As the cost of a barrel of Brent crude hit a nine-month low of around US$46, so the Aussie broker took out the red pen.
It sees Brent averaging just over US$54 in the second-half (down from almost US$59), then US$49.33 and US$52.75 a barrel for 2018 and ’19 respectively.
Longer term it expects the price to average US$65 a barrel (down from US$70).
While it expects demand for the ‘blacks stuff’ to hold up, the problem is one of supply – or over-supply to be precise.
Feeding these assumptions into the Macquarie spreadsheet has come up with a rather depressing analysis of integrated oil and gas sector – home to the majors.
Oil is officially back in a bear market. Brent crude has fallen 20.18% from its January peak of $57.10 a-barrel. Now trading at $45.58. pic.twitter.com/gUi75Qxjwu— Tara Cunningham (@TaraSCunningham) June 20, 2017
Its analysts have reduced their per share earnings and cash flow estimates by 7% and 4% respectively for this year – which doesn’t appear to be a major drama.
Going forward the cuts are deeper – 24% and 9% (for 2018 EPS and cash flow) and 26% and 10% (for 2019).
It is negative or neutral on the other large European integrated stocks.
In BP’s case it has moved to ‘underperform’ from ‘neutral’ and has gone to a ‘neutral’ from an ‘outperform’ recommendation on Royal Dutch Shell.
Moving to the North Sea explorers, the picture is equally depressing.
While Macquarie remains bullish on Cairn Energy PLC (LON:CNE) it is a ‘seller’ of Premier Oil PLC (LON:PMO) and Enquest PLC (LON:ENQ). Services company Soco is downgraded to ‘underperform’ on “lack of organic growth potential”.