UPDATE: Deutsche Bank Initiates Coverage On ConocoPhillips, Sees 16.3% Upside

ConocoPhillips COP was initiated with a Buy rating at Deutsche Bank with a $94 price target (16.3 percent upside) Tuesday morning.

Analyst Ryan Todd likes ConocoPhillips’ free cash flow (second highest yield in the sector), dividend and long-term strategy.

“COP’s attack is balanced: Volume growth is 50% US unconventional, 50% offshore/international, and cash flow growth is 50/50 volume/margin growth,” starts Todd. “A steady string of margin-accretive projects should support ~4%/yr cash margin growth through 2017, while a strong balance sheet and FCF boost COP’s debt-adjusted cash flow growth into the top quartile of E&P peers.”

Related: Deutsche Bank Initiates On Chevron, Sees 14% Upside

Todd also commented on ConocoPhillips’ upstream business, “Providing ~50% of growth volumes through 2017, we see potential upside on high asset quality, long inventory life (17 yr avg.), conservative activity levels and solid emerging basins (Permian, Montney, Duvernay, etc).”

The $94 price target is based on a 6.6 times forward EV/DACF multiple, which is a small discount to the peer group.

Shares of ConocoPhillips last traded at $80.85, unchanged Tuesday morning.