While the markets remain focused on Greece and China, the month of July has been a hard month for the oil and gas sector. Oil had reached $60 again, but now West Texas Crude is back down close to $51. Still, investors keep looking for value and opportunity, and they have proved this by buying every market dip and pullback for almost 4 years now. Many long-term investors have been searching through the oil and gas sector for solid opportunities where stocks are either grossly oversold or where they represent true value for the next year or in the years ahead.
24/7 Wall St. reviews dozens of analyst upgrades and downgrades each day. The goal is to find the hidden value or upside calls that stand out above the rest of the pack. Some of these calls come from the oil and gas sector, and some of these calls can come with much more than the 8% to 15% implied upside calls in traditional analyst ratings.
Investors need to understand that Analysts are not omniscient, and if oil breaks under 450 and heads back down on the way to $40 that almost every stock in the oil and gas sector is likely to drift lower. These are some of the top oil and gas analyst calls shown from this past week.
Apache Corp. (NYSE: APA) has had a rough 2015, and shares just hit a 52-week low on Friday. The exploration and production outfit was lower despite the upgrade to Buy from Neutral at Citigroup. The firm’s price target was lowered to $62 from $68 in the call and that may have been the drag. Still, Citi sees normalized earnings of $3.50 per share in 2016. Citi noted that the international portfolio of assets has led to the stock’s poor performance over the last year, but its underperformance is now said to make it very fairly valued now as well.
Apache shares were at $51.00 late on Friday against a 52-week range of $50.76 to $104.57. This leaves an implied upside of more than 20%, and the consensus price target is still much higher at about $69.00 now. For both sides of the coin, please note that many analysts have tried to say that Apache now reflects value with the downside priced in — only to play the game of catching falling daggers.
Kinder Morgan Inc. (NYSE: KMI) was reiterated as Buy at Argus on Friday, after this week’s earnings report. What stood out here was that Argus, which is a truly independent research shop without any conflicts of interest, also reiterated its $50 price target. Kinder Morgan is the top oil infrastructure player now in America with an $80 billion market cap, and a $36.90 price late on Friday left an implied upside of 35% without even considering its 5% yield.
Argus expects Kinder Morgan to expand its footprint both organically and through acquisitions and thinks it has an increased scale and competitive advantage against peers. It also like the company’s $22 billion five-year project backlog. Kinder Morgan’s consensus price target is $47.11 and it has a 52-week range of $33.25 to $44.71. This fresh dividend hike is not expected to be the last dividend hike.
YPF S.A. (NYSE: YPF) was featured in two different analyst calls this last week. Credit Suisse raised YPF to Outperform from Neutral. Morgan Stanley also featured it as a Buy late this week.
Morgan Stanley’s price target of $42.00 is almost $4 above the consensus price target. YPF is a upstream and downstream player in Argentina and was among three emerging market energy picks named by Morgan Stanley. The firm sees an attractive valuation here with near-term growth opportunities in its current asset base. Another boost was that a currency pass through in fuel prices has been protecting margins. Investors can see how volatile YPF is with a 52-week range of $20.83 to $41.74.
Last weekend 24/7 Wall St. featured 6 detailed analyst calls in the oil and gas sector, including the following: ConocoPhillips, Spectra Energy, Superior Energy, Weatherford, California Resources, and Azure Midstream Partners. It also covered several other summary calls as well.