- Statoil (STO -2.5%) is downgraded to Equal Weight from Overweight at Morgan Stanley, as shares have sharply outperformed peers YTD; the firm prefers Royal Dutch Shell (RDS.A, RDS.B) within the space.
- STO's strong showing has left shares trading at a ~5% forward yield, the lowest among the European majors; STO shares historically have traded at a 4%-6% dividend yield with few exceptions, "hence valuation now appears less compelling in both absolute and relative terms," the firm says.
- The pace of project delivery moving forward likely will slow before another wave of startups in H2 2017 into 2018, Stanley says, believing this will limit further upside to consensus free cash flow expectations in the near term; meanwhile, the firm predicts Shell will enjoy a period of strong FCF growth over the next 12 months.