Raising estimates on higher crude prices: In a separate report (Oil market outlook:Spare capacity diminishing; raising price forecasts, 9 November 2021) we raised ourBrent price forecasts from USD65/b to USD75/b flat real from 2022. As a result, weraise our company cash flow estimates by an average of 8%. We see three importantlessons from the recent sector rally and the latest results:

1. The companies are all in an extremely strong financial position, with an increasing focus on returning cash to shareholders. With average crude price breakevens inthe mid-USD50/b’s, we see the sector generating 2022e-24e average free cashyields of ~9%, leading to distribution yields (dividends + buybacks) of ~8%.

2. This was a commodity-driven rally, not a fundamental re-rating. The sector’s6% correction in recent days despite excellent 3Q results and all the positivenews on cash distributions reinforces our view that the sharp September rallywas a short-term reaction to the surge in commodity prices, not the start of a  fundamental reappraisal of long-term value by investors.