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Piper Sandler Initiates on Integrated Oils, Names Chevron as Top Pick
Summary
Investment bank Piper Sandler has initiated coverage on the global integrated oil sector with a neutral outlook, highlighting Chevron as its sole 'Overweight' pick due to its re-rating potential.
Piper Sandler initiated coverage on the Global Integrated Oils sector with a broadly neutral stance, naming Chevron Corporation (CVX) as its top pick with an Overweight rating. The firm assigned Neutral ratings to peers including ExxonMobil (XOM), BP (BP), Shell (SHEL), and TotalEnergies (TTE), citing limited upside to its price targets for most of the group.
Chevron Stands Out
Piper Sandler's sole Overweight rating for Chevron is based on the potential for a significant valuation re-rate. The investment bank noted that two major overhangs on the stock have recently been resolved: the conclusion of the Hess dispute in Chevron's favor and the completion of its Tengiz FGP expansion mega-project.
With an attractive cash flow profile expected in the coming years, analysts at the firm believe Chevron's valuation discount to rival ExxonMobil should narrow. They project Chevron will revert to its historical average discount of approximately 0.5x enterprise value to EBITDA, a significant improvement from its current discount of closer to 1x.
AdCautious Outlook on Crude, Favorable View on Refining
Piper Sandler's sector-wide view is underpinned by a forecast for Brent crude to average approximately $80 per barrel through next year, assuming adequate supply absent any major war-related disruptions.
The firm expressed a more favorable outlook for downstream operations compared to upstream activities. Analysts see the strength in refining crack spreads persisting well into next year, driven by a severe tightening in the supply of refined products, particularly middle distillates. Reflecting this bullish downstream view, Piper Sandler's EBITDA projections for the sector in 2026 and 2027 are approximately 15% and 16% above Wall Street consensus, respectively.
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