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Investing.com -- In the competitive landscape of oil and gas, Wolfe Research has identified several standout performers worth investor attention.
Their analysis highlights companies positioned for growth despite market fluctuations, with particular focus on free cash flow potential and strategic asset management. Let’s examine the top contenders in this vital energy sector.
Exxon Mobil maintains its position as Wolfe Research’s top major idea in the oil and gas sector. The company is poised for a significant inflection in free cash flow starting in the third quarter of 2025.
This anticipated financial milestone reinforces XOM’s standing as a premier choice among major energy corporations, offering investors potential stability with growth prospects.
ExxonMobil’s preliminary third-quarter results indicated earnings per share of approximately $1.81, and the company is also reportedly planning to reduce its global workforce by about 2,000 jobs as part of a restructuring plan.
2. BP (NYSE:BP)
Moving up what Wolfe Research describes as the "controversy curve," BP has gained attention for its strategic approach to asset sales. Analysts are particularly focused on updates regarding these divestments, which are deemed necessary to accelerate and rehabilitate the company’s capital structure.
These moves could prove pivotal for BP’s financial positioning in the competitive energy landscape.
BP recently won an arbitration case against Venture Global over LNG deliveries and has also agreed to sell its stake in the Culzean gas field in the UK North Sea to Serica Energy.
3. APA, DK & DVN
Within the U.S. exploration and production (E&P) and refiner categories, Wolfe Research identifies Apache Corporation (NASDAQ:APA), Delek US Holdings (NYSE:DK), and Devon Energy (NYSE:DVN) as companies with potential for incremental data points that could support relative outperformance through earnings season.
These companies represent opportunities in different segments of the domestic energy market.
APA Corporation reported a net gain of $177 million on oil and gas transactions for the third quarter, while UBS raised its price target on the company, citing progress on cost reductions.
Delek US Holdings reported second-quarter revenue of $2.76 billion, which exceeded expectations, and has also received ratings upgrades from several firms, including Morgan Stanley and Wolfe Research, following a favorable EPA decision on refinery exemptions.
In its second-quarter results, Devon Energy reported revenue of $4.28 billion, which surpassed expectations, while also announcing the appointment of Brent J. Smolik to its board of directors.
4. EQT & EXE
For investors interested in natural gas exposure, Wolfe Research sees greater alignment with gas E&Ps where directional strength in seasonal gas prices favors deleveraging capacity.
EQT Corporation (NYSE:EQT) and Exelon (NASDAQ:EXE) lead this category. The analysis suggests these companies are well-positioned to benefit from natural gas price movements while potentially strengthening their balance sheets.
A recent development for EQT Corporation includes a price target increase from UBS, which cited the company’s project backlog and long-term growth profile.
Exelon Corporation’s second-quarter results showed adjusted operating earnings of $0.39 per share on revenue of $5.43 billion, while Evercore ISI initiated coverage on the company with an Outperform rating.
Wolfe Research further notes that their oil-levered investment ideas focus on companies where they see rate of change that can support market recognition of value.
Their analysis acknowledges limited risk of near-term oil weakness in their discounted cash flow framework, while considering the consequences that could eventually lead to longer-term recovery as markets rebalance.
As energy markets continue navigating complex global dynamics, these selections represent Wolfe Research’s assessment of companies with strategic advantages in their respective niches within the oil and gas sector.
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