Energy investors will have a tough time navigating the market in 2024 with oil expected to remain volatile on geopolitical risks in Ukraine and the Middle East as well as OPEC policy, according to Bank of America. Analyst Doug Leggate is recommending defensive stocks with big oil poised to demonstrate some of the greatest value this year, as the major players see tailwinds from big acquisitions. Leggate has selected Occidental , Chevron and Exxon Mobil as his top picks. All three companies entered into major deals in 2023 that could accelerate cash flow expansion and dividend growth, Leggate wrote. Chevron is purchasing Hess for $53 billion , Exxon is buying Pioneer Natural Resources for $60 billion , and Occidental is acquiring CrownRock for $12 billion. Bank of America is broadly cutting stock price targets in the oil and gas sector on a declining oil curve. But the bank’s top picks “represent some of the greatest absolute upside we see for the broader sector in 2024, while avoiding exposure through outsize commodity volatility,” he wrote. OXY 1Y mountain Occidental shares over the past 12 months Leggate’s top pick overall is Occidental, arguing the CrownRock deal will reset the company’s ability to shift value from debt back to equity. He has set Occidental’s price target at $80, implying 35% upside. Chevron’s acquisition of Hess addresses questions over cash flow and dividend capacity, positioning the company for the “biggest rate of change in its portfolio depth” among the oil majors, Leggate said. The analyst has a price target of $180 for Chevron, suggesting the company’s stock could rise 19% from here. Exxon’s target is $140, suggesting nearly 37% upside, while Chevron has 19% upside with a target of $180. “Having navigated the collapse in oil prices with its dividend intact, XOM continues to lead the sector with a long list of organic growth opportunities but with the pending acquisition of Pioneer Natural Resources accelerating an inflection in c/flow that is expected to more than double vs pre-COVID levels by 2027,” Leggate said. XOM 1Y mountain Exxon Mobil shares over the past 12 months
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