UBS Names Top Oil Sector Picks
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Industry News
UBS has identified its top stock picks in the oil sector, highlighting companies positioned for potential re-rating opportunities and strategic growth across exploration, production, and oilfield services segments.
The investment bank’s selections focus on companies that have addressed key operational challenges and are poised to benefit from strategic acquisitions and improved financial profiles.
1. Ovintiv (NYSE:OVV) - UBS’s top pick in the oil exploration and production space has successfully addressed two major concerns that previously weighed on its valuation. The company’s acquisition of NVA’s Montney assets, combined with its recently announced Anadarko Basin divestiture, has largely resolved issues related to crude and condensate inventory as well as its high debt balance.
UBS analysts believe there is no justification for Ovintiv to continue trading at one of the lowest multiples among exploration and production companies given its pro-forma profile. The firm views Ovintiv as presenting the best re-rating opportunity in the exploration and production sector based on its forward outlook.
Ovintiv reported fourth-quarter earnings that surpassed analyst expectations, with an EPS of $1.39 against a forecast of $0.97. Separately, Truist Securities initiated coverage on the company with a buy rating.
2. Antero Resources (NYSE:AR) - The natural gas exploration and production company earns UBS’s endorsement based on its exposure to international natural gas liquids export markets, which allows the company to capture higher realized pricing.
The integration of HG represents the most significant near-term value driver for Antero Resources. UBS notes that the transaction adds operational scale, benefits from an improved balance sheet, leverages AM’s existing midstream infrastructure, and offers a clear path to synergies that exceed initial forecasts.
In recent developments, Antero Resources announced fourth-quarter earnings and revenue that exceeded projections. The company also completed the sale of its Utica Shale assets for total cash consideration of $800 million.
3. SLB (NYSE:SLB) - In the oilfield services category, UBS highlights SLB’s potential driven by several key factors. The firm points to the execution of the company’s Digital growth strategy, integration of CHX, improving artificial intelligence hardware growth, and returning activity levels in Saudi Arabia as primary catalysts. UBS continues to view SLB’s new Digital unit as supporting potential for stock re-rating.
SLB announced an expanded technology collaboration with NVIDIA to develop AI infrastructure for the energy industry. Additionally, its OneSubsea joint venture was awarded a multi-well subsea production systems contract by China National Offshore Oil Corporation.
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