BofA Upgrades Equinor to 'Buy' on Bullish European Gas Price Forecast

BofA Securities has upgraded its rating on Norwegian energy company Equinor ASA to "Buy" from "Neutral", citing a stronger outlook for European gas prices that is expected to significantly boost the company's cash flow. In a research note dated Sept. 18, the bank also raised its price target on the stock to 465 Norwegian kroner (NOK) from 400 NOK.

Higher Gas Prices Fuel Upgrade

The upgrade is underpinned by BofA's Commodities Research team, which now forecasts European TTF gas prices will average 95 euros per megawatt-hour this winter. This projection is more than 20% above the current market strip, prompting the bank to raise its free cash flow (FCF) estimates for Equinor by 23% across 2026-2027.

The new price target implies an FCF yield of more than 8% at mid-cycle 2028 levels, according to the bank. BofA also increased its earnings-per-share estimates for Equinor, raising its 2026 forecast to $5.54 from $5.28 and its 2027 forecast to $4.60 from $4.26.

Projections Outpace Consensus

BofA's financial projections for Equinor are now substantially more optimistic than both market consensus and the company's own guidance. The bank's 2027 FCF estimate is now more than 140% above the Visible Alpha consensus, the note stated.

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Specifically, BofA projects Equinor's 2027 cash flow from operations will reach $21 billion, based on Brent crude at $75 per barrel and TTF prices below $20 per million British thermal units (mmBtu). This compares to Equinor's own guidance of $19 billion, which assumes a lower TTF price of $12 per mmBtu, and a consensus estimate below $16 billion.

Shareholder Returns and Geopolitical Factors

While BofA maintained its $4 billion buyback estimate for Equinor, it noted significant potential for increased shareholder returns. The bank's forecasts point to Equinor accumulating more than $10 billion in net cash by the end of 2027, creating scope for future capital distribution.

BofA also suggested that Equinor's shares do not fully reflect the potential upside from geopolitical risks, such as a prolonged closure of the Strait of Hormuz. The bank said this scenario could add $23 billion in additional free cash flow for Equinor in 2026-27 compared to its previous model.