Oil prices have rebounded just as dramatically as stocks have in the last year, with crude bottoming out at around $40 a barrel in early 2009. But a look at demand numbers shows that energy consumption isn’t really racing up the charts in kind. So what is the outlook for global oil giants Exxon Mobil (XOM), BP (BP), Chevron (CVX), PetroChina (PTR), Royal Dutch Shell (RDS), and Petrobras (PBR) in this muddled market?
The driving force behind the price swings in oil recently appear to be news that China’s exports grew a staggering 46% year-over-year in February. Chinese officials have set a GDP growth target for 2010 of 8.7%, a target they are almost certain to exceed and many experts are predicting that will result in raging demand for oil. The prospects of a broader global recovery also would naturally give crude a boost. But with consumer spending still in question, nothing is for certain.
Exxon Mobil (XOM), the largest stock by market cap on all of Wall Street, has been improving its earnings in recent quarters — but still missing forecasts. The company snatched up natural gas giant XTO Energy (XTO) in December in a $31 billion all-stock transaction as a move to diversify beyond just crude, but fluctuations in oil price still have a big sway over XOM. The company saw-full year earnings cut in half, and only spent a modest 4% more on exploration in 2009 than the previous year. This was enough to warrant an upgrade at Collins Stewart to “Buy” from “Hold,” and other analysts are cautiously optimistic as well. The average price target is around $80 for XOM shares, a 15% premium above current pricing of $69.
Chevron Corp. (CVX) missed forecasts by about 10% in its latest earnings report in January due to a 39% drop in profits. In order to improve looking forward, this oil stock said Tuesday it will cut 2,000 jobs this year and sell some overseas operations as it revamps its struggling refinery, marketing and transportation operations. The job cuts represent about 3% percent of its overall work force. Chevron was upgraded from “hold” to “buy” at Citigroup in January, but most analysts are cautious about shares. The mean price target for CVX is about 20% above current levels of $75, but one outlier on the downside puts a target of a mere $48 a share on this top oil stock.
BP (BP), one of the world’s largest oil companies, also missed earnings forecasts drastically in its latest quarterly report. The integrated oil and natural gas company reported fourth-quarter earnings per share of $1.10, well below the consensus estimate of $1.51. Still, the global energy giant also said it sees a “slow and gradual” recovery from the recession. Citi upgraded BP in January, but the mean target for BP shares is only a few dollars above current levels of $56.
PetroChina (PTR) is a publicly traded subsidiary of state-run China National Petrolum Corp. It has proved reserves of over 10 billion barrels of crude oil and 60 billion cubic feet of natural gas in the People’s Republic. PTR also appears to be diversifying beyond crude — in conjunction with Royal Dutch Shell (RDS), PetroChina has thrown its hat into the ring to purchase Arrow Energy, a gas provider based in eastern Australia and Asia. Like oil stocks Exxon and Chevron, there are a wide range of analyst forecasts for PTR shares, but the average target for PetroChina is about $140 a share. That’s well above the company’s current level of $120.
Petroleo Brasileiro (PBR), the Brazil oil stock better known as Petrobras, is probably the highest-flying pick of the group. The company has seen a flood of upgrades in the last few months — an upgrade from “neutral” to “overweight” at HSBC Securities, an upgrade from “hold” to “buy” at Standpoint Research, and an upgrade from “hold” to “buy” at Citigroup. The company set a 52-week high of more than $53 a share back in December before bottoming out at under $40 as the market got choppy in February. Shares have been climbing back ever since and appear to be showing strength.
