On Wednesday, Bernstein SocGen Group issued an upgrade for Hess Corp . (NYSE: NYSE:HES) stock, raising its rating from Market Perform to Outperform and adjusting the price target to $172 from $166. The firm's revised stance comes amid expectations of a successful merger with Chevron Corp. (NYSE: NYSE:CVX) and an analysis of market conditions affecting oil prices and the energy sector.
The analyst based the upgrade on several factors, including the historical trend of oil price beta being less attractive in the latter half of the year, as detailed earlier in 2024. Poor messaging at the June OPEC meeting and the anticipated impact of the December OPEC meeting were also highlighted as influential factors. Additionally, a weaker call on OPEC in the upcoming quarters was noted.
In light of these considerations, Bernstein SocGen Group has lowered its 2025 WTI and Brent oil price forecasts by $5 per barrel, to $75 and $78 respectively, and updated its 2024 market prices. The firm also incorporated a more bearish outlook on Henry Hub gas prices and increased the crack spread assumption for integrated oil companies by $2.5.
Despite these adjustments leading to a 7% to 10% decrease in the 2025 EBITDA forecast for the sector, the potential Hess-Chevron merger is a significant driver behind the upgrade. The analyst posited that Hess shareholders would benefit from a 16% upside if the merger concludes successfully, as they are set to receive 1.025 Chevron shares for each Hess share.
Even if the merger does not close, which is deemed unlikely due to ongoing arbitration, Hess's standalone value is robust, supported by a 27% volume growth and almost 75% EBITDA increase in the first quarter of 2024, implying a potential undisturbed price target of $188 per share.
The firm's overall outlook for the energy sector remains positive, with continued Outperform ratings for Exxon Mobil Corp. (NYSE: NYSE:XOM), Diamondback (NASDAQ:FANG) Energy, Inc. (NASDAQ: FANG), and ConocoPhillips (NYSE: NYSE:COP), alongside Market Perform ratings for EOG Resources, Inc. (NYSE: NYSE:EOG), Devon Energy Corporation (NYSE: NYSE:DVN), Kosmos Energy Ltd . (NYSE: NYSE:KOS), and Apache Corporation (NYSE: NASDAQ:APA).
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.