By now, we have all become familiar with Europe’s woes regarding natural gas and its dependency on Russian gas supplies, observes Tony Daltorio, contributing editor at Investors Alley.

But do you know what company is the second-biggest provider of natural gas to Europe, behind only Russia’s Gazprom? It is Norway’s Equinor (EQNR), which provides more than 20% of Europe’s gas.

Equinor — my Top Pick for conservative investors for the coming year — is majority-owned by the Norwegian government. The company has ramped up production of gas in Norway by 18%, to record levels, in order to help meet European demand following the withdrawal of vast volumes of Russian gas.

And here’s another big plus: currently, shares in European energy majors are trading at less than half the value of their US rivals, when measured as a multiple of their expected profits over the next year.

Equinor produces more than two million barrels a day of oil and its equivalent, split evenly between oil and gas. Two-thirds of its output comes from its prolific Norwegian offshore fields. European gas is about a third of Equinor’s total output. Most of this is sold on the spot market, benefiting from current relatively high gas prices.

Unlike some of its peers, Equinor plans to grow oil and gas production through 2026, at about a 2% compound annual growth rate. A quick look at Equinor’s financials reveals that, despite the growth in renewables (like offshore wind), oil and gas will remain the cash flow and earnings driver for the foreseeable future.

Its strategy focuses on investing in its highest-quality assets while divesting smaller, non-core assets. New oil and gas projects coming online by 2030 break even at less than $35 per barrel, and payback comes in less than 2.5 years on average, according to the company.

Another company characteristic that I love is that Equinor has no net debt, giving it one of the best balance sheets among the major energy companies. And there is lots of room for dividend growth (current yield 4.66%).

In July, Equinor said it would return an additional $3 billion to shareholders. Then in October, it said it would raise its special quarterly dividend by $0.20 to $0.70 per share for the third quarter. This came after it achieved record adjusted pre-tax earnings of $24.3 billion in the third quarter of 2022, up from $9.8 billion a year earlier.

Equinor’s base dividend is low relative to its peers, and the company plans to increase it in the coming years. The special dividends, announced for 2022, should become the norm given Equinor’s healthy balance sheet. Add all these factors up and Equinor is a buy on any drop in its stock price. Its current price in the mid-$30s a share is a good entry point.

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