Oil stocks have come to life this week after the price of WTI crude hit a three-year high near $67 on fears of geopolitical unrest among the three largest oil producers in the world. With the price of oil seemingly stabilizing in the mid-$60 range for now, Bank of America has added Exxon Mobil Corporation (NYSE: XOM ) to its US1 list of top American stock picks.

Headlines in the oil market this week have been dominated by reports of an attack on Saudi Arabia by rebels in Yemen. On Wednesday, two more major oil producers joined the fray when U.S. President Donald Trump tweeted that Russia should "get ready" for a missile strike on Russian ally Syria.

[See: 7 of the Best Energy Stocks to Buy for 2018 .]

The unrest has the price of Brent crude trading in the low $70s, but Bank of America analyst Doug Leggate says Exxon stock is still trading near where it was when Brent bottomed at $28 per barrel.

Leggate says investors seem to be ignoring Exxon's goal of doubling cash flow within the next several years and focusing on what he says are "transitory" issues.

"We believe three issues are likely responsible: the hangover from a 4Q17 earnings miss coinciding with wider market weakness, the arrogance of a capex increase through 2025 in contrast to the majority of peers and perceptions that capital efficiency has deteriorated at the expense of share buy backs," Leggate says.

He predicts that Exxon will be able to achieve its longer-term goals given a series of opportunistic property acquisitions and the capital efficiency of the company's base business.

Leggate says investors seem to be punishing Exxon for its spending.

"Our analysis suggests perceptions that higher spending delays a return of share buybacks is wrong given capital efficiency of short cycle developments in the Permian [basin] and rapid cost recovery in Guyana that we believe remains substantially misunderstood," he says.

[See: Oil ETFs: 8 Ways to Invest in Black Gold .]

Leggate says Exxon covers its spending and dividends via free cash flow at an oil price of $60 per barrel. He also says Exxon has the capacity to restart share buybacks in 2018 if oil prices remain stable.

Analysts disagree on just how much upside investors can expect from oil prices over time, and this week's rising geopolitical tensions have clouded the picture even further.

Bank of America has a Buy rating and $100 price target for XOM stock .

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Raymond Mitchell, Author

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