Morgan Stanley: 'Oil On Sale,' We're Upgrading Whiting Petroleum

In a report published Monday, analysts at Morgan Stanley upgraded Whiting Petroleum Corp. (NYSE: WLL) to Overweight. The price target was set to $48. The company is expected to outperform, following a rebound in growth as well as reduction in leverage due to divestitures.The stock is best suited for investors looking for exposure to oil via a company that can withstand low oil prices for the next 2-3 years. The current negative sentiment surrounding the stock has led to discounted valuation, which offers an attractive point of entry for investors.The analysts expect the discount to peers to narrow with a decline in leverage and rebound in growth, in line with Whiting Petroleum's high quality peers. The company's divestiture program is expected to reduce leverage to 2.2x by year-end 2016.According to Jefferies, "[W]e expect slower 2016 growth for WLL at 3 percent (post asset sales) vs. peers at 18 percent, but on strip pricing WLL will be FCF neutral while its peers are spending 142 percent of cash flow.""While we think pullback in crude prices is plausible in the next few months, the macro environment appears more supportive over the medium term. We expect most longer-time horizon investors to focus on the big picture trend of reduced upstream investment and slowing US oil production growth," the analysts added.