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Equinor (EQNR) to Divest Danish Refining Business to Klesch

·3 min read

Equinor ASA EQNR recently agreed to divest the refining business in Denmark to the Klesch Group, an industrial commodities group with presence in several countries. The financial details of the deal are yet to be disclosed.

The deal incorporates Equinor’s Kalundborg refinery and terminal, located northwest of Zealand. The refinery has a processing capacity of 107,000 barrels of oil and condensate per day. It produces 5.5 million tons of oil-related products per annum. Moreover, its Hedehusene terminal and related infrastructure and industrial properties located near Copenhagen are included in the deal. The employees of the divested facilities are expected to be transferred to the Klesch Group, wherein they will likely enjoy equitable employment conditions.

The move is in line with Equinor’s plan of streamlining its portfolio, while focusing more on core operations. As such, the company is expected to get down the Mongstad refining business in Norway, which offers a major industrial cluster and is expected to support Equinor’s green ambitions. It is expected to play a significant role in the company’s hydrogen, biofuel and ammonia value chains’ development. Equinor’s key strategy is to align operations with the Paris Climate Agreement and capitalize on the renewable energy space.

To combat climate change, the company is investing actively in renewable energy projects, comprising power generation from solar and wind energy. Equinor expects to boost production capacities from renewables to 4-6 GW by 2026. Moreover, by 2035, the company plans to boost the capacity of renewable projects to 12-16 GW.

Importantly, streamlining its Marketing, Midstream & Processing segment’s portfolio through divesting the Danish refining business is expected to boost the company’s profitability. The segment recorded adjusted profit of $61 million for the first quarter, which declined drastically from $229 million a year ago owing to low refinery margins.

Price Performance

Shares of the company have gained 58%, outperforming the industry’s 27.1% growth in the past year.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Earthstone Energy, Inc. ESTE, Pembina Pipeline Corporation PBA and PHX Minerals Inc. PHX, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earthstone’s sales for 2021 are expected to jump 87.7% year over year.

Pembina Pipeline’s bottom line for 2021 is expected to rise 37.4% year over year.

PHX Minerals’ bottom line for 2021 is expected to surge 140% year over year.

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