Morgan Stanley24 Sep 2024 12:42
"Despite the overall gloom, not all European oil and gas stocks have been downgraded. Harbour Energy (LON:HBR) and Var Energi (OL:VAR) remain bright spots in Morgan Stanley’s analysis, with both companies retaining "overweight" ratings due to their resilient cash flow profiles and attractive dividend yields.
Harbour Energy, which recently completed a significant transformation with the acquisition of Wintershall Dea’s assets, has emerged as one of the firm’s top picks.
With a diversified portfolio spanning multiple countries, including Norway, the UK, and Argentina, Harbour Energy is forecast to deliver an impressive free cash flow yield of 16% per annum between 2025 and 2027.
In addition, the company’s hedging strategies, particularly in gas, provide a cushion against potential declines in commodity prices, ensuring that cash flows remain strong even in bearish scenarios.
Investors can also expect substantial returns, as the company is set to distribute an 8% dividend yield, complemented by a 5% share buyback program, further enhancing shareholder value."