Energy

Analysts Keep Upgrading Oil & Gas Stocks in Wake of OPEC Production Cuts

Jon C. Ogg

Published: December 5, 2016 1:10 pm

Last Updated: January 12, 2020 5:06 pm

Last week’s oil production cut announced by OPEC has really put in a solid floor for oil stocks. Some of the second tier and offshore drillers and exploration companies even saw their shares rally by 15% to 30% in just a day. The major producers and largest companies have not participated as much due to the laws of size. What is amazing is that some of these stocks have kept rallying even in the face of what might be an overbought chart pattern.

24/7 Wall St. tracked 15 key oil and gas stocks receiving analyst upgrades and price targets last week. Some of these were the top names in the oil patch, while others were in second tier stocks. It turns out that the analyst upgrade brigade has continued marching in full force on Monday, December 5, 2016.

One issue helping out is that NYMEX crude was last seen up 0.7%, or $0.37 per barrel. This might not seem like much of a move on its own, but this takes the price of oil north of $52 per barrel. What matters here is that oil is now within a couple percentage points of a six-month high!

These analyst upgrades have been rather strong and are creating moves. 24/7 Wall St. has shown how each oil stock is moving up, what this looks like in the size of the company. We have also included what the consensus analyst price target is on each and a 52-week range. If available, color has also been added on each analyst call.

These are some of Monday’s top oil and gas analyst upgrades where the rating, the price target or both were raised:

Baker Hughes Inc. (NYSE: BHI) was reiterated as Buy at UBS, but the firm raised its price target to $73 from $62. Shares popped handily last week (was a $60 stock last Tuesday) and its shares were up a muted 0.3% at $65.50 in late morning on trading on Monday. The stock has a 52-week trading range of $37.58 to $66.93, but it is trading above the $62.30 consensus analyst price target, now that it is in the deal with General Electric.

Chevron Corp. (NYSE: CVX) saw its price target raised to $129 from $110 at Citigroup. Chevron shares were up 0.8% at $113.90, in a 52-week range of $75.33 to $114.91. The consensus analyst price target is $115.33. Chevron still yields 3.8% for new investors.

Eni SpA (NYSE: E) may be based in Italy and may be highly diversified, but its shares were higher after the Italy no-vote. Eni engages in the oil and gas, electricity generation and sale, petrochemicals, oilfield services construction and engineering industries. Morgan Stanley raised its rating to Equal Weight from Underweight. The American depositary shares were last seen up 1.6% at $29.22, in a 52-week range of $24.73 to $33.38. The market cap is $56 billion.

Holly Frontier Corp. (NYSE: HFC) was raised to Outperform from Neutral at Credit Suisse. The target price was raised to $38 from $29 in the call. The firm noted Holly Frontier as the most favorable, based on the post-OPEC reaction and noting that Washington policy (tax) could also become meaningful. The shares were up almost 6% more at $30.95, and they have a 52-week range of $22.07 to $48.14.

Williams Companies Inc. (NYSE: WMB) was last seen trading up another 2.2% at $31.52 after Barclays resumed its coverage with an Overweight rating. The price target of $35 is higher than the $32.31 consensus analyst target, and the 52-week range is $10.22 to $31.85. The company has close to a $24 billion market cap now.

Noble Energy Inc. (NYSE: NBL) was reiterated as Outperform at RBC Capital Markets, and the firm raised its price target to $46 from $45. Its shares were last seen up 3.6% at $40.23 and hit a new 52-week high, with the new range at $23.77 to $40.24.

RSP Permian Inc. (NYSE: RSPP) is raised to Overweight from Equal Weight at Morgan Stanley. The 52-week trading range is $16.74 to $44.74. The consensus price target is $50.59. The shares close Friday at $44.36.

Other key oil and gas related analyst calls with higher price targets and/or formal analyst upgrades were seen as follows:

Ferrellgas Partners L.P. (NYSE: FGP) is raised to Buy from Neutral at Citigroup. The 52-week range is $5.04 to $20.85. The consensus price objective is $8. The stock closed last Friday at $5.65.

Hi-Crush Partners L.P. (NYSE: HCLP) was raised to Outperform from Market Perform at Cowen. The firm raised its target price to $22 from $12. The units were up 7.7% at $19.83 in the aftermath of this call, in a new 52-week range of $3.55 to $19.85.

PDC Energy Inc. (NASDAQ: PDCE) is a smaller outfit with a $4 billion or so market cap, but its shares were up 3.3% at $76.29 after it updated production guidance. Merrill Lynch reiterated its Buy rating, but the firm raised its price objective to $85. Shares hit a 52-week high of $76.48. The firm noted that the 2017 guidance was actually an upside surprise on production growth and oil mix and that it will drive stronger cash flow.

Merrill Lynch also came out favorably on many other key oil and gas stocks. Their view is that the immediate reaction to OPEC’s first intended cut in eight years is that Brent and NYMEX crude are trading back near $50 and this is a directional recovery for oil. That recovery is to be underpinned by an accelerated rebalancing of oil markets and the prospect of renewed earnings momentum. Merrill Lynch reiterated its Buy ratings as follows:

• Continental Resources,
• Anadarko,
• Cabot Oil & Gas,
• Patterson-UTI,
• Pioneer,
• Newfield,
• Devon Energy,
• Parsley Energy,
• Oasis Petroleum,
• ConocoPhillips,
• Tesoro,
• Occidental Petroleum,
• Marathon Petroleum,
• Nabors Industries,
• Halliburton,
• and Range Resources.