As inflation concerns continue to escalate the energy sector remains one of the few outperformers, IBD's integrated oil and gas industry group ranks seventh out of 197 industries. It includes many names in the IBD 50. Top Norwegian oil stock Equinor is in focus as strong European energy demand has led to solid fundamentals and impressive growth.
Equinor — headquartered in Stavanger, Norway — is involved in oil and natural gas exploration, production and refining.
Equinor was highlighted in IBD Screen of the Day earlier this week as being uniquely positioned as the second-largest supplier of pipelined natural gas to Europe. This advantage has become crucial as Europe quickly looks for alternatives to Russian gas and energy.
Equinor Signs Gas Commitments Amid Supply Concerns
The unpredictable demand for natural gas, especially during the winter, has furthered concern for governments. Equinor has been on the beneficial side of this demand, signing a three-year commitment with U.K.-based Centrica today.
The new deal will expand a current agreement by providing the United Kingdom with an additional 1 billion cubic meters of natural gas per year. The agreement covers the next three winters.
To meet soaring demand, Equinor has been busy looking to expand operations in the long term. On June 9, the company reached a 15-year agreement with Cheniere Energy to purchase 1.75 million tons of liquefied natural gas per year, starting in 2026.
In addition, Equinor has looked to expand its renewable segment agreeing today to a collaborative effort with Technip Energies to develop more efficient floating wind structures for the offshore wind industry.
Higher energy prices are driving soaring growth, with Equinor's EPS increasing to $3.09 last year from just 28 cents in 2020. Earnings growth should continue. Analysts project EPS of $5.80 for this year.
Europe Situation Favors Oil Stock
There seems no letup for soaring growth, especially with the precarious energy security situation in Europe. Nevertheless, investors should take caution due to the heightened volatility in the sector.
High inflation has led to aggressive central banks, which in turn has led to growth concerns. If the U.S.> Federal Reserve and European Central Bank continue their hawkish rhetoric to decrease inflation at all costs, a recession and lower energy prices are possible long-term results.
Shares of Equinor are trading with a relative strength line at new highs as the stock forms a cup-with-handle base. A 38.80 buy point has been identified by MarketSmith pattern recognition.
