Tullow Oil PLC (LON:TLW) and Cairn Energy PLC (LON:CNE) saw target price upgrades as the oil and gas analysis team at UBS lifted their view on crude.
Cairn is viewed among the Swiss bank’s ‘top picks’ with a ‘buy’ rating and a new target of 280p from 260p (current price: 239p). UBS still has a ‘neutral’ rating for Tullow and the target is raised to 250p from 190p, bringing it closer to the current market price (259p on Friday).
READ: Goldman Sachs upgrades Tullow Oil and Cairn Energy on crude strength
Analyst Amy Wong said the global oil market rebalancing is effectively complete, and, against the improved market backdrop, she expects investor interest will “move up the risk curve” towards pure-play exploration and production shares.
“With higher oil prices, the E&P sector benefits from improved cashflows and the prospect of more supportive capital markets,” the analyst said in a note.
Wong added: “We increase our price targets, NAVs and EPS, but our stock picking strategy remains unchanged - buy well capitalised E&Ps with undervalued assets with near term catalysts to unlock value.”