Morgan Stanley review: BP downgrade to equalweight.

Interesting to read the views of Morgan Stanley on part of the oil sector: 
- uk.webfg.com: morgan-stanley-downgrades-bp-cuts-target-for-shell, 
particularly given that 2, BP and Royal Dutch Shell, hold places in my portfolio and a weighting of around 13.66%.

In their latest release Morgan Stanley have downgraded BP to equal weight from overweight instigated by a couple of things:

1. By its own strategy Total is preferred to BP on the basis of an assumption that BP will make reducing debt a priority over the dividend and Total have recently increased their dividend.
2. The broker has limited itself to 2 overweight recommendations (by sector?), and as Royal Dutch Shell is on overweight, moving Total to overweight from equalweight forces its hand to downgrade BP.

More a discipline thing than any particular change in BP's improving position but Morgan Stanley do also point out that, by 2019, Total will have a stronger, more secure 1.5 times cover to the dividend by free cashflow v. BP's 1.1 times.

That being said, at current share price levels (not directly to cashflow), BP currently yields 6% v. Total's 5%, a discount which Morgan Stanley also recognises as potential for an increase in BP's share price as confidence in its dividend grows.

And, by paying down its debt, ultimately BP's free cashflow should potentially accelerate in the longer term.

Anyway, despite the discipline of only maintaining 2 overweight recommendations I'm not sure its hugely relevant to holders of one or the other of these 2 companies.