The Cowen team notes in the report that almost all the majors have different areas of focus, and those areas should keep them occupied for the near term. They also stay positive on three big oil companies that offer investors a degree of safety and outstanding dividends.
Chevron
This stock is very solid story for investors looking to stay long the energy sector. Chevron Corp. (NYSE: CVX) sports a sizable dividend and has a solid place in the sector when it comes to natural gas. Some Wall Street analysts estimate the company will have a compound annual growth rate of over 5% for the next five years, and the stock trades at a modest valuation discount to some of its mega-cap peers.
Chevron management is aggressively pursuing cost saving initiatives, and it has already completed over 2,200 supplier engagements, with 700 more in progress. Cost savings and improving investor sentiment may be a key for the mega-cap integrated as it has struggled mightily over the past year.
Chevron is a company that the Cowen team sees as focused on current major projects, and probably not in the market for a major deal at this time.
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Chevron investors are paid a large 4.125% dividend. The Cowen price target is $124. The Thomson/First Call consensus price target is $113.21. Shares closed Tuesday at $100.42.
Occidental Petroleum
This stock is another top energy stock that comes in as a high-yielding domestic stock in the sector. Occidental Petroleum Corp. (NYSE: OXY) announced last year that it will continue to grow dividends and expects to begin buying back more shares this year and beyond, a double plus for shareholders. Analysts feel that the company still faces the rebounding oil price correction with the strongest balance sheet in the sector, with net cash at year-end 2014 estimated at around $1.7 billion and a whopping $11 per share of cash available for buy backs. With chemicals and other products helping to blunt the drop in oil, Occidental is well positioned to continue to ride out the storm.
After the spin-off of California Resources last year, many on Wall Street that champion the stock feel that the overall corporate portfolio is much more streamlined. In addition, the company’s lower-than-average leverage gives it the flexibility to return cash to shareholders at a “best in class” rate. The Cowen team does think that the company could be a buyer of Permian Basin assets.
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This is another company taking advantage of huge cost savings. In fact, capital expenditures are expected to fall from $1.7 billion to $1.0 billion by the end of the year.
Occidental shareholders are paid an outstanding 3.85% dividend. The Cowen price target is $94. The consensus target is set at $85.96. The stock closed on Tuesday at $77.48.
Total
This giant European integrated is based in France. Total S.A. (NYSE: TOT) announced last year that it will move forward with its plans to develop the Kaombo oil field off of the Angolan coast. This is a giant oil field that is estimated to contain approximately 650 million barrels of oil. Several other companies, including Exxon also have large interest in this field that is expected to deliver huge production volume. Total stands to receive 30% of this amount as that is its ownership stake.
Total also has a huge field in the Kurdistan region of Iraq that could have outstanding production. With five big projects on track and cost cutting helping to save capital, it is one of top picks at Cowen for growth and value.
Total investors are paid an outstanding 4.85% dividend. The Cowen price target is $66, but the consensus target is quite a bit lower at $58.21. Total closed Tuesday at $49.46.
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The Cowen team is smart. They are staying with big cap stocks that pay outstanding dividends. In a sector that could remain volatile, that makes very good sense for investors.
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