Broker tips: Shell, Lancashire, Tullow

16th Mar 2011 13:20

Oil giant Royal Dutch Shell (RDS) still looks like a safe place to be, until 2012 at least, according to Evolution Securities.The broker says that the group's programme of improvement in project management and business units' performance is far from over. "This lends credibility to the new target of 3.7m barrels of oil equivalent per day by 2013, keeping capital expenditure at $25-27bn per annum between 2011-14, and critically advancing another 30 new projects that could sustain or grow production through to 2020," says analyst Richard Griffith.However, he questions the company's strategy update which contained "ambitious" growth targets: "Hasn't the industry learnt that growth is easy to promise and desperately hard to deliver?""Perhaps we're being a bit tough but history suggest that when the international oil companies go for growth it's a good time for investors to move on. The question is whether RDS has learnt from the past," he says. Nevertheless, Evolution keeps its 'buy' rating and 2,500p target price.With the political dispute in Uganda now settled, UBS believes a significant overhang on the Tullow Oil's shares has now been lifted and raises its target price for the stock.The oil exploration and production company announced yesterday that it had signed a memorandum of understanding (MoU) with the government of Uganda that brings to an end the conflict over taxation, "which has been weighing on sentiment for almost a year," according to the broker."The MoU paves the way for Tullow to sell 66.7% of its Ugandan assets to Total/CNOOC and serves to draw a line under what has been a persistent bugbear for investors."The current share price looks very cheap to UBS, having underperformed the sector by 3% over the past week. With that, the broker keeps its 'buy' rating and ups the target price by 10% to 1,750p, from 1,620p.RBS lowers its profit forecast for insurance underwriter Lancashire Holdings, but warns that figures remains under review ahead of further clarity on the Japanese earthquake.The insurance group announced yesterday that to date in the first quarter of 2011, net losses are estimated to be in the range of $45-55m. Of that, $15-25m relates to losses from the Australian floods and the New Zealand earthquake, while other losses include an energy loss in the North Sea and a loss on the terrorism book from the unrest in Egypt."Unsurprisingly, it has not commented on its potential net loss from Japan," says RBS. The broker nudges back its 2011 pre-tax profit estimate from $199m to $192.5m, but awaits further news on losses from the devastating earthquake that hit Japan on 11 March.However, given the losses on the international book since the Chilean earthquake in February 2010, the broker expects international reinsurance rates to start to harden, which should be positive for Lancashire.RBS keeps a 'hold' rating and target price of 600p.