Markets are lower today, and a series of related factors are weighing on them. First of all, investors are concerned about the possibility of a rebound in the rate of inflation, which is directly related to the second fear. This concern is caused by the rise in oil prices, which is due to the agreement reached by Russia and Saudi Arabia to extend their oil production until December. Finally, with oil prices nearing $90 a barrel, gasoline prices are rising in US markets even though the summer driving season is over.
Higher gas prices directly contribute to inflation. According to data from AAA, the national average price for a gallon of unleaded gasoline reached $3.80 on Sept. 6, surpassing last year’s high and earning the title of second-highest average gasoline price nationally. As gas prices continue to rise, the Federal Reserve may face greater pressure to consider further rate hikes, increasing the risk of a recession.
Every change in market conditions presents opportunities for investors, whether the markets rise or fall. With rising crude oil prices and rising gas prices, Oil reserves They are set for possible benefits.
Wall Street analysts are paying attention and are rating some of the market’s biggest oil companies as ‘buys’. Let’s dive deeper into these companies along with the analysts’ insights.
Conco Phillips (b.Copy)
We start with one of the giants of the industry, Conco Phillips. The company has a market capitalization of over $147 billion and is one of the largest independent exploration and production companies in the oil sector based on proven reserves and proven production. ConocoPhillips operates in 13 countries and employs more than 9,700 people.
This strong foundation positions ConocoPhillips as an oil giant that can withstand a changing economic landscape. In the previous quarter, ConocoPhillips produced more than 1,800 thousand barrels of oil per day (Mboe/d), down from 1,700 barrels per day in the 2Q22 period. Year-to-date, at the end of 1H23, ConcoPhillips production stands at 1,798 Mboe/d, up from a full-year 2022 average of 1,738.
Among the company’s prominent ventures are its liquefied natural gas (LNG) projects. LNG is gaining importance as a cleaner burning fossil fuel compared to coal or oil. ConocoPhillips operates LNG projects around the world, with prominent locations in the Gulf of Mexico, the Caribbean Sea, off the coast of West Africa and Australia.
ConocoPhillips ended the second quarter with $7.1 billion in cash and short-term investments — after distributing $2.7 billion to shareholders through a combination of $1.4 billion in dividends and $1.3 billion in share repurchases.
ConocoPhillips offers a fixed dividend and a variable dividend that changes depending on the company’s performance. The final payout included a regular dividend of $0.51 per share (yielding a 1.66% yield) and a dividend of $0.60 per share (a 1.95% yield).
The stock has drawn the attention of Truist’s 5-star analyst Neil Dingman, who sees the company’s strong presence in LNG as one of the main upsides. Dingman wrote about the company and its stock: “We believe ConocoPhillips has substantial U.S. upstream reserves coupled with materially attractive LNG assets. While the company’s upstream and LNG assets are more than sufficient to sustain the business for more than a decade, we would not be surprised to see COP add additional positions in both areas. While we believe US ops and LNG will buy in the future, we believe the company has many other attractive assets such as Sermont and Willow that will generate strong cash flow with a stellar balance sheet.
Dingman’s bullish stance fully complements his buy rating on COP shares, and his $151 price target reflects his belief in a 23% upside over the next year. (To see Dingman’s record, Click here)
In total, no fewer than 15 analysts have recently weighed in on COP shares, with 13 Buys and 2 Holds giving them a consensus rating of Strong Buy. (look out ConocoPhillips stock forecast)
Chevron Corporation (CVX)
Chevron, the second major oil company on our list, is one of the largest hydrocarbon producers in the world and a giant by any measure. The company generated nearly $240 billion in revenue last year and has a market cap of ~$318 billion.
Chevron is known for its oil and natural gas exploration and production, its hydrocarbon transportation assets (including a marine shipping company), a variety of fuels, lubricants, petrochemicals and additives, and its extensive refining operations. A segment that includes a chain of gas stations that market refined products. In addition, Chevron is a 50/50 partner with its peer company Phillips 66 in the production of industrial fuels and chemicals.
Looking at the last quarter 2Q23 shows us where the company is. Specifically, revenues fell nearly 29 percent from 2Q22, but the $48.9 billion result was $900 million above expectations. Chevron’s bottom line, reported by non-GAAP measures as EPS of $3.08, was 10 cents ahead of forecasts.
Along with better-than-expected revenue and earnings, Chevron also impressed on cash flow. The company’s cash flow was reported at $6.3 billion, a figure that included $2.5 billion in free cash flow. The company used its strong cash position to deliver a $7.2 billion return of capital to shareholders through a combination of dividends and buybacks.
Chevron last declared a dividend on July 28th, at $1.51 a share. That equates to $6.04 per common share annually, yielding 3.62 percent. Chevron has a dividend history dating back to 1990, and has been gradually raising its payout since 2005.
So it’s clear that Chevron has a healthy footing based on strong fundamentals — and that was the starting point when Raymond James analyst Justin Jenkins wrote about the company: “With a strong financial base, high relative shareholder payouts and attractive relative assets.” Portfolio, we think Chevron offers the most direct positive risk/reward in a market that is still very difficult to differentiate between the oil and gas majors. 2Q earnings were again strong for CVX’s Upstream portfolio with Sunday’s early release of strong Permian production data on the big side – highlighting CVX’s Permian growth trajectory.
The 5-star analyst didn’t stop there, but summed up his comments on a positive note: “Overall, based on a solid balance sheet, high-level leverage for oil macro, and capital allocation will continue to shift to preferred.” Direction, we look forward to your superior rating…”
Jenkins’ Score (i.e. Buy) rating is paired with a $200 price target, implying a 20% upside over a one-year horizon. (To look at Jenkins’ track record, Click here)
Now turning to the rest of the street, 9 buys and 4 holdings have been published in the last three months. Therefore, CVX has a Medium Buy consensus rating. (look out Chevron stock forecast)
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Disclaimer: The opinions expressed in this article are those of the featured analysts only. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.
