JP Morgan has reaffirmed its 'overweight' rating on Shell PLC (LSE:SHEL, NYSE:SHEL), highlighting the company's potential to lead a new phase of efficient energy investments.
Looking at the wider sector, the bank predicts that European oil companies will begin focusing on more specialised low-carbon growth strategies by 2025, balancing near-term performance with long-term sustainability.
Shell is named as a top recommendation, alongside Eni and Equinor, which have been upgraded.
JP Morgan commended these companies for their strong financial resilience and capacity to adapt to the evolving energy market. TotalEnergies and OMV also received favourable mentions.
The new investment framework reallocates capital into low-carbon energy projects, increasing from 5-10% over the next three years to around 10% by 2027. This shift is expected to boost free cash flow (FCF) — a measure of cash generated after covering costs and investments.
JP Morgan estimates that FCF at an oil price of $70 per barrel will be 11.2%, above the long-term average.
Looking at potential laggards, BP and Repsol are rated 'underweight', reflecting concerns about their ability to cope with these anticipated changes.
In afternoon trading, Shell was up 3% at 2,545p, reflecting the rising price of crude amid Middle East uncertainties.