In a new report sent to Rigzone this week, which was published alongside a European Gas Primer report from the company, BofA Global Research published its top equity picks with the greatest exposure to higher-for-longer gas prices.
The company revealed its top big oil and top exploration and production company picks in the new report. The top big oil picks in the report comprised Equinor, Shell and TotalEnergies, while the top exploration and production company picks were made up of Harbour, Energean and Kosmos.
“Our big oil top picks all offer above-average sensitivity to European gas (EQNR, TTE) and LNG (TTE, Shell) prices,” the BofA Global Research report stated.
“While we see near-term earnings revisions greatest at EQNR, we see more profitable LNG contracting drive up profitability at Shell and TTE structurally into 2030,” the BofA Global Research report added.
“As a result, our 2022-23 estimates offer >40 percent upside to consensus and >20 percent FCF yields – allowing room for structurally higher shareholder remuneration (currently running at ~10% of market cap p.a.) while at the same time increasing investments into the energy transition as well as continuing to de-gear,” the report continued.
Looking at its top exploration and production company picks, the BofA Global Research report noted that they stand to benefit from structurally tight gas markets, applicable to both European prices as well as global LNG, with around 60 percent of their aggregate reserves in gas.
“Harbour is set to benefit from first gas at Tolmount starting imminently. We think investors will also increasingly recognize the strategic value of Energean’s and Kosmos’ gas resources,” the BofA Global Research report stated.
“Catalysts for each: first gas from Energean’s Karish field in 3Q22 and Kosmos’ Tortue LNG project continuing to contract LNG for Phase 2,” the BofA Global Research report added.
BofA Global Research’s European gas primer report highlighted that the report provided detailed fundamental analysis that underscored the company’s higher-for-longer thesis on gas prices.
“We believe Europe’s quest for energy independence will make Europe into the world’s fastest-growing LNG market,” BofA Global Research stated in its European gas primer report.
