AHC trades at an 18% discount to its peers ... which we believe is wide enough to compensate investors for the risks inherent in the stock -- namely, a price exploration strategy, significant downside risk should oil prices retreat, weaker free cash flow generation and returns. |
Although Exxon Mobil had a strong quarter operationally, results were severely impacted by a higher tax rate -- an issue we suspect will not reverse going forward. |
Since the beginning of the month, Exxon has outperformed its peers by over 6%, leaving the company trading at a significant premium to the group. As such, we are downgrading Exxon to neutral, as the stock's valuation is not as compelling. |
The Unocal deal gives Chevron the near- to medium-term production growth it was lacking, as well as the potential for future growth from its Asian assets. |
We do not think Murphy is out of the woods yet operationally and still recommend avoiding the stock. |
We recommend investors avoid the more oily names with no near-term supporting catalysts or valuation support, such as Murphy Oil. |