Morgan Stanley hikes target prices for BP and Shell on higher commodity prices
Shell 'B'
1,894.60p
17:05 28/01/22
Morgan Stanley marked up its target prices across the European Oil&Gas space after updating its commodity price assumptions.
BP
381.25p
12:54 24/12/24
FTSE 100
8,136.99
12:59 24/12/24
FTSE 350
4,491.87
12:54 24/12/24
FTSE All-Share
4,449.61
13:14 24/12/24
Oil & Gas Producers
7,727.62
12:54 24/12/24
The 2022 price strip for Brent crude oil had moved "meaningfully" since their last forecasts, from $78 a barrel to $88 a barrel.
Furthermore, marking-to-market resulted in another 10-15% across-the-board increase to their 2022 earnings per share estimates for companies in the sector, the brokers' analysts explained.
But "robust" commodity prices weren't the only tailwind, others included prospects for strong free cash flows, rising distributions, reductions in net debt, compelling valuations, a rotation towards value stocks and a "slowly" improving perception among ESG investors.
All told, the broker hiked its target price for Royal Dutch Shell shares from 2,136.0p to 2,440.0p and for BP from 401.0p to 465.0p.
In the case of the former, they noted that its valuation was no longer at a "material discount" following a rally in its shares.
However, Shell was a key beneficiary of strength in LNG markets and remained the "most likely candidate for meaningful DPS acceleration at some point".