Zacks Analyst Interview Highlights: Exxon, Chevron, Baker Hughes, Transocean and Diamond Offshore

Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Sheraz Mian, who discusses Exxon (NYSE: XOM), Chevron (NYSE: CVX), Baker Hughes (NYSE: BHI), Transocean (NYSE: RIG) and Diamond Offshore (NYSE: DO).

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Where do you see oil prices heading in the near term?

While downside risks still remain, particularly if the global economic weakness turns out to be more protracted than currently anticipated, oil prices are expected to consolidate around current levels. We expect crude oil prices to bottom around $70 a barrel.

We are strong believers in the secular underpinnings of the oil cycle – the current downturn is just a pause in a long secular cycle that still has plenty of room to go.

In which areas would you advise investors to look for oil stocks?

The large-cap integrateds – Exxon (NYSE: XOM), Chevron (NYSE: CVX) – remain the best positioned given their energy conglomerate business structures, stellar balance sheets, substantial free cash flows, and growing dividends.

The underlying business fundamentals of integrated oilfield service companies such as Baker Hughes (NYSE: BHI), as well as deepwater-capable drilling contractors like Transocean (NYSE: RIG) and Diamond Offshore (NYSE: DO) still remain robust. Oil prices will need to drop even further and then stay there to materially impact their operating outlook.

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