Skip to main content

Jensen: Talos and Occidental More Attractive

Oil plunge sparked by omicron scare has made two energy stocks more affordable.

Two energy stocks, Talos Energy  (TALO) - Get Talos Energy, Inc. Report and Occidental Petroleum  (OXY) - Get Occidental Petroleum Corporation Report, could benefit from the impact of the latest variant of the coronavirus, omicron, Real Money’s Bret Jensen argues.

The energy sector tanked by 13% on this news as there are concerns that the variant, omicron, could have several mutations and spread quickly and that the current vaccines and booster shots could be less effective against it. The new variant could impact future economic activity and growth as travel has been banned in several countries globally in an effort to prevent the spread of the variant.

The steep decline in oil prices also impacted energy stocks, lowering their prices, Jensen noted in a recent Real Money Pro column. “The crash in oil prices did provide much lower entry points across almost all stocks in the energy sector Friday,” Jensen wrote.

Jensen is a fan of adding Talos Energy TALO and Occidental Petroleum OXY to a portfolio. Shares of Talos Energy had already endured a rough six months before the big decline in crude oil prices from Hurricane Ida shutting down production in the Gulf of Mexico, resulting in a loss of 15% of projected production in the third quarter. But the company has value and could see growth once oil prices rebound.

TheStreet Recommends

“Even assigning no value to the Zama field, the company's other producing assets assuming oil prices at just $75 a barrel are worth more than twice Talos' current enterprise value,” he wrote.

Insiders of Talos Energy have bought over $1 million Talos shares in the past month.

Investors should also take a look at Occidental Petroleum, which has been down by 20% from its recent highs. The oil company continues to show promise, Jensen argues.

“The company continues to clean up its balance sheet after its ill-timed Anadarko Petroleum deal two years ago,” he wrote. “Debt has gone from about $45 billion to $30 billion as Occidental Petroleum sold off some non-core holdings. The company is targeting another $5 billion in debt reduction in the near term as it pays down liabilities from its substantial free cash flow.”

As long as Brent crude oil prices remain above $60 a barrel, Occidental Petroleum “looks like a good bet,” Jensen wrote.

Get more trading strategies and investing insights from the contributors on Real Money.