Analysts at Barclays sounded an upbeat note on Big oil, telling clients that companies in the space remained free cash-flow positive in the first quarter of 2019, with management teams' commitment to both discipline on capital expenditures and shareholder returns seen driving a "re-rating" in share prices over the next 12 months.
"The near 30% recovery in the Brent oil price over the last 12 weeks has brought a sense of optimism back to the oil sector, and we see the commitment of the management teams to capex discipline and shareholder returns as driving a re-rating of the sector over the coming 12 months," they said.
For the first three months of the year, Barclays also expected seasonally lower costs bases - as capex outlays declined by 20% against the last three months of 2018 - and its assumptions for the impact of IFRS 16 to help push companies' organic cash breakevens down by 7% versus the fourth quarter of 2018, to $48 a barrel on Brent.
Nevertheless, the sequential drop in oil prices and downstream margins was expected to result in a 17% drop in sector net income quarter-on-quarter.
Its key 'overweight' recommendations were Royal Dutch Shell (target price: 3250p), Neste (target price: €38), BP (target price: 700p), Total (target price: €65) and Equinor (target price: NOK270).
For the nearer-term however, while Neste and BP looked "relatively advantaged" going into the first quarter results, there was a greater risk to the numbers for GALP (taget price: €16.5) and Saras (taget price: €1.7).