retain its stake or reduce it via sales rather than inject further capital, particularly in light of Ørsted's share recovery following a rights issue.
Market positioning and potential catalysts
RBC noted that Equinor carries the lowest proportion of buy ratings and the second-highest proportion of sell ratings within its coverage universe. The broker added that a sustained upswing in commodity prices could catalyze a broader re-rating across the coverage set, potentially leading to additional upgrades.
Overall, the broker's actions combine a more constructive regional gas-price view with lowered commodity assumptions and adjusted valuation methodology, resulting in a mixed near-term earnings outlook but a more balanced rating and higher price target.