A bright year for Big Oils, but clouds are already on the horizon
TOTAL (onto CL), RD Shell (off CL) and ENI are our Buys
- TOTAL (added to the CL) offers strong CF generation (6%-8% 2017-19E FCF yield), high growth from 2017-18 start-ups (4% production CAGR to 2020E) and an attractive portfolio of new investment opportunities.
- ENI (Buy) is in the middle of a transformation into a higher-return business, driven by exploration success, disposals and a strong project pipeline. Management continuity will be key, in our view, to deliver this.
- RD Shell (off CL, remains Buy) continues to focus on capital efficiency after the BG integration, with a FCF turnaround to support a 7% dividend yield.
- Repsol (Neutral) comes off the Buy List on strong share price performance.
- Statoil (Sell): Our 2017/18 EPS estimates are 37%/54% below Bloomberg consensus on lower oil and gas price assumptions, despite Statoil’s significant cost reduction efforts.