Whiting Petroleum: Rockin’ the Bakken Again?
Posting a smaller than expected loss may not be enough to rekindle buyout hopes for this Bakken oil player, even if Whiting saw numerous positive calls. Whiting shares closed at $37.68 on Friday, and its 52-week range is $24.13 to $92.92. Whiting was raised to Buy from Neutral, and the price target was raised to $44 from $34 (versus the prior $35.13 close) at SunTrust Robinson Humphrey early last week.
Then Whiting was reiterated as Buy with a $52 price target by Sterne Agee CRT’s Tim Rezvan toward the end of the week. His report said:
Despite weaker-than-expected natural gas/NGL realizations, core results from Whiting’s oily portfolio were strong. Production beat expectations, lease operation expense was at its lowest level since ’05 and updated 2015 guidance suggests realizations should tighten and cash costs should decrease.
Oppenheimer maintained an Outperform rating and raised its target to $47 from $40. The Oppenheimer report said:
With Whiting now likely to run cash-flow neutral next year while generating $500 million to $1 billion from asset sales, we see the EV/EBITDA discount to the E&P group narrowing to 20%, and increase our price target to $47 from $40 (using a 27% discount). Whiting also reported impressive results from slickwater fracs and recently acquired Kodiak acreage.
Merrill Lynch reiterated its Buy rating with a $45 price objective. The firm said:
Production of 166.9Mboe/d came in above the high end of guidance, reflecting Whiting’s continued success with new completions in the Bakken. … In our view, Whiting remains one of the cheapest ways to play a continued recovery in the oil price.
YPF: Don’t Cry for Me Argentina
YPF S.A. (NYSE: YPF) was given one of the larger upgrades, on a basis of price target to the current share price, but this is the Argentine play, so on the surface it would seem to have the most risk as well. JPMorgan raised the rating to Overweight and gave a $440 price target at the time. YPF’s American depositary shares closed out the week in New York trading at $30.95 per share, against a 52-week range of $20.83 to $41.74. That 52-week range and current share price should give you an idea of the volatility it can see.
The JPMorgan report said that YPF is likely to continue benefiting from a supportive fuel pricing policy near-term, which would allow for higher price realization that would allow it to cope with $6 billion in capital expenditures. JPMorgan’s valuation is concentrated on conventional resources and downstream, with the unconventional oil and gas projects still being in the early stages and adding only a small amount to a sum of the parts valuation.
JPMorgan’s team also believes that country-risk tailwinds are likely to help shares going into the reelection of President Cristina Fernandez de Kirchner this coming October. While JPMorgan also talked about this trading at a discount to global peers, 24/7 Wall St. would remind readers why: this is a troubled Latin American nation that has a history of trying to take away what it wants with foreign investors holding an empty bag.
24/7 Wall St. would also point to a past research note from Merrill Lynch back in March. The firm raised YPF to Buy with a $39 price target, based largely on expected country risk improvement at the time. A much more recent report from Merrill Lynch, from April 29, said:
There is great expectation for changes in Argentina that could come under a new government after the fourth quarter of 2015 election. While the end result of potential changes should be, on balance, favorable for the energy sector, key challenges remain. Despite challenges, we remain positive on the Argentine oil and gas sector, with Buy ratings on both YPF and Petrobras Argentina.
Again, the aim here is not to see which oil and gas stocks are going to pop on news coverage or on any one-quarter earnings expectations. It is for investors who are taking long-term views, looking for companies that offer value or that may have been oversold during the crushing oil price carnage that took place in late 2014 and early 2015. Not all these companies have the same risk parameters. That being said, investors should do their own due diligence, and the caveat that you must understand what it is that you really own must be kept in mind.
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