Are major European oil companies undervalued compared to the US oil majors.

by hjaltlander

Specifically I was thinking the major European companies like Shell and BP.

  • BP down to lows not seen since 1997.
  • Shell down to lows not seen since 1996

One of the major drivers for the low oil stocks worldwide is the expected collapse of US shale. However, BP especially is not particularly exposed to this market.

Is there an argument that a long term investment into the European oil companies is reasonable at this stage. BP is not really in the US shale market? Currently only around 3% of their output is shale [1][2].

However, Shell is actually very exposed with output of around 250,000 [3] out of an overall production of 1.77 mil barrels [4]. For a minimum shale output of 14% of total output.

Looking at the US companies, which are far more involved in the US shale market than BP:

  • Exxon Mobile to lows not seen since 2004 (~7% shale but massive recent investment) [5]
  • ConocoPhilips to lows not seen since 2004 (couldn’t find numbers but likely very high) [6]
  • Chevron to lows not seen since 2006 (~10% shale but massive recent investment) [5]

Possibly implying there is more value in the European stocks.

Maybe I’m overestimating the impact of shale problems on the stock prices but I can’t shake the feeling that the European majors are much cheaper that the US majors despite less exposure to the shale market – with BP especially looking very attractive to me. Any opinions?

Sources: [1] – www.reuters.com/article/bp-results-shale/bp-more-than-doubles-u-s-shale-oil-output-in-2019-idUSL8N2A42QC [2] – www.bp.com/en/global/corporate/what-we-do/bp-at-a-glance.html [3] – www.reuters.com/article/us-royal-dutch-shell-shell-shale/shell-boosts-crude-output-in-top-u-s-shale-field-to-250000-bpd-idUSKBN1ZZ2KR?il=0 [4] – www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/013020-shell-suffers-in-q4-despite-6-jump-in-oil-output [5] – www.ft.com/content/5543d674-b512-11e9-8cb2-799a3a8cf37b [6] – www.vault.com/company-profiles/oil-gas/conocophillips

(Too much of a scientist, feels wrong to not provide sources…)

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.