Shell, Exxon and BP have invested in natural gas projects as a means of providing energy while producing less carbon emissions. Still, the industry as a whole is not moving quickly enough on emissions reduction and lessening hydrocarbons reliance, critics say, thanks in part to the attractive profits currently stemming from loftier oil prices.
“We don’t think of all the new energy spend as they start to diversify — there’s a massive ramp-up in capex that is coming that’s going to eat into new cash flow, the very thing that most of the bulls are citing as the reason you buy these companies.”
The core selling point of these companies, however, is returning cash to shareholders, Malek said.
“If it’s not growth, it’s not value, they have to defend why institutional investors are going to be involved.”
The companies best equipped to weather this transformation while delivering returns? Shell, BP and Repsol, J.P. Morgan said, remaining overweight on those stocks. Meanwhile, it’s underweight on France’s Total and Italy’s ENI.
Key to a positive outlook, according to the bank, are companies offering long-term portfolio quality, a differentiated downstream position, lower energy emissions and competitive total shareholder return.
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