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BP and Royal Dutch Shell targets upgraded by HSBC

Against a backdrop of rising crude prices, the bank lifted its targets for London's largest oil firms.

oil and gas operations
HSBC's upgraded target sees some 8.1% upside for BP

BP PLC (LON:BP) and Royal Dutch Shell PLC (LON:RDSB) have had their price targets raised by City analysts at HSBC, who have today revised their views on the sector in light of higher crude oil prices.

As the market price of Brent crude gained 1.1% to US$79 on Tuesday, the bank’s Brent forecast for 2018 increases to US$70 per barrel, up from US$66 per barrel.

“We continue to like the sector - particularly given the strength of support for cash distributions - but the stocks’ upsides to our target prices have become much more muted after the sector’s outperformance,” said analyst Gordon Gray.

READ: City analysts react to Royal Dutch Shell’s first quarter

HSBC repeated its ‘buy’ recommendation for BP and raised its target to 610p, up from 600p previously. The new target suggests some 8.1% upside to price.

The analysts believe continuing evidence of BP’s transition into strongly positive free cash flow will improve BP’s chances of a market re-rating.

Shell, meanwhile, is rated ‘hold’ by the HSBC analysts and the target price moves to 2,700p, up from 2,665p.

“We rate both Shell A and B shares Hold after the strong share price performance of recent months. Although we see a solid outlook for cash generation and free cash flow, we believe this is offset by the high level of market expectations on the stock,” HSBC said in a note.

Quick facts: BP PLC

Price: 468.55 GBX

Market: LSE
Market Cap: £94.98 billion

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