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Barclays Calls Chevron's Quarter A 'Relief' After Disappointing Results From Exxon

Barclays Calls Chevron's Quarter A 'Relief' After Disappointing Results From Exxon - ConocoPhillips NYSE:, Chevron Corporation NYSE:

Despite an underwhelming quarter, Barclays analyst Paul Cheng believes Chevron Corporation CVX 3.11% did well enough to demonstrate relative strength compared to peers Exxon Mobil Corporation XOM 3.37% and Royal Dutch Shell plc (ADR) (NYSE: RDS-A) (NYSE: RDS-B). According to Cheng, Chevron’s share price might find some support from investors rotating out of Shell and Exxon and into Chevron.

“As a result of their backlog of major projects start-up over the next 2-3 years, CVX should deliver one of the strongest production growth rates through 2018/2019 among the mega majors while generating substantially positive free cash flow,” Cheng explained.

Despite the positive long-term outlook, Barclays remains cautious on Chevron in the near term. Cheng estimates that the company will need $60–65/bbl Brent crude oil prices in 2017 to be cash flow neutral.

Barclays projects that Chevron will burn through an average of $13.5 billion in fee cash annually between 2013 and 2016 before returning to an average positive annual free cash flow of about $7.5 billion from 2017 to 2020.

For now, the firm maintains its Equal-Weight rating on the stock, and Cheng sees a more favorable risk/reward balance for investors at ConocoPhillips COP 3.32%.

So far this year, Chevron shares are up 12.1 percent.

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Disclosure: The author holds no position in the stocks mentioned.

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