Oil prices usually spike when there is unrest in the Middle East and Russia invades Ukraine. Nevertheless, oil prices have unexpectedly fallen 11% thus far this year, amid substantial volatility.
Roger Read, a highly regarded analyst at Wells Fargo, predicts that commodity prices in the oil and gas markets will not rise sharply in the near future. “We are constructive on global oil prices and expect the market to remain range-bound into 2024, reflecting our expectation of a balanced market,” said Read.
Read has an optimistic view of the energy industry and has upgraded two oil and gas equities to buy ratings, indicating that he thinks they have significant upside potential. Examining Read’s optimistic thesis and these energy equities is vital.
Coterra Energy Set For Breakout Production Growth
Oil and gas exploration and production (E&P) firm Coterra Energy (CTRA) is up first. Its primary holdings are located in Pennsylvania, Oklahoma, and Texas. Read thinks Coterra is prepared for a turnaround in operations and breakthrough increase in production after disappointing performance.
“We are upgrading CTRA to Overweight from Equal Weight on relative valuation and strong momentum on oil production growth,” wrote Read.
The company’s turnaround over the past year has been expertly engineered by management. For the past two quarters in a row, the corporation has raised its output guidance, indicating that it is exceeding its production outlook for FY’23.
Coterra’s third-quarter output of 670,000 BOE/d significantly above guidance. When Coterra announces its Q4 earnings, another forecast hike may be on the horizon due to the company’s ongoing efficiency gains and strong outperformance.
Read is quite bullish on CTRA shares and has set a price objective of $30, which is 19% above where the stock is trading now.
Antero Resources Accelerating Performance And Efficiency
Read also raised Antero Resources’ (AR) Overweight (Buy) rating for its pure-play natural gas production. He anticipates that Antero will show signs of operational vigor and greatly enhance capital efficiency.
We see a rising trend in the operational performance and capital efficiency of AR. In light of the company’s good well performance and better operations, Read remarked that the production guidance for FY’23 has been increased for two consecutive quarters.
At 3.5 BCf/d, Antero’s net production increased 9% year-over-year in Q3. The full-year projection was raised twice by Antero due to robust well productivity. In addition, early 2024 predictions indicate that D&C spending will fall by 10% while production remains same.
With Read’s $26 price objective, Antero has a potential 18% gain for the coming year. His argument for COMPRESS compression is based on Antero’s promising 2025 free cash flow generation and appealing value, which should lead to further gains in 2024.
Energy Stocks Outlook Remains Constructive
To sum up, Roger Read of Wells Fargo has a positive outlook on the gas and oil markets for the long run. Commodity prices would remain range-bound until 2024, despite a decline in 2022, according to his analysis.
Some energy stocks, including Coterra Energy and Antero Resources, which have been showing signs of rapid operational improvement, might benefit from this prediction.
Read offers a positive prediction to develop positions before the next leg of growth by upgrading both equities to buy ratings.