Analysts Are Downgrading These 5 Energy Stocks

2. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 53

Chevron Corporation (NYSE:CVX) is an integrated energy and chemicals firm. On March 20, negotiations on a new labor contract stalled and workers of the firm went on strike in Richmond. The strike was also threatening other production facilities of Chevron Corporation (NYSE:CVX) but workers accepted an updated contract offer from the oil giant. The company has also raised its stake in an oil project in Myanmar despite promising to exit the country following violent protests against a coup last year. 

On March 14, Morgan Stanley analyst Devin McDermott downgraded Chevron Corporation (NYSE:CVX) stock to Equal Weight from Overweight with a price target of $166, noting that the valuation of the firm was now beginning to “look expensive”. 

At the end of the fourth quarter of 2021, 53 hedge funds in the database of Insider Monkey held stakes worth $6.5 billion in Chevron Corporation (NYSE:CVX), up from 51 in the preceding quarter worth $4.4 billion. 

In its Q3 2021 investor letter, Goehring & Rozencwajg Associates highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:

“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron Corporation (NYSE:CVX) announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.

What should Chevron Corporation (NYSE:CVX) expect?

It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”