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BP (NYSE:BP) -1.8% in Monday’s trading as Piper Sandler downgraded the stock to Neutral from Overweight with a $38 price target, cut from $45, “to reflect a more moderate macro outlook… in a range-bound oil environment.
“While we still view BP as inexpensively valued, its opportunity shines brightest in its upside leverage to the commodity,” Piper analyst Ryan Todd wrote, preferring Shell (SHEL), which he said offers both greater relative free cash flow generation and shareholder returns in a $75/bbl world, as well as greater strategic visibility given the current uncertainty at the top for BP.
Todd noted the potential for an incoming CEO to provide a potential catalyst for BP (BP), but until then, with a higher degree of risk in its current growth outlook and less resource depth to lean into, he sees a higher degree of forward uncertainty at BP.
Shell (SHEL) remains Todd’s top pick among European oil and gas names, driven by its leading free cash flow position and the continued opportunity for new CEO Wael Sawan to continue to streamline portfolio activity and further reduce capital spend going forward.
The analyst also downgraded PBF Energy (PBF) to Neutral from Overweight with a $50 PT, cut from $65, citing margin weakness, higher costs and likely reduced share buybacks.
BP (BP) and most other energy shares are weighed as crude oil prices decline following Saudi Arabia’s cut in the February selling price of its flagship Arab Light crude to Asian customers.
