BofA Equity Research: Sweet 16 price targets - Sept 30

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

BofA Equity Research: Sweet 16 price targets - Sept 30

Post by dan_s »

Updated price targets from BofA

CLR = $20
CXO = $65
DVN = $18
EOG = $64
PXD = $130
XEC = $38 < up $5 from their previous report.

The valuations above are based on a conservative estimate that WTI won't go over $50/bbl until 2022.

"Our house view is that oil prices cannot remain at current levels, with prospects for a
medium term rebalance of supply and demand that lifts oil prices towards our base case
that has WTI and Brent at $50 and $55 from 2022
. At those levels we believe free cash
yields are significant and support valuations with significant upside vs current levels,
including the resumption that some level of reinvestment for growth. This is obviously
subjective and accordingly we do not expect the market to discount an upside case until
the current inventory overhang shows signs of relief; but we should expect the market to
discount what it knows – the value of sustainable free cash flow at current oil prices.

The broader sector outlook remains a call on oil prices. Top ideas have greatest upside
to our base case and limited downside at strip, as defined by management guidance on
sustaining cash flow; but for stocks that are no more than a subjective call on oil, we
continue to view the appropriate rating as Neutral as it may be too early to make a call
based solely on ‘beta’. Still, at our base case we see significant value for many of the US
oils that screen as undervalued on a transparent valuation framework and can inform
relative positioning through a volatile & extended bottoming period for the commodity.

For Buy-rated names, stock selection is anchored on three screens – dislocations in
value defined as below strip prices on an ex growth basis, line of sight on catalysts that
can close gaps and the caveat that to select higher beta needs confidence in balance
sheet resilience that amplifies equity leverage but is conditioned on no liquidity issues
that can support a move up the risk curve."


It is a very long report with details on lots of individual companies. If you'd like to read it, send me an email: dmsteffens@comcast.net
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: BofA Equity Research: Sweet 16 price targets - Sept 30

Post by dan_s »

BofA really like the DVN + WPX merger

DVN / WPX: merger of equals announced; solid combination
28 September 2020
"Press commentary of a possible tie up between Devon & WPX was confirmed this morning, with a merger of equals announced between DVN/WPX which is subject to the normal regulatory approvals . In an all-stock deal Devon will pay a premium of just 2.6% based on Friday’s close (0.5165 DVN shares per WPX share). The deal premium in our view shares similarities with CVX/NBL, where the intention is to realize value in the equity of the combined company. As one of the key considerations, WPX CEO Rich Muncrief will lead the combined company. The conclusion of the deal is an outcome that translates DVN’s strategy to a larger footprint and essentially takes the combined value of two companies from Friday’s close and adds the value of lower costs. We like it on what is already an undervalued DVN equity. Reiterate Buy; $18 Price Target risked on completion of this deal expected in early 2021."
Dan Steffens
Energy Prospectus Group
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