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Energy forecast changes; impact on oil stocks
BofA Global Research Media Relations
Energy reports
Global Energy Weekly: All things thrive at thrice
US Oil and Gas: Value framework in practice: adopting $60 Brent base case, hi-grading stock selection
Oilfield Services: Watching OPEC policy closely as artificially inflated oil prices tempt US Shale
LatAm Oil & Gas: Rising oil tide bests politics: Raise Petrobras to Neutral; Ecopetrol to Buy
European Oil & Gas: Fast-track on redemption roadmap
Oils E&P Sector: Brent to $60 for longer: best picks for beta
EEMEA Oil & Gas: The road to demand recovery: Raising our LT oil price forecast
Energy reports
Global Energy Weekly: All things thrive at thrice
• After three price crashes in '16, '18, and '20, US shale's sensitivity to a 1% rise in oil prices halved in the past 5 years
• With monthly OPEC+ decisions and accelerating demand, we now see $63/bbl Brent and $60 WTI in 2021, and $60 and $57 in 2022
• Yet prices may soon test supply/demand elasticities, so a sustained rally may have to wait for demand to recover more broadly
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US Oil and Gas: Value framework in practice: adopting $60 Brent base case, hi-grading stock selection
• Our global oil team lifts its long term Brent assumption to $60, a level consistent with OPEC+ stabilization during 2017-19
• We see this as a level that Saudi is willing to defend with capital discipline now ending the days of unbridled US growth
• Our PO's move up 17% on avg but with a favor towards high beta. EOG XEC CLR & COP move to Neutral on relatively modest upside
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Oilfield Services: Watching OPEC policy closely as artificially inflated oil prices tempt US Shale
• We are watching OPEC+ policy carefully as we are bit nervous 'artificially inflated' oil px will again subsidize US shale.
• Led by strong Private E&P growth, raise '21 US E&P capex forecast to +9% y/y. Int'l inflection nears but still -3% y/y in '21
• OFS stks still attractive on revisions, pre-COVID performance & valuations, so we maint. ratings but carefully watch OPEC+.
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LatAm Oil & Gas: Rising oil tide bests politics: Raise Petrobras to Neutral; Ecopetrol to Buy
• We take more positive view on outlook for Latam oil/gas stocks due to our higher oil px forecast (near-term and long-term).
• We raise our rating on Petrobras from Underperform to Neutral and the rating on Ecopetrol from Underperform to Buy.
• We increase our DCF-based POs for Petrobras, Ecopetrol, Tenaris and YPF due to more positive cash flow expectations..
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European Oil & Gas: Fast-track on redemption roadmap
• We raise our Brent forecast by $3-5/bbl to $63/bbl in 2021 and $60/bbl from 2022 onwards. While this is only slightly...
• ...above futures, our updated Big Oil EBITDA estimates (up c.5%) now show 12/3% upside to 2021/22 consensus.
• We prefer Buy-rated EQNR, RDS and Total fast-tracking their de-gearing along the redemption roadmap.
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Oils E&P Sector: Brent to $60 for longer: best picks for beta
• Our 2021E Brent edges up to $63 and we now hold $60 flat from 2022E - a $5 bump. Valuations weight $55 long-term prices.
• High beta: Buy EnQuest for potent mix of higher FCF = faster deleveraging. Tullow U/P ahead of refi without an easy solution.
• Norwegian names big benefactors too: tax relief magnifies oil price upside. We prefer Lundin for near-term growth.
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EEMEA Oil & Gas: The road to demand recovery: Raising our LT oil price forecast
• OPEC+ delivered yet another surprise by extending the supply cuts to April against market expectations of 1.5mn b/d release
• Given the tight supply control and expected demand recovery, we increase our long term oil price to US$60/bbl from US$55/bbl
• We concurrently increase our POs and estimates and reiterate Rosneft, Tatneft and Gazprom as our top picks
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