3 E&P Stocks Just Upgraded At Jefferies

In a report published Tuesday, Jefferies analyst Jonathan D. Wolff upgraded the ratings on Anadarko Petroleum Corporation APC, Noble Energy, Inc. NBL and EOG Resources Inc EOG, citing “more realistic embedded oil price and growth.”

The natural gas forecast for 2015 and 2016 have been reduced from $3.50 per MMBtu to $3.00 per MMBtu and from $4.25 per MMBtu to $4.00 per MMBtu, respectively, which “remains well-ahead of futures (~$3.00) and reflects a view of slowing growth in the Northeast US (pipeline constraints) and rising power demand,” analyst Jonathan Wolff wrote.

In the report Jefferies noted, “We remain bullish on long-term NYMEX gas prices from 2016+ due to increasing demand for gas for power generation in the southeast (SERC) and mid-atlantic (PJM) due to a sharp shift away from fast fading coal supplies, alongside better industrial (chemicals) and LNG export demand.”

• Wolff upgraded Anadarko Petroleum from Hold to Buy, while raising the price target from $85 to $88. The analyst cited increased confidence in “a deep, future Delaware Basin (Wolfcamp) development, the potential for opportunistic monetizations (i.e., Mozambique, WGP shares) and a now more attractive valuation.”
• Jefferies upgraded the rating on Noble Energy from Underperform to Hold, while reducing the price target to $40. The recent pressure on the company’s shares has left the stock “better reflecting the reinvestment risk we see in both the replacement of domestic US reserves production and the potential for unfavorable contract changes/longer lead times in NBL’s Israel gas projects,” Wolff explained.
• Wolff upgraded the rating on EOG Resources from Underperform to Hold, while maintaining the price target at $80. Jefferies stated in the report that there was risk to the Street’s oil growth expectations for EOG for 2016. However, the shares now better reflect “a slower ramp.”