Investment case summary
On balance, we believe rising oil prices, spending reductions alongside
potential upstream cost deflation, greater opex reduction plans as well as
an earlier-than-expected (one year) financial inflection point are likely to
be largely offset by lower shareholder distributions, possibly higher decline
rates and evidence of project delivery still in its early days. Hence, we
maintain our broadly neutral view on European Integrateds.
Stock pick recommendations
We still recommend stocks with a robust balance sheet and business
portfolios, which are approaching a material turning point and are in the
position to significantly raise shareholder returns, once oil prices start
trending up again. Total and ENI (upgrade to Buy) therefore stand out as our
sector most preferred stocks. While BG Group remains a Buy, we downgrade
BP to Hold and maintain Hold ratings on RDS, Repsol, Statoil, and OMV.