BP vs Shell Share Price: Which is a Better Buy?

Summary:

In this BP vs Shell share price comparison, we look at why the two supermajors have lagged and what to expect going forward

The BP and Shell share prices have underperformed the global oil and gas industry in the past year. BP shares have declined by about 8% while the Royal Dutch Shell stock has risen by more than 8%. The Vanguard Energy ETF (VDE) has risen by more than 40% in the same period.

The same trend has continued this year as the VDE has risen by more than 25% while the two stocks have risen by less than 18%. Crude oil price has also jumped by more than 40% this year, as shown below.

Why Shell and BP have lagged

To a large extent, the two companies have done relatively well this year. The two firms reported strong quarterly results, helped by higher oil and gas prices. Shell also managed to make $2.6 billion in 2020 from its trading operations.

Further, the two supermajors have reduced their overall cost of doing business and exited some of their unprofitable businesses. For example, Shell sold its Puget Sound Refinery in a $350 million deal. It is also considering selling its Texas shale assets. Meanwhile, BP sold its petrochemicals business in a $5 billion deal to Ineos. It also sold its Oman gas stake.

As a result, these asset sales have helped these firm boost their balance sheets, invest in renewable energy, and boost their dividends. BP even said that it will resume share buybacks after exiting some of its businesses earlier than expected. The two firms now have a dividend yield of 6.6% and 7.2%, respectively.

This underperformance is mostly because of the company’s investments in green energy. Recently, a court in the Netherlands ordered Shell to slash its emissions by more than 40%. The two companies have also spent billions acquiring charging stations and other clean energy products. While American firms like Exxon and Chevron have announced a clean energy plan, they have not been as aggressive as BP and Shell.

So, which is a better buy between BP and Shell? Looking at valuation multiples, we see that Shell is trading at a forward PE ratio of 9 while BP is at 8. The forward EV to EBITDA shows that Shell has a multiple of 4.07 while BP has 4.17. Therefore, these numbers show that the two firms are valued almost the same. Still, Shell’s financial performance has been worse than that of BP.

BP share price forecast

The daily chart shows that the BP share price has dropped by more than 13% from its YTD high. It is also trading at an important level considering that it struggled moving below it in May and June. It is also between the 23.6% and 38.2% Fibonacci retracement levels. The 50-day and 100-day moving averages are also about to make a bearish breakout. Therefore, there is a possibility that the stock will slide to at least 263p in the near term.

Shell share price forecast

The daily chart shows that the Royal Dutch Shell share price has also been under pressure lately. It has fallen by about 11% from its YTD high. It is also slightly above the important support level at 1,280p, which was the lowest level in April and May. It is also a few points below the two moving averages. Therefore, a bearish breakout will be confirmed if the price moves below the support at $1,280. Still, while it is early to tell, Shell seems like a better buy than BP at the present levels.