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Shares of Chevron (CVX) - Get Chevron Corporation Report climbed 1.4% to $117.44 Monday after a Barclays analyst initiated coverage of the oil and gas company with an overweight rating and a stock price target of $145.

Analyst Jeanine Wai said in a note to investors that the San Ramon, California-based Chevron "is well-positioned to both return significant free cash flow to shareholders and fund its 3-4% five-year growth CAGR guidance."

Wai also initiated coverage of Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report at equal weight with a price target of $73 a share.

"We like management's approach to its $4-5 billion run rate buyback as being a ratable return of cash through the commodity cycle," Wai wrote. "While CVX has outperformed XOM by 11% over the last year, the stock still trades at a discount on an after-tax cash-blow basis in 2020, which should invert over the next year as the market becomes comfortable with the sustainability of CVX's casg return program."

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Wai added that "while we think XOM's counter-cyclical investment approach will eventually pay off, it leaves a near-term FCF deficit after dividend at Brent prices less than $70."

Wai said the Permian Basin in the southwestern part of the U.S. is "the largest driver of medium-term production growth for XOM and CVX."

"Energy is currently one big 'Show-me Story' and the Permian is coming up on FCF inflection for both names as XOM targets its Permian as FCF positive in 2021 at $60 flat real Brent, while CVX targets 2020 at $55 West Texas Intermediate.

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