Every time oil gets up around the $60 a barrel level, President Trump talks it back down some with a tweet. While that can be disconcerting for energy investors, the reality is oil has had a big run off the mid-$40s lows back in the winter. The good news is most on Wall Street are modeling $50 to $55 levels for West Texas Intermediate (WTI) for this year, and many of the top companies can make solid money at those levels.
While the president did jaw down the price some on Thursday, WTI is still trading closer to $60 than $50, and with the busy summer driving season just about eight weeks away, and production from OPEC expected to stay lower, the sector makes sense for growth investors now.
We screened the Goldman Sachs energy coverage universe and found four stocks rated Buy that have big implied upside to the firm’s price targets.
This top stock is still down a stunning 30% from highs printed in October, and it is also a solid liquefied natural gas (LNG) play. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs). The other segments are Midstream and Marketing.
Anadarko has the capacity to sustain planned stock buybacks at current levels, providing support to close a value gap that many on Wall Street see at 50%. Strong free cash flow, enabled by advantaged Brent leverage, has competitive free cash compared with traditional large-cap “yield” names, but with competitive growth potential. The company has made a transition toward compelling value with growth and yield.
Anadarko Petroleum shareholders are paid a 2.66% dividend. The Goldman Sachs price target for the stock is $67.50. That compares with the Wall Street consensus price objective of $68.89. The shares closed trading on Thursday at $45.07.
Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street liked the deal as a good bolt-on acquisition. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties.
It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.
Concho Resources has reported strong earnings but still has a lot of upside to the posted price targets.
Goldman Sachs has a price target of $160, while the posted consensus target is $157.18. The stock closed most recently at $111.31 per share.