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Standard Lithium, together with Equinor, reported that the Preliminary Economic Assessment for the Franklin lithium project in East Texas has been filed, outlining potential annual output of up to 70,000 tonnes of battery-quality lithium carbonate over a 20 year modelled life with an unlevered pre tax NPV8 of US$5.9 billion.
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The Franklin report points to a large, high grade brine resource and contemplates co located bromine production, which gives Equinor a possible new foothold in U.S. critical minerals alongside its traditional oil and gas activities.
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This article will examine how Equinor’s investment narrative is influenced by the Franklin lithium PEA and its 70,000 tonne capacity ambition.
Compare Equinor’s lithium move with other potential critical minerals opportunities by reviewing our hand picked 33 best rare earth metal stocks.
Equinor Investment Narrative Recap
To own Equinor, you need to be comfortable with a cash engine that still relies heavily on oil and gas while gradually adding projects like offshore wind and now lithium. The key short term swing factor remains how well core upstream operations and long term gas contracts hold up as revenue and earnings are expected to decline.
The main risk is that maturing Norwegian fields, lower prices or higher capex for transition projects squeeze cash flows just as expectations for shareholder payouts stay high. The Franklin lithium PEA does not change that near term picture in a material way because it is early stage and sits on a 2030s timetable.
The Franklin PEA with Standard Lithium is the announcement that really matters here. It gives Equinor a defined lithium project in East Texas with modelled capacity of up to 70,000 tonnes a year of battery grade lithium carbonate and a US$5.9b unlevered pre tax NPV8, plus optionality around bromine production.
This sits alongside Equinor’s existing oil, gas and renewables portfolio rather than replacing it. Execution risk is meaningful because the project is only at PEA stage and still needs a Preliminary Feasibility Study, direct lithium extraction testing and commercial decisions on bromine and potash. Investors may still focus on upstream delivery and capital discipline as nearer term catalysts.
Equinor Earnings Assumptions Behind the Franklin Story
The Franklin lithium project lands on top of an Equinor equity story that already bakes in declining headline revenue and only modest earnings compression. Analysts are working with a 5.4% yearly drop in revenue over the next three years, while profit margins are expected to edge from 8.0% today to 8.1% by 2029. That means the Franklin PEA is being layered onto a base case where the traditional portfolio is assumed to shrink in absolute top line terms, even as analysts look for slight efficiency gains.
Consensus earnings forecasts give a clearer yardstick. Equinor is reported at about US$9.1b of earnings today, with analyst models pointing to US$7.8b by 2029. That is an earnings decline of roughly US$1.3b, not growth, and it reflects the tug of maturing oil and gas assets, higher transition capex and more mixed profitability in newer segments like offshore wind. Franklin does not reverse those numbers on its own. It simply adds another potential source of future cash flow that could offset some of that pressure if the project advances beyond PEA and into construction.
Valuation assumptions also frame how much weight the market might give to lithium. On the analyst numbers, investors would need to be comfortable with Equinor trading at a P/E of 13.3x 2029 earnings, up from 10.9x today and higher than the 10.5x cited for the broader GB oil and gas group. At the same time, the consensus view looks for 2029 revenue of US$96.2b alongside that US$7.8b earnings figure. The Franklin project could eventually support those earnings through diversification into U.S. critical minerals, but current models still lean heavily on hydrocarbons and contracted gas flows.
Equinor’s narrative projects US$96.2b revenue and US$7.8b earnings by 2029. This assumes a 5.4% yearly revenue decline and an earnings decrease of about US$1.3b from US$9.1b today.
Uncover why Equinor’s fair value indicates a 13% potential downside to its current price, which leaves little room for error.
OB:EQNR 1-Year Stock Price Chart
Exploring Other Perspectives
One alternate view around Equinor focuses on much sharper top line pressure rather than project upside. The most pessimistic analysts were working off revenue of about US$79.7b and earnings of US$6.6b by 2029, far below consensus. Franklin’s 70,000 tonne lithium ambition could prompt those expectations to shift in either direction, so treat this as a moment to compare narratives and decide which set of assumptions you find more realistic.
Explore 6 other Equinor fair value estimates, including one that suggests as much as 33% downside from the current price.
Reach Your Own Conclusion
Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so consider forming your own conclusions.
Looking For More Investment Ideas Beyond Equinor?
Once you have a view on Equinor and the Franklin lithium project, it can help to compare it with other companies that fit different risk and return profiles using the Simply Wall St Screener.
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If capital preservation and smoother returns matter most to you, start with a group of businesses that show more resilient characteristics through our 227 resilient stocks with low risk scores.
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If you prefer to hunt for overlooked opportunities, scan through our hand picked 617 high quality undiscovered gems that highlight underfollowed stocks with stronger fundamentals.
This article by Simply Wall St is general in nature.
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
