There seems to be more runway for big oils and the geopolitical disruption scenarios seem underpriced, according to BofA Securities.
The European Oil & Gas Outlook: Analyst Christopher Kuplent named Shell and TotalEnergies as the Big Oil top picks and changed the target prices for:
- Equinor ASA (NYSE:EQNR) - upgraded from Neutral to Buy, while raising the price target from NOK 266 ($29.65) to NOK 425 ($47.37).
- Shell PLC (NYSE:SHEL) – maintained at Buy, while raising the price target from 2450p ($32.15) to 2750p ($36.09).
- TotalEnergies SE (NYSE:TTE) – maintained at Buy, while raising the price target from €62.00 ($67.64) to €73.00 ($79.64).
- Eni SpA (NYSE:E) - maintained at Neutral, while raising the price target from €14.30 ($15.60) to €18.10 ($19.75).
- BP plc (NYSE:BP) – upgraded from Underperform to Neutral, while raising the price target from 360p ($4.73) to 410p ($5.38).
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The European Oil & Gas Thesis: The forecast for Brent oil has been raised to average $110 per barrel through 2023 and, “more significantly, for European TTF (title transfer facility) gas prices to average ~$200/boe across the same timeframe,” Kuplent said in the note.
“Our updated commodity forecasts leave us with almost 50% average upside vs 2022-23 earnings consensus and 25% average FCF yields over the same timeframe,” he added.
“Our top Big Oil picks Shell and TTE (TotalEnergies) rank at the higher end of this range, benefitting from their leading positions in global LNG markets – with TTE’s >10% share price drop since Russia’s invasion of Ukraine overstating TTE’s cash flow reliance on Russia,” the analyst wrote.
