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Oil sector is unloved, but holding up under pressure – HSBC

Oil sector is unloved, but holding up under pressure – HSBC

** HSBC says the global integrated oil sector is holding up well despite combined pressure of price and margin weakness

** Brokerage upgrades Royal Dutch Shell to “buy” from “hold”, saying its financial framework is not at a significant risk

** However, says Shell’s current free cash flow breakeven is above average for the sector

** BP Plc and Total SA remain at low risk, and BP is HSBC’s preferred stock with best company-specific catalysts this year

** Brokerage expects natural gas prices and petrochemical margins to come off their lows, but believes it might take until 2021 for them to move higher

** HSBC also expects a “sharp recovery in crude prices” if the coronavirus outbreak is contained with positive momentum returning to the sector in coming months

** Says risk/reward balance in the sector is strongly positive at present and companies are demonstrating a good resilience to weak macro conditions

** Oil prices have tumbled ~17% this year

** HSBC revises PT on these companies: Company Name RIC New PT Old PT BP Plc 595p 600p Chevron $115 $118 ExxonMobil $70 $74 Royal Dutch Shell 2450p 2520p Total SA EUR 56 EUR 57 ENI SPA EUR 14.75 EUR 15 Repsol EUR 15.75 EUR 16 Equinor ASA NOK 200 NOK 210

(Reporting by Aniruddha Chakrabarty)

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