5 Oil and Gas Stocks Analysts Want You to Buy Now

September 13, 2015 by Jon C. Ogg

Investors are still buying the dips in their hunt for value. Now that the stock market finally corrected more than 10% before recovering, many sectors have stabilized. Others remain in a state of flux. Oil, gas and energy remains in a very high state of uncertainty. Still, oil is in the mid-$40s for West Texas Intermediate (WTI) crude, and it has acted as though it wants to find some stable ground.

With huge sell-offs come huge long-term opportunities for the most nimble and most opportunistic investors. Some of these investors have looked for the formation of a bottom in energy, or they are looking for long-term value out in the next year or longer.

24/7 Wall St. evaluates dozens of analyst research reports each day of the week, and there are almost always some key upgrades or downgrades in the energy sector. The problem to date is that sticking your neck out in the energy sector has not showed much mercy to investors who are just buying dips blindly. Another risk is that Goldman Sachs just outlined how oil could dip back into the $20s — and presumably readers do not need to be told what oil prices anywhere close to $20 will do to oil, gas and other energy stocks.

Several analyst calls from this past week have highlighted that the most recent selling pressure may have brought up some long-term bargain opportunities in the oil and gas sector. That also pertains to tangents to energy, via services, master limited partnerships, solar and even coal.

ALSO READ: Nomura’s 6 Top Oil Production Stocks to Buy Now

24/7 Wall St. wants to remind readers that analysts making upgrades and downgrades often have no more insight than many institutional investors. Analysts are often wrong, and trying to call a formal bottom in the price of oil has wrecked many careers and has created many financial implosions in 2015. These are some of the key energy analyst calls for investors with a long-term view seen in the past week.

Chevron Corp. (NYSE: CVX) was raised to Overweight from Neutral at JPMorgan on Friday. The firm really sees multiple reasons to own the stock. Its $86 price target is more than $10 higher than the $75.79 close on Friday and the prior close ahead of the call was $75.66. Chevron had a consensus price target of about $99.00 mid-week, but that is now down at $97.05. Chevron’s 52-week trading range is $69.58 to $125.70. One of the big catalysts for the call was value, and another is that JPMorgan thinks its 5.6% dividend yield is going to remain a safe dividend. This would imply potential upside of nearly 20% on a total return basis if the firm is right on its price target.

Newfield Exploration Co. (NYSE: NFX) was started as Outperform at Credit Suisse last Wednesday. The firm set a $45.00 price target (versus a $34.14 prior close and versus a $34.13 close on Friday). Nomura Securities also had it among six exploration companies to buy now as well. Newfield has a consensus price target of $42.48, slightly lower than on Tuesday and Wednesday, and it has a 52-week range of $22.31 to $40.27. If Credit Suisse is right, Newfield’s potential return for investors is north of 30%.

Occidental Petroleum Corp. (NYSE: OXY) was not issued a formal analyst upgrade, but the firm was named among the UBS Dividend Rulers portfolio for picks for the rest of 2015 and into 2016. Occidental wants to continue growing its dividends, and it expects to begin buying back more shares this year and beyond. It faces an energy price correction by having one of the strongest balance sheets among sector peers, with net cash at year-end 2014 estimated at around $1.7 billion and a whopping $11 per share of cash available for buybacks. Occidental’s chemicals and other products are said to be a buffer against the drop in oil, and cutting capex by about 40% is expected to help.

ALSO READ: 10 States Burning the Most Coal

Royal Dutch Shell PLC (NYSE: RDS-A) was part of a three-way value call from Jefferies this week. The firm pointed out that Shell has been in a sort of “penalty box” since announcing the huge BG acquisition. Their take: Shell is dirt cheap versus peers, it has made asset sales, and it is lowering capex , all of which brings the conclusion from the Jefferies to on with huge value and a huge a dividend. The Jefferies price target is $66.70 on an ADS basis. With a share price of just over $50, the implied upside if Jefferies is accurate would be almost 40% when you include the dividend.

Total S.A. (NYSE: TOT) was upgraded at Goldman Sachs on Friday, to the firm’s prized Conviction Buy List from a prior Neutral rating. It has not been the norm of late for a firm like Goldman Sachs to come out with such high conviction in a European oil and gas giant. This French company operates globally and has its tentacles in so many aspects of energy, chemicals, refining, mining and in end-user products that require chemicals and fuels that the firm thinks it is becoming safer here. Total’s ADSs closed at $45.13 on Thursday and closed at $45.12 on Friday, against a 52-week range of $40.93 to $65.42.

Again, not all analysts are bullish on the oil and gas sector. Several cautious calls were made this week. BP PLC (NYSE: BP) took two downgrades at the end of the week. Petrobras, or Petróleo Brasileiro S.A. (NYSE: PBR), took multiple analyst downgrades after Brazil’s sovereign rating was cut to junk status. And for another view from the dark side, short sellers have massively raised their bets against many key major oil companies.

ALSO READ: 6 Alternative Energy Stocks to Outperform Into 2016

In case you missed the positive energy calls from analysts over Labor Day weekend, there were seven key energy analyst calls along that front: Energy Transfer Partners, Occidental, Shell, Schlumberger and more.