By Sam Boughedda
BofA analysts downgraded Chevron (NYSE:CVX) to Neutral from Buy and upgraded Occidental Petroleum (NYSE:OXY) to Buy from Neutral in a note Friday.
The analysts also raised Chevron's price target, albeit by $1 to $191 from $190, and lowered Occidental's price target to $80 from $82.
On the U.S. oil and gas industry, the analyst said they see a harder year ahead in 2023 with even harder conversations.
"The starting point is an oil outlook punctuated by geopolitics and a myriad of demand uncertainties led by recession risk," writes the analysts. "Our valuation base case is anchored on '$80 as the new $60' contending that when not challenged for market share, Saudi will defend price. But with strip below that level & FCF facing headwinds on several fronts we see valuations capped for some, with sector performance stalled beyond a more aggressive call on oil or broader equity market recovery."
For 2023 the analysts see relative performance divided, "favoring rate of change in key value drivers such as FCF, including improved hedges where deleveraging still matters as a route to transfer value from debt to equity."