JP Morgan says 'stay bullish' on European oil and gas, keeps Shell as 'top pick'

As regards valuation, the shares were pricing in a long-term price for Brent crude oil of roughly $65 per barrel.

Furthermore, after marking-to-market to the oil and gas forwards strips through 2023, their estimates for earnings in 2022 were boosted by 20%, putting them 20% above the consensus.

That was despite having zeroed out the group's net asset value exposures to Russia.

Spot free cash flows meanwhile had moved above 20% and the sector was set to return more than a quarter of its market value to shareholders over the following three years.

Their key overweights were Shell - which was also their ¡top pick' - ENI, BP and Repsol.

Yet whereas for Shell they bumped up their target price from 2,500.0p to 2,600.0p, in the case of BP they lowered it from 500.0p to 480.0p.

In the case of ENI, they noted that it was due to hold a Capital Markets Day on 18 March, while on BP and Repsol they said that the pair offered "Oil&Gas Beta", premium cash yields and a rate of change on transition.

"We see a higher risk premium on oil as structural and expect prices to normalize to $125/bbl despite the potential return of Iran and a limited impact on Russia oil production," they said.

"Higher-for-longer oil and reset capital frames enable premium EU Oils TSR and a credible energy transition."

In 2023 crude oil prices were seen at $150 a barrel.