High-flying Devon Energy downgraded at BofA; Suncor leads list of oil favorites
Jan. 10, 2022 7:25 PM ET Devon Energy Corporation (DVN), SU, PXD EOG, OVV, COP, OXY, HES, XOM, APA, CTRA, MRO By: Carl Surran, SA News Editor 26 Comments
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Oil and gas stocks rose more than any other sector in 2021, and Devon Energy's (NYSE: DVN) 173% gain was the best on the S&P 500 for the year, but Bank of America analyst Doug Leggate thinks Devon and some other top names likely are ready to take a breather.
Leggate downgrades Devon and Pioneer Natural Resources (NYSE: PXD)to Neutral from Buy, with respective $57 and $234 price targets, while cutting Marathon Oil (NYSE: MRO) and Coterra Energy (NYSE: CTRA) to Underperform from Neutral with $19 and $23 PTs, respectively.
In addition to the ratings changes, Leggate lists Suncor Energy (NYSE: SU) among his top ideas in the sector, citing its sector-low $35/bbl breakeven price and its dividend coverage, "setting the stage for leading cash return growth off an already compelling yield proposition (~5.3% dividend yield)."
Leggate also likes APA Corp. (NASDAQ: APA), ConocoPhillips (NYSE: COP), EOG Resources (NYSE: EOG), Exxon Mobil (NYSE: XOM), Hess (NYSE: HES), Occidental Petroleum (NYSE: OXY) and Ovintiv (NYSE: OVV) as his other top oil and gas picks for 2022.
Overall, Leggate sees U.S. oil stocks with ~30% valuation upside, even as the market takes a more rational approach to the transition to clean energy, as the capex discipline of recent years has positioned the group to return an unprecedented amount of cash to investors.
BofA also initiated Chesapeake Energy with a Buy rating and $90 price target. |
