While many are cautiously optimistic the oil price may start showing signs of recovery in the second half of this year, RBC has out itself as an outright bull, saying companies will return to project-sanctioning mode in 2H 2016 despite expecting further cutbacks up until then.

Exxon is due to sanction the PNG LNG expansion next year, along with Golden Pass LNG in Texas and Phase II of the Julia field in the Gulf of Mexico, which Exxon operates, with Statoil as its 50-50 partner.

“With the lag in costs from an oil price drop around 12–18 months for major projects, we think the majors will be unwilling to sanction major projects in the near term, as they wait to benefit from cost deflation,” RBC said in its Integrated Oil & Gas – 2016 Outlook.

“Looking ahead to 2016 sanctions, we therefore expect a limited number on the first half of the year, with activity set to pick up in 2H16.”

RBC sees the dividends of Exxon and Royal Dutch Shell as the most secure, while European majors Statoil and Repsol find themselves at the opposite end of the spectrum.

“Given an uncertain energy landscape, we retain our preference for either quality (Exxon, Total) or value accretion (Royal Dutch Shell, BG Group),” RBC said.

“Elsewhere, we are becoming incrementally positive on BP, mainly driven by continued momentum in cost reduction, which we see as a key theme for 2016.”

RBC says investors will likely reward Exxon’s combination of top-tier operational execution, a focus on cost control, and the only AAA balance sheet in the group.

“While Exxon has historically been one of the leanest operators, investors may be surprised by the scale of cost-cutting potential that Exxon should see in 2016,” RBC said.

“The longer oil prices stay at low levels, we think the likelihood of Exxon making a meaningful acquisition increases, and we think Exxon may be among a very select group of upstream oil companies that raise dividends in 2016.”

Total, which runs the Papua LNG project in PNG, is also looking good in RBC’s eyes, as a “relatively attractive” holding for investors.

RBC says Total is “sitting in the sweet spot between capital expenditure rolling off and new projects ramping up”

“Although we do not expect material shifts in strategy, we think Total will remain in the first quartile on costs,” RBC said.

“In terms of capex, Total has guided to $US20-21 billion for 2016, and although our forecasts remain within this range, we suspect there is downside risk to this number at $40/bbl oil.

“The question for us is, given how sticky Total’s budget is in the near term, will a further cut impact production, and if so how much (and when)?”