One would think that President Biden’s initiatives on climate change would have been the worst possible scenario for the energy sector in 2021 and beyond. He stopped construction on the XL pipeline, rejoined the Paris Climate Agreement via executive order and paused drilling on federal lands, putting a shudder through energy investors. The reality, according to many on Wall Street, is that politics often takes a backseat to supply and demand dynamics, and nothing proved that more than the rise in energy prices as wind farms were shut down from the brutal cold that swept Texas and other parts of the country.
Another factor could be huge for the top companies in the sector as West Texas Intermediate crude surges to near $65 a barrel, which is the highest level in over a year. With the ongoing reopening of the economy, people are now traveling for business and pleasure, and the airlines are reporting much higher passenger numbers recently. Moreover, we are not that far away from the busy summer driving season.
In a new report, Raymond James is very positive on three top integrated energy giants, as well as three other energy companies that make good sense now for investors looking to add positions in the sector. The report noted this:
The “re-open vs. lockdown” trade has dominated much of trading for the past 9+ months. With the first vaccinations already underway, optimism in commodity markets, and a concurrent shift toward cyclicals/value in the market positioning bets are clearly back to the re-open bucket. We agree that a recovery looks to be solid especially in the second half of 2021 and in 2022, but prefer to gain exposure on the lower-end of the risk curve in the integrateds in the near-term.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This company has had a very rough 10 years, but Raymond James is coming around on the shares. BP PLC (NYSE: BP) is one of the world’s leading integrated energy companies, with operations in over 100 countries worldwide. Its operations are focused on a wide range of activities, including exploration and production of oil and gas, refining and marketing, chemicals, gas and power, and renewable energy.
The company is evolving into a far greater entity that many on Wall Street remember, and Raymond James sees a solid path forward. The report noted this:
While much has been said about BP’s push into low/no-carbon investments, we model total spending in 2021/2022 remaining near 2020 levels as management focuses on returns and improving the balance sheet (e.g., hitting the sub-$35 billion net debt target). Specifically, we see total capital spending of $14 billion in 2021, edging to $15 billion for 2022. Our model shows room for share repurchase to reenter the conversation in 2022, but conservatively do not forecast any buybacks.
Raymond James has an Outperform rating and a $30 price target on the shares. The Wall Street consensus target is $29.07, and BP stock closed on Wednesday at $26.47 a share.