On Monday, BofA Securities adjusted its stance on Chord Energy Corp (NASDAQ:CHRD) shares, downgrading the company's stock rating from Buy to Neutral. This shift comes alongside a significant reduction in the price target, now set at $138.00, a steep fall from the previous $208.00. BofA Securities analysts cite Chord Energy's performance as one of the weakest within their coverage, attributing this to a deteriorating macro-outlook for global oil balances.
Despite Chord Energy's ability to meet earnings expectations and even achieve some modest upward revisions in oil production, analysts at BofA Securities highlight the company's vulnerability due to its high leverage to oil prices. With a 2025 free cash flow breakeven at $53 per barrel, Chord Energy is more susceptible to headwinds than its peers, especially as supply is anticipated to shift from a slight deficit to a surplus.
Chord Energy's stock has fallen 37% from its peak in April, and with an 8% 2025 debt-adjusted free cash flow yield at BofA's price deck, it is not considered particularly inexpensive compared to peers with lower breakeven points. While the company's three-year outlook suggests confidence in its free cash flow capacity, BofA analysts believe that outperformance is contingent on a rise in oil prices.
The potential for four-mile laterals remains a positive catalyst for Chord Energy's stock, according to BofA Securities. However, with initial well results not anticipated until mid-2025, analysts see limited near-term upside. The price objective has been lowered to $138, and the stock rating has been adjusted to Neutral from Buy, reflecting these concerns.
Looking ahead to 2025, analysts expect Chord Energy's drilling program to trend towards two-mile laterals, with only 40% being three-mile laterals. This proportion is projected to increase to an average of 50% over the three-year period in 2026 and 2027, which could potentially impact the company's operational dynamics and financial outcomes.
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