SHEL - EU Majors: Prefer TotalEnergies Over Shell And BP
2024-03-05 14:33:30 ET
Summary
- I see TotalEnergies as uniquely positioned among the EU majors to benefit from a higher-for-longer scenario in oil prices due to its significantly deeper and liquids-heavier portfolio.
- At 12.5 years of current reserve coverage and ~113% 5-year average replacement ratio, Total can sustainably support 2-3% in annual production growth through 2030.
- At 7.2x forward EPS, Total trades ~20% below Shell and BP, a discount I do not find warranted given the company's best-in-class balance sheet and capital efficiency.
- Based on a peer-estimated fair multiple of 9x forward EPS and a DCF valuation, I see significant rerating potential and initiate shares at Overweight (PT $92, ~44% upside).
Having previously covered US supermajor ExxonMobil (see here ) as well as independent E&Ps Occidental Petroleum (see here ) and ConocoPhillips (see here ), I will move across the Atlantic in this note and begin my coverage of European Oil & Gas supermajors with French TotalEnergies ( TTE )....
EU Majors: Prefer TotalEnergies Over Shell And BP