EOG Resources (NYSE:EOG) gained more than 2% on Friday after Scotiabank upgraded the stock to Sector Outperform from Sector Perform, assigning a $130 price target. The firm pointed to EOG's relatively attractive valuation compared to other large exploration and production companies, as well as its strong operating footprint in the Permian Basin.
Analyst Paul Cheng said investors are increasingly favoring companies with strong balance sheets in today's uncertain market. He highlighted EOG's low net debt to capital ratio, which stood at under 2% at the end of 2024 the lowest among Scotiabank's coverage group.
Cheng also noted that EOG's exposure to North American natural gas and its diversified asset mix provide a degree of insulation from oil price volatility, placing it among the lowest oil beta names in the large-cap energy space.
At the same time, Scotiabank downgraded Occidental Petroleum (NYSE:OXY) and Chevron (NYSE:CVX) to Sector Perform from Sector Outperform. Occidental's nearly 54% net debt to capital ratio, driven by its CrownRock acquisition, was flagged as the highest in Scotiabank's coverage. For Chevron, the concern lies in potential buyback reductions, with Cheng estimating its repurchase pace could drop from $17.5 billion annually to $10 billion, while peer Exxon Mobil is expected to maintain its payout levels.
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