Shell PLC (LSE:SHEL, NYSE:SHEL) looks a more resilient bet than BP PLC (LSE:BP.) if the crude price remains at around US$70 a barrel, suggests US bank JP Morgan.
Under that scenario, the sector’s free cash yield is 10.2% scenario, which is down on 2022/23 but still comfortably ahead of historical averages, says the bank.
Even if distributions in 2025 are rebased (8%) this still implies a double-digit 2025 scenario cash yield of 11.1%, says JP Morgan, with a dividend portion yield of 5.8% covered down to a $55/bbl breakeven.
Looking further out, JP Morgan suggests Shell, Eni and OMV have the greatest optionality to sustain distributions at/near existing levels, while BP and Equinor appear most vulnerable to more marked resets.
The US bank says that Shell has a clear capacity to sustain the buyback at more than US$3bn a quarter but BP possibly is looking at less than a 100% payout, which might mean the buyback level is rebased slightly to US$1 billion per quarter.
Shell today was up 0.2% at 2,581p and BP by 0.5% at 413.9p.