With oil prices stubbornly disconnected from fundamentals,
we move to reflect the market view, assuming US$115/bbl
in 2008/09F (+21%/+44%). Our long-term view moves to
US$90/bbl (+50%). We upgrade RD Shell from HOLD to BUY.
Change in oil macro methodology
United Kingdom
21 May 2008
Pan-Euro Oils
Rip it up
Oil & gas
We have fundamentally remodelled for all of the Pan-European
oil majors. Higher price assumptions imply higher cost inflation; increased
exploration, capital and R&D spend; and volume effects. Our average EPS
estimates are up 27% for 2008F, 43% for 2009F and 54% for 2010F. The
average uplift for sector DCF is 21.1%. We upgrade RD Shell from Hold to
buy.