Citi makes case for BP over Shell

(Sharecast News) - Analysts at Citi reiterated their preference for shares of BP over rival Shell, telling clients that while they were both sporting similar dividend yields, of 6.0% and 5.6%, respectively, the foundations for shareholder income at the former were "very different".
Hence, they opened a 'Catalyst Watch' for BP, telling clients that: "a combination of higher returns to shareholders and potential market rotation (rising rates/cyclicals) can see the market reward differentiated growth."

The dial-down in BP obligations for Macondo to a ratable $1.2bn per year, versus $5.5bn in 2017, and progress on deleveraging would help it achieve its target for $10.0bn in proceeds from disposals.

Their analysis showed that BP now had over $2.0bn per year of financial capacity to boost dividends - perhaps by as much as 20.0% - or to initiate a long-promised buyback, possibly as soon as its third quarter earnings.

Furthermore, while Shell was over-distributing and or under-investing, BP was under-distributing when compared with its rivals, even as free cash flows improved and the company deleveraged.

Citi was at 'buy' on BP and 'sell' on Shell.

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