Oil Gains With US Interest Rates and XOM, COP, or SLB: Which Oil Stock has More Upside Potential

Dec 4, 2023 | Stock Analysis

The energy sector has been a focal point of investor interest as oil prices and industry dynamics continue to evolve in response to global economic conditions and geopolitical tensions. With the U.S. Federal Reserve’s interest rate decisions influencing market liquidity and investment appetite, oil stocks have been under the spotlight for their dividend yields and growth potential. Among the prominent names, Exxon Mobil (XOM), ConocoPhillips (COP), and Schlumberger (SLB) are frequently analyzed for their investment viability. This report aims to dissect the potential of these stocks, focusing on which could be considered a “Strong Buy” with more upside potential.


Exxon Mobil Corporation (NYSE: XOM)

Exxon Mobil, a stalwart in the oil and gas industry, reported earnings of $2.27 per share for the quarter ending October 27, which fell short of analysts’ consensus estimates by $0.09. Despite this, the company’s substantial revenue of $90.76 billion, though below expectations, showcases its massive scale and operational capabilities. The company’s ability to sustain or increase its dividend is a testament to its financial resilience and commitment to shareholder returns. Growth drivers in the Permian Basin and Guyana are cited as reasons for bullish sentiment on the stock, suggesting that Exxon Mobil’s strategic investments could bolster its long-term performance.

ConocoPhillips (NYSE: COP)

ConocoPhillips has been recognized by analysts for its promising upside potential, with a predicted 18.81% increase based on 12-month stock forecasts. The consensus rating of “Moderate Buy” based on 21 analyst ratings, with a consensus price target of $135.63, indicates a favorable outlook for the stock. In the last 90 days, the stock has had one upgrade by analysts, further reinforcing investor confidence in the company’s prospects.

Schlumberger Limited (NYSE: SLB)

While specific data on Schlumberger’s stock performance and analyst ratings is not provided in the information given, Schlumberger is a leading provider of technology and services to the energy industry. As such, its fortunes are closely tied to the overall health of the oil and gas sector. Schlumberger’s diverse portfolio and global footprint could position it well to capitalize on an increase in oil prices and industry activity.

Industry Outlook

Goldman Sachs has expressed a bullish stance on oil prices, predicting a range of $70-$100 per barrel in 2024 due to potential supply disruptions. The Energy Information Administration (EIA) forecasts higher crude oil prices in the second half of 2023 and into 2024, with rising demand surpassing supply and leading to an average inventory drawdown. The EIA expects Brent crude oil prices to increase to the mid-$80 per barrel range by the end of 2024.

Comparative Analysis

When comparing XOM, COP, and potentially SLB, a few key factors must be considered: financial performance, growth prospects, industry conditions, and analyst ratings. Exxon Mobil’s slight earnings miss may raise concerns, but its vast revenue and ability to maintain dividends are strong indicators of its financial health. ConocoPhillips seems to have a more explicit upside potential as per analyst predictions, which could make it an attractive option for investors seeking growth.

Given the positive industry outlook and the potential for oil prices to rise significantly, companies with strategic growth drivers and a strong operational foundation are likely to benefit. Both Exxon Mobil and ConocoPhillips have clear growth strategies, with Exxon Mobil focusing on the Permian Basin and Guyana, while ConocoPhillips has received analyst upgrades.

Conclusion

Based on the provided information and considering the anticipated increase in oil prices, both Exxon Mobil and ConocoPhillips present compelling investment opportunities. However, the higher predicted upside and the recent analyst upgrade make ConocoPhillips stand out as the stock with more upside potential. Investors should closely monitor industry trends, oil price movements, and company-specific developments to make informed decisions.

While Schlumberger’s potential cannot be fully assessed without additional data, the company’s role as a service provider to the industry could also position it to benefit from the forecasted rise in oil prices. Investors should seek further information on Schlumberger to complete their comparative analysis.

In summary, ConocoPhillips (COP) appears to have a more pronounced upside potential, making it a “Strong Buy” candidate among the oil stocks discussed.

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