Market Overview

Hess Shares Higher Following Goldman Upgrade, Addition To 'Conviction Buy' List

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Hess Corp. (NYSE: HES) has seen a significant jump in share price over the last 24 hours, bounding off a low on Tuesday around the $37.40 handle, up 3 percent Wednesday.

This rebound follows an upgrade by Goldman Sachs from Neutral to Buy.

Additionally, the stock may be experiencing positive movement based upon its inclusion to Goldman Sachs' "Conviction Buy" list, also announced in the upgrade note.

Goldman Sachs: Return Potential 52%

In the research note out Wednesday, Goldman Sachs reaffirmed its confidence in Hess, stating, "We upgrade HES to Buy from Neutral and add the shares to the Americas Conviction List. We see 52 percent total upside to our unchanged $59/share 12-month DCF-based target price."

Related Link: Select Oil, Gas Names Boosted By Goldman's Hess Call

The firm supported its thesis by highlighting the following catalysts:

  • Upside Potential To Exploration: "The key unique catalysts for HES are exploration and appraisal wells in Guyanan […] and the Gulf of Mexico."
  • Possible Consolidation: "We also believe success in Guyana could drive a greater likelihood of consolidation."
  • Flexibility Ahead With Oil Price Improvement: "We view HES' North Dakota asset base favorably with superior well performance. WE see potential for ramp up in activity when oil prices rise."
  • Valuation: "HES trades at 8.0x 2016E/17E EV/EBITDA vs. 8.5x/5.6x for peers and at 8.3x/5.4x 2016E EV/DACF vs. 8.1x/5.8x for peers."

The firm did underline the following risks, however: well results, costs, commodity volatility and land disputes/government pronouncements.

Calling Hess the "hopes-and-dreams" story of 2016, Goldman Sachs reiterated its conviction on "old-fashioned exploration and production," stating, "We upgrade HES to Buy from Neutral and add it to the Conviction List as we see an attractive combination of new project startups, shale flexibility, liquidity if oil prices remain low, and most importantly, meaningful exploratory resource catalysts over the next 12 months.

"While the selloff has been particularly severe across international diversified oils in recent months, we believe HES stands out as one stock that could display an improvement in its relative performance from specific upcoming events."

Latest Ratings for HES

DateFirmActionFromTo
Dec 2019UpgradesUnderweightNeutral
Dec 2019Initiates Coverage OnMarket Perform
Nov 2019DowngradesSector OutperformSector Underperform

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View the Latest Analyst Ratings

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