The turmoil in the oil market is likely to continue in 2024. If you think speculating on the price of oil is too risky, you could decide to buy individual energy stocks. Goldman Sachs analysts consider two candidates from the sector to be particularly promising.
• Oil prices are likely to continue to rise in 2024
• Expert forecasts for the oil market vary widely
• Goldman Sachs recommends investing in two undervalued US oil stocks
There is no consensus among analysts about the development of the oil price in the new year. Some experts expect supply shortages due to OPEC production cuts and the Middle East war, while others expect falling demand due to an impending recession.
Oil price analysts waver between pessimism…
For example, Max Layton, global head of commodities research at Citigroup, sees huge downside risks with a potential collapse in oil prices of up to 50 percent. Goldman Sachs analysts also recently lowered their oil price forecast for 2024.
… and optimism
The Bank of America raw materials experts assess the situation on the oil market completely differently. They expect huge upside potential if the situation in the Middle East worsens. “We recently outlined four scenarios for the oil market and expect prices to reach $150 per barrel or more if an expanding regional conflict leads to damage to energy infrastructure in the Middle East,” Kitco quoted from the corresponding Study.
Legendary investor Warren Buffett also seems to be bullish on the price of oil, as the “Oracle of Omaha” recently purchased a further 10.5 million shares in the US oil company Occidental Petroleum worth $588.7 million through his investment vehicle Berkshire Hathaway .
What Goldman Sachs analyst Neil Mehta recommends to investors
In the midst of this confusing situation, Goldman Sachs analyst Neil Mehta sees an opportunity. Mehta recognizes the nuanced differences in performance between different subsectors of the energy sector and identifies latent potential in two select underperforming stocks. Instead of broadly investing in the oil sector or even speculating on the price of oil, investors should take a closer look at the following two stocks, as can be seen from the analyst’s analysis quoted by “TipRanks”.
Schlumberger: Innovative company with upside potential
The first company where Mehta senses high price potential is probably not familiar to all European investors: Schlumberger. While exploration and production companies focus on discovering and producing oil, they often lack the expertise to carry out this work. Enter Schlumberger – a Curaçao-based, NYSE-listed company that provides specialized engineering, drilling, hydraulics and technical solutions essential to the completion and operation of wells.
Schlumberger recognized the development away from dependence on fossil fuels early on and is diversifying its business models. The company invests in digital technologies to develop tailored solutions for data analysis and performance improvement. The company is also venturing into the field of artificial intelligence to enable autonomous operations in oil fields.
Despite robust financial results in the third quarter of 2023 with increased profits and sales, Schlumberger missed analysts’ sales forecasts by about $10 million. Although the company generated strong cash flow, the stock remained stagnant throughout 2023.
Goldman analyst Neil Mehta is bullish on Schlumberger. He points to the company’s solid performance in offshore drilling and its efforts in digital technologies. Mehta believes the stock is undervalued because investors have not yet fully priced in promising factors such as robust offshore activity and expansion in digital business. Mehta gives the share a buy recommendation and thus shares the opinion of the vast majority of analysts who are bullish on the shares of the exploration and oil field services company. Mehta’s target price for Schlumberger shares is $65.
Chevron: Oil giant with growth ideas
The Goldman Sachs analyst’s second piece of advice is probably more familiar to investors in this country: Chevron. The US oil company is active in various sectors, including oil and gas production, the transport of hydrocarbon products and maritime shipping for crude oil and natural gas. Chevron also has a significant petroleum refinery and is a major producer and supplier of various petrochemical products, which it sells through a network of branded gas stations.
Recent developments have drawn attention to two important innovations in the company’s oil business. In 2023, a significant agreement was reached with Hess Corporation for a $60 billion deal, including a $53 billion all-stock acquisition and the assumption of approximately $7 billion in debt by Chevron. The Hess takeover is expected to be completed by the first half of 2024. Additionally, Chevron’s expansion efforts have taken center stage in Kazakhstan’s Tengis oil field, managed by Kazakhstan’s Tengizchevroil, a key operating unit with significant reserves of approximately 25.5 billion barrels of recoverable oil.
Although Chevron reported third-quarter 2023 revenue of $54.08 billion, down 18 percent year-over-year, it beat analyst expectations by $1.08 billion. However, earnings per share of $3.05 missed forecast by 64 cents, leading to heavy selling pressure on Chevron shares.
Goldman Sachs analyst Mehta now sees upside potential in Chevron shares. In his assessment, he primarily points to potential profits from the takeover of Hess and the expansion of the Tengiz oil field. His analysis highlights improving earnings performance, commitment to capital returns and a positive operating balance, which he believes will lead to the stock outperforming in 2024. Mehta’s Chevron price target is $180.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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