Bank of America has moved Norwegian energy company Equinor to a Neutral rating, arguing the shares offer limited upside from current levels as they sit close to the bank's price objective of 260 Norwegian crowns.
The bank trimmed its longer-term forecasts and said the current valuation already embeds long-term Brent crude near $70 a barrel, reducing the scope for further re-rating.
"We cut our 2026+ estimates and rating to Neutral - with limited share price upside to our (unchanged) PO of NOK260," analysts led by Christopher Kuplent wrote.
In the same note, the team added that their updated modeling for 2026 assumes below-strip oil prices and sits beneath company guidance. "Our updated estimates for 2026 assume below-strip oil prices: We sit below company guidance and see no more consensus upside," they noted.
BofA also took a more cautious stance on Equinor's near-term cash returns after the company ended 2025 with higher gearing than the bank had expected. The bank said working capital swings and stronger-than-anticipated capital spending pushed net debt roughly $3 billion above its projections, prompting a reduction in buyback expectations to the announced $1.5 billion annual run-rate.
That adjustment leaves Equinor's total cash yield at about 8%, which BofA says is broadly in line with peer firms. While guidance for operating cash flow and capital expenditure in 2026 is near consensus, the bank expects limited headroom for boosting shareholder distributions in the near term.
BofA estimates that, on an organic basis, covering both dividends and buybacks across 2026-27 would require oil to average above $65 a barrel. Given the bank's assumptions of weakening oil and gas prices, the analysts conclude there is no improvement to Equinor's cash return profile before 2028.
"We believe questions about the long-term role of Equinor's 10% stake in Orsted will remain unanswered (at least) until its capital markets update in June," the team wrote.
Looking ahead, the bank expects continued uncertainty around long-term capital allocation decisions ahead of Equinor's capital markets update in June, including clarity on the company's 10% holding in Orsted. This unresolved position, combined with the bank's lower price assumptions and the reduced flexibility on shareholder returns, underpins the Neutral rating.
Overall, BofA's note frames the downgrade around a valuation that already captures much of the upside from current oil price assumptions and a balance sheet position that curtails near-term increases in cash distributions.