Morgan Stanley is bullish on European oil stocks

High oil and gas prices will generate levels of cash flow for Europe’s largest oil and gas companies, which will also be able to reduce debt and increase shareholder returns, Morgan Stanley said.

Europe’s five biggest oil majors could generate a total of $ 66 billion in free cash flow in 2022, according to an analysts note, cited by Sharecast News.

“With attractive valuations and rising bond yields causing stocks to rotate, we are reiterating our ‘attractive’ stance,” Morgan Stanley analysts wrote in the note.

The main choices of the bank are Royal Dutch Shell and the Italian Eni among the largest companies, as well as the Spanish Repsol among the mid-cap companies.

Morgan Stanley has also raised its targets for the stock prices of all European majors on their respective national stock exchanges.

All of Europe’s oil and gas companies – BP, Eni, Repsol, Shell, TotalEnergies and Equinor – have pledged over the past 18 months to become net zero energy companies. Shell, BP and Eni have set deadlines for their respective peak oil production. Shell said earlier this year that its oil production peaked in 2019, while BP plans to cut oil and gas production by 40% by 2030 through active portfolio management and lack of exploration in new countries.

Despite these promises, it will be oil and gas that will be the supermajors’ “cash engine” for years to come.

“In fact, we see our upstream portfolio as a critical cash driver, not just for this decade, but for the next decade,” Shell CEO Ben Van Beurden said on a call for results. in February 2021.

Ahead of second quarter results, Shell, for example, said in early July that “strong cash generation supports additional distributions to shareholders in the second half of 2021.”

Shell increased its dividend and started repurchasing shares after a strong performance in the second quarter.

By Tsvetana Paraskova for OilUSD

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