Deutsche Bank raised its ratings for
Monday, saying that both stocks will benefit if crude oil prices recover from recent lows.
Deutsche Bank raised Exxon to buy from hold and raised ConocoPhillips to hold from sell. Its price target for Exxon Mobil is $80 per share, while its price target for ConocoPhillips is $40 per share.
Deutsche Bank's energy analysts are predicting that crude oil prices will stabilize in the first half of 2009. They also say that shares of Exxon Mobil and ConocoPhillips are highly correlated with crude oil prices. Thus, they both stand to benefit if crude prices move higher.
The bank said that Exxon Mobil's break-even oil price is the lowest in the integrated energy peer-group. Furthermore, Exxon is expected to yield a return on cash deployed of 10%, which is nearly double the industry average. It is also the only integrated energy company that is expected to continue buying back its own stock in 2009.
Regarding the change to Exxon Mobil's rating, Deutsche Bank said in a client note that "this is less a trading call than an effort to reflect preference for companies with quality assets and quality management through the cycle."
Regarding ConocoPhillips, the bank said in a client note that the company's debt relative to its total capitalization is high, as is its cash breakeven point. However, Deutsche Bank changed its rating for ConocoPhillips to reflect that the company's share price is in line with its near-term price target of $40 per share.
The performance of the individual players in the integrated energy space on Monday has so far been mixed. Exxon Mobil was recently climbing 0.5% at $71.57 per share; ConocoPhillips was sliding nearly 0.5% at $39.24 per share;
was losing 1.4% at $39.53;
was unchanged at $65.07, and
Royal Dutch Shell
was falling 1.8% at $46.69.
The near-month West Texas Intermediate crude oil contract at the New York Mercantile Exchange was gaining 7 cents at $40.10 per barrel, while Brent crude was rising $0.34 at $42.23.