Credit Suisse Lowers Oil Target, But Upgrades This Mid-Cap Stock

• Year to date, Southwestern Energy Company SWN has declined 44 percent.
• Credit Suisse's Edward Westlake upgraded Southwestern Energy to Neutral from Underperform in a new research note.
• The firm said that Southwestern Energy's stock price already "properly discounts" risks to shares, minimizing the potential for additional losses.

Management at Southwestern Energy Company still are facing quite a few headwinds, according to Edward Westlake, an analyst with Credit Suisse. Among these "key concerns" is the question of whether Southwestern Energy's growth can help the company remain "investment grade." However, given the 44 percent declines in the share price this year, Westlake said that the risks are now well accounted for within the stock price, a belief that underpinned Credit Suisse's upgrade of Southwestern Energy from Underperform to Neutral.

Westlake also said that Southwestern Energy may be able to "unlock" some growth potential in its southern Appalachia properties. That could lead to additional capacity in 2017 and 2018. When compared with other companies in the energy exploration and production sector, Westlake said that "continued underperformance" in the stock is not warranted.

This view also fits within Credit Suisse's view of U.S. energy production. Though the analyst admits that "deepening macro headwinds" have led to lower oil prices and lower corresponding stock prices, he argued that the market is starting to see a "supply response." The analyst now forecasted WTI Crude Oil would reach $54 per barrel in 2016, followed by $60 and $65 in 2017 and 2018, respectively.

Last week, Westlake also mentioned that the firm also liked Chevron Corporation CVX among mega-cap oil stocks, noting that the company had a strong balance sheet that would enable management to choose "its next strategic" direction.