Investing.com -- Berenberg downgraded Equinor ASA ADR (NYSE:EQNR) (OL:EQNR) stock to Hold from Buy, citing an anticipated significant rise in leverage during the second quarter and a lowered outlook for long-term shareholder distributions.

The broker’s analysts expect that the Empire Wind 1 project, located offshore in the United States, may be scrapped, which could lead to a substantial increase in the company’s leverage from 10% in the first quarter to 26% in the second quarter.

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This is due to an anticipated rise in net debt to $13 billion from $5 billion, while capital employed remains roughly unchanged.

“The specific impact of the Empire Wind 1 cancellation is expected to be a $2.5bn write-down of the South Brooklyn Marine Terminal (SBMT) as well as provisions for cancellation fees ($1.5bn-2bn),” Berenberg analysts led by James Carmichael said in a note.

Berenberg also includes a provision for the state share of the buyback program, estimated to be around $3.9 billion to be paid in the third quarter, and notes that the accelerated repayment of the $1.5 billion drawn on the project finance facility is neutral from a leverage perspective.

On a more positive note, Berenberg notes that Equinor’s dividend remains solid, with the company’s guidance suggesting a quarterly dividend per share of $0.37 in 2025, growing at $0.02 per year. This represents a dividend yield of just over 6% in 2025, slightly ahead of the sector average.

By 2030, the yield is expected to grow to 8%, compared to a sector average of just over 7%.

However, the outlook for buybacks is less certain. While Equinor has guided for $5 billion in buybacks in 2025, Berenberg has left its $2.5 billion assumption for 2026 unchanged but has reduced its buyback modeling to $1.5 billion from 2027 onwards, a level that minimizes draw on the balance sheet and keeps leverage stable at around 25%.

“It implies an average total cash yield of just over 10% from 2026 to 2030, below the sector average of 12%,” the note states.

Alongside the rating cut, the analysts have also reduced their price target for Equinor to NOK 275 from NOK 325.

Additionally, they have updated their estimates, reducing the 2025 EBITDA and adjusted EPS forecasts by 5% to $37.1 billion and $2.90, respectively.

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