Barclays Calls Chevron's Quarter A 'Relief' After Disappointing Results From Exxon

Despite an underwhelming quarter, Barclays analyst Paul Cheng believes Chevron Corporation CVX did well enough to demonstrate relative strength compared to peers Exxon Mobil Corporation XOM and Royal Dutch Shell plc (ADR) (NYSE: RDS-A) (NYSE: RDS-B). According to Cheng, Chevron’s share price might find some support from investors rotating out of Shell and Exxon and into Chevron.

“As a result of their backlog of major projects start-up over the next 2-3 years, CVX should deliver one of the strongest production growth rates through 2018/2019 among the mega majors while generating substantially positive free cash flow,” Cheng explained.

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Despite the positive long-term outlook, Barclays remains cautious on Chevron in the near term. Cheng estimates that the company will need $60–65/bbl Brent crude oil prices in 2017 to be cash flow neutral.

Barclays projects that Chevron will burn through an average of $13.5 billion in fee cash annually between 2013 and 2016 before returning to an average positive annual free cash flow of about $7.5 billion from 2017 to 2020.

For now, the firm maintains its Equal-Weight rating on the stock, and Cheng sees a more favorable risk/reward balance for investors at ConocoPhillips COP.

So far this year, Chevron shares are up 12.1 percent.

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Disclosure: The author holds no position in the stocks mentioned.