Earnings season is well underway, Greece may be closer to being resolved, and China and Iran are being factored into the markets. Still, the S&P 500 slid 2.2% this last week. The trend that is almost 4 years old now is that investors have been gobbling up bargains in each and every sell-off. With oil back under $50 again, down more than 20% since the final days of June, oil and gas investors have to be taking a very long view of the oil and gas sector for value in the year ahead or for an even longer outlook.
24/7 Wall St. reviews dozens of analyst upgrades and downgrades each day to find hidden value that stands out above the rest of the pack. Some of these analyst calls come from the oil and gas sector, and they are generally targeted at long-term investors who are looking just beyond the next direction of the tick in oil prices.
Analysts often have very ambitious calls. Investors just need to understand that analysts are far from perfect. They certainly are not omniscient, and every investor needs to know that almost no Buy rating in oil and gas is going to look good if oil decides to head further south to $40 per barrel. Again, this is a hunt for value for the next year or even longer in the oil patch. The top six big oil and gas calls from this week have been included up front, but there were many other calls and some additional research notes on the second page of this report as well.
Enterprise Products Partners L.P. (NYSE: EPD) is a top MLP and was among 4 top picks from Jefferies in a sector call this week. Enterprise managed again to raise its distribution, it maintains a very good long-term position in the market, and provides many of its services on the basis of long-term, fixed-fee contracts. Enterprise investors get better than a 5% distribution yield and Jefferies has a price target of $36.00 that is actually almost 10% lower than the consensus price target of $39.67. Enterprise closed at $27.39 on Friday, with Jefferies implying upside north of 35% with that distribution included.
EOG Resources, Inc. (NYSE: EOG) was started as Outperform in a positive exploration and production call from Credit Suisse mid-week. EOG’s new price target was set at $103, implying upside of almost 40% higher than the $75.16 close on Friday if you include the 1% dividend. This EOG call is not even that much more ambitious than the consensus analyst target of $101.11. Also, keep in mind that earlier in July Goldman Sachs noted EOG as being one of the potential M&A players ahead. It has a $41 billion market cap.
Exxon Mobil Corp. (NYSE: XOM) received a great call, but its stock broke under $80 to hit new 52-week lows at the end of the week. Exxon is also one of the 24/7 Wall St. 10 Stocks to Own for the Next Decade and was just given a review as value versus Chevron ahead of earnings in the coming days. The oil and gas giant was maintained as Buy at Goldman Sachs, but the firm added the oil and gas giant to its prized Conviction Buy List with a $95 price target. Exxon was covered more in-depth this week with the history of Goldman Sachs on Exxon, and its consensus analyst price target is now down to $92.35. What stood out here was that this key upgrade came on a day where the Goldman Sachs strategist had more cautious comments about its outlook on the oil sector in general.
Schlumberger Ltd. (NYSE: SLB) is apparently a double-buy because it received two key analyst upgrades this last week. Wells Fargo raised its rating to Outperform from Market Perform, and it was raised to Buy from Hold at Societe Generale. The Wells Fargo fair value range was set at $93 to $103 in its call. If you want an opposing view, S&P Capital IQ maintained its Hold rating but cut the price target to $45 from $51 in its call. Schlumberger closed out the week at $82.90, and its consensus price target is almost $102 as of now.
Valero Energy Corp. (NYSE: VLO) was started as Outperform with an $82 price target at Macquarie in what was a sector call with several other positive calls (see page 2). This was versus a $65.72 prior close, and shares went out at $65.70 at the end of the week. Valero has a consensus price target of $75.36 and a 52-week range of $42.53 to $68.27.
Whiting Petroleum Corp. (NYSE: WLL) is continually a controversial stock, with its dominance in the Bakken and with leverage that has made it move from a buyout candidate to a struggling shale player. Whiting received several calls this week, which will seem mixed when you consider the price change direction. Also, Whiting was at $26.00 earlier in the week but shares closed down at $22.93 on Friday versus a consensus analyst target of $42.46.
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