Analyst Actions: UBS Upgrades Petrobank, Petrobakken, and Petrominerales, Believing Oil is Now Undervalued

By Midnight Trader,  June 18, 2012, 12:09:16 PM EDT

UBS has upgraded three Canadian energy stocks as it reaffirmed a bullish view on the crude oil market.

Petrobank (PBG.TO), Petrobakken Energy (PBN.TO) and Petrominerales (PMG.TO) were all upgraded to a buy from neutral, based on their recent share price weakness that was largely tied to the decline in crude oil in recent weeks. Price targets on PBG and PBN were both reaffirmed at $16; the price target on PMG also remains unchanged, at $13.50

All three stocks are getting a boost on the TSX today; Petrobank is up 13 cents, or 1.2%, at $10.99; Petrobakken Energy is up 8 cents, or 0.6%, at $12.25; and Petrominerales is up 40 cents, or 3.3%, at $12.50

"Pressure on oil prices has largely stemmed from worries surrounding the future of the euro zone and weak economic data from China, India, the US and elsewhere," UBS said in a research note today. "Equities have followed suit, with our large cap and international covered stocks down 7% and 11% YTD respectively.

"However, we believe a possible Saudi cut in production, as well as seasonal demand and the potential for a sustained risk premium related to Iran will help balance markets and keep prices supported around current levels."

UBS reiterated its long-term Brent and WTI estimates of $95/bbl and $93/bbl, respectively, which are currently 7% and 9% above long-term futures pricing.

"We continue to believe a tight supply/demand model, rising upstream development costs and high fiscal needs for key OPEC producers will support our long-term estimates. Given our sum of the parts NAV methodology, we have left our price targets unchanged on this basis, yet have upgraded stocks given their recent weakness."




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Commodities

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