Goldman Sachs Makes a Surprising Energy Addition to Its Conviction List

EOG Resources

This leading energy company is another top energy pick across Wall Street. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.

The company posted an earnings miss last week on fixed price oil contracts that did not fully participate in the rebound in oil prices at the end of the quarter. Forecast earnings estimates for the year ending December 31, 2020, recently have been increased. The current consensus is for $0.58 per share, up from the previous consensus of $0.52 per share, and is derived from 30 publicly distributed estimates.

Holders of EOG Resources stock receive a 3.16% dividend. The $70 price target at Goldman Sachs is higher than the $64.53 consensus target. Shares closed at $47.14 on Thursday.

Marathon Petroleum

This is another solid way for more conservative accounts to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.

Until just recently, the company operated approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.

Earlier in August, the company announced it would sell Speedway to 7-11 in an all-cash deal valued at $21 billion, or $16.5 billion after-tax. The sale transforms the company’s balance sheet and creates options to revisit the corporate structure of MPLX. Many across Wall Street feel that with Speedway removed, the dislocation in refining value becomes even more transparent as the company trades much cheaper than its industry peers do.

The dividend yield is a robust 6.23%. Goldman Sachs has set its price target at $44. The consensus target is higher at $48.71, but Marathon Petroleum stock closed at $37.26 a share.

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Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.

Pioneer is a huge player in the Permian Basin and in the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With updated 2020 and 2021 hedging adding $1.2 billion to cash flow estimates over next two years, a new $900 million credit facility further enhances liquidity. In addition, the Gulf coast marketing makes Pioneer less exposed to widening Midland differentials.

Pioneer Natural Resources stock investors are paid a 1.99% dividend. The Goldman Sachs price target is $127. The consensus price figure is $122.16, and the most recent close was at $109.94 per share.

While oil has had a sparkling run off the lows back in the spring, West Texas Intermediate is just barely over the $40 level, and any sustained reopening of the economy and a return to any sense of normality easily could spike the price as much as 50% or more.