In a 40 page review today, Citigroup’s energy analyst Faisel Khan writes that the bank has raised its “long term” price target for oil to $80 per barrel, up from a prior estimates of $65, and upgraded shares of Chevron (CVX) to “Buy” from “Hold,” calling it his top pick among integrated E&P firms. Chevron has the greatest exposure to fluctuations in the changing price of oil, writes Khan.
Khan and his team believe oil majors must have $80 per barrel oil to be profitable, citing data from energy industry research firm IHS Herald.
Khan raised his price target on Chevron to $97 from $78, writing that the company’s approaching $10 per share in “earnings power” as the price of oil trends around $80. For this year, he’s modeling $8.74 per share, which is above the $7.78 consensus.
Chevron shares are up $1.33, or 1.7%, at $80.80.
Khan reiterated his “Buy” ratings on ExxonMobil (XOM) and Marathon Oil (MRO), writing that Marathon has the most catalysts this year because it has six exploration wells to drill. Exxon may lag pending its acquisition of XTO Energy (XTO), writes Khan. He rates Hess (HES) and Occidental Petroleum (OXY) “Hold.”
In separate research, Khan’s colleagues at Citi who follow global oil markets raised BP PLC (BP) to “Buy,” as well as Petrobras (PBR).
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