COP, HAL, PR, VST Stocks Fall Amid Tumbling Oil Prices — Goldman Reportedly Urges Buying The Dip

• Among the top picks are Conoco Phillips, Halliburton, Permian Resources, and Vistra, all of which pay dividends and have an upside potential of more than 18%, as per the analyst. 
• Mehta emphasized a bullish long-term view of oil, stating that Brent crude oil would normalize at $75 per barrel as one of the reasons for his views.
• Cenovus Energy, Ovintiv, and Golar LNG were other dividend-paying energy stocks that made Mehta’s list.

Major energy stocks tumbled on Friday, following a steep decline in oil prices after Iran said that the critical Strait of Hormuz would be “completely open” for the rest of the ceasefire period. Yet, the fall could indicate a buying opportunity in many of the dividend-paying energy stocks, Goldman Sachs reportedly said.

Among the top picks are Conoco Phillips (COP), Halliburton Co. (HAL), Permian Resources Corp. (PR), and Vistra Corp. (VST), all of which pay dividends and have an upside potential of more than 18%, as per the analyst, according to CNBC.

Goldman’s Broad Rationale

Goldman Sachs analyst Neil Mehta reportedly said in a note that the picks were based on four themes.

First, Mehta emphasized a bullish long-term view of oil, stating that Brent crude oil would normalize at $75 per barrel. At the time of writing, ICE Brent Crude futures expiring in June were trading more than 8% lower at $90.79 per barrel. Meanwhile, WTI Crude futures expiring in May were down more than 10%, trading around $84.62 per barrel.

Second, Mehta said that the firm’s views on American exploration and production companies were more positive in light of their valuation risk and reward. Third, the analyst also took a positive stance on electrification and further capital expenditures by utility companies.

Finally, the analyst also emphasized underappreciated idiosyncratic stories in some of the small cap energy stocks that had upward potential from their current levels.

“We recognize there is significant geopolitical and commodity volatility, but these are ideas that we believe are fundamentally underpinned at our mid-cycle views,” Mehta said, as per CNBC.

View On Energy Stocks

COP stock, which declined more than 4.6% on Friday, is on Goldman’s Americas Conviction List. Mehta said that as the company’s capital spending took off and major projects came online, its shares would benefit from an inflection in free cash flow. When combined with $1 billion in cost reductions, ConocoPhillips would deliver a 20% to 25% free-cash-flow per share compound annual growth rate through 2030, the analyst said.

Goldman Sachs has a price target of $144 on COP, which implies an upside potential of about 24% from the current trading price of $115.94. Meanwhile, the company also has a dividend yield of 2.76%.

Meanwhile, PR stock, which is down more than 5% at the time of writing, is a win based on execution, Mehta said. The stock has a 3.13% dividend yield. The analyst has a price target of $23 on the stock, indicating an upside potential of more than 18% from its latest trading price of $19.35.

Power generation company VST stock gained a bullish rating on attractive fundamentals in its base business. Mehta said that the company had hedged most of its short-term generation, reducing earnings volatility, and bolstering future power prices. The analyst has a $212 price target on the company, indicating an upside potential of nearly 30% compared to its current price of $163.45.

Cenovus Energy (CVE), Ovintiv (OVV), and Golar LNG (GLNG) were other dividend-paying energy stocks that made Mehta’s list.

Meanwhile, the United States Oil Fund ETF (USO) was down nearly 8% at the time of writing, while the ProShares Ultra Bloomberg Crude Oil ETF (UCO) tumbled more than 10%.

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