Value opportunity in big oil stocks?

The run up in crude oil prices that commenced in mid April has pushed West Texas Intermediate (WTI) crude prices from approximately US$ 87/bbl to approximately US$ 110/bbl, a gain of more than 26% in five months.

Over the same period, stocks of the major integrated oil and gas companies have moved in a ranfe from a decline of approximately 1% to a gain of approximately 16%.

The movement in Brent crude prices somewhat differs from that for WTI. In mid April the spot price for Brent was approximately US$ 97/bbl. It now stands at approximately US$ 113/bbl, a rise of approximately 16%. This change is much more in line with the performance of the big oil companies.

ConocoPhillips and France’s Total S.A. have been the biggest gainers, both around 16%. Chevron Corp. is up approximately 3.5%, BP Plc is up approximately 1.5% and ExxonMobil Corp is down 1%.

ConocoPhillips was able to increase second quarter production by 4% year over year, so even though realised price per barrel was flat with the year ago price, revenues and profits were up. At ExxonMobil production was down nearly 2%. At Chevron and BP, reported production was down approximately 1.5%. And at Total, liquids production was down 5% but natural gas production pushed barrels of oil equivalent to a gain of 1%.

24/7 Wall Street studied five of the world’s largest oil and gas companies in an effort to spot a value play among the group:

• ExxonMobil closed at US$ 87.98 on Thursday and has a market value of approximately US$ 387 billion. The consensus target price from Thomson Reuters is approximately US$ 95.20, and the 52 week range is US$ 84.70 to US$ 95.49. Exxon has a dividend yield of 2.9%. The implied upside to the consensus target is 8.2%, and it was noted that the target price is slightly below the 52 week high.
• Chevron Corp. closed at US$ 123.89 on Thursday and has a market value of approximately US$ 239 million. The consensus target price is approximately US$ 132.50, and the 52 week range is US$ 100.76 to US$ 127.83. Chevron has a dividend yield of 3.3%. The implied upside to the consensus target is 6.9%, and the target price is above the 52 week high.
• BP Plc closed Thursday at US$ 42.10 and has a market value of approximately US$ 239 billion. The consensus target price is approximately US$ 132.50, and the 52 week range is US$ 39.58 to US$ 45.45. BP has a dividend yield of 5.2%. The implied upside to the consensus target is 15.7%, and again the target price is above the 52 week high.
• ConocoPhillips closed at US$ 68.78 on Thursday and has a market value of approximately US$ 84 billion. The consensus price target is approximately US$ 69.00, and the 52 week range is US$ 53.95 to US$ 69.38. Conoco pays a dividend yield of 4.0%. The stock is essentially fully valued at last night’s closing price.
• Total S.A. closed at US$ 56.70 last night and has a market value of approximately US$ 129 billion. The consensus price target on the shares is US$ 58.20, and the 52 week range is US$ 45.93 to US$ 57.07. Total pays a dividend yield of 4.8%. The implied upside of the stock is approximately 2.6%.

Conoco and Total are at and very close to fully valued, respectively. Of 23 analysts’ recommendations cited at MarketWatch, 11 rate Conoco at Buy or Overweight. Out of 29 ratings, 20 list total either as Buy or Overweight.

Of 33 analysts’ recommendations, 20 rate the stock as Hold. An even higher proportion, 17 out of 24 analysts, rate Exxon as Hold, while 13 of 23 analysts rate Chevron as either Buy or Overweight.

Adapted from a press release by Emma McAleavey.

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