The Zacks Analyst Blog Highlights:PetroChina, McGraw-Hill Financial, Exxon Mobil, Chevron and ConocoPhillips

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Jun 11, 2013, 09:30 ET

CHICAGO, June 11, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include PetroChina Co. Ltd. (NYSE:PTR-Free Report), McGraw-Hill Financial Inc. (NYSE:MHFI-Free Report), Exxon Mobil Corp. (NYSE:XOM-Free Report), Chevron Corp. (NYSE:CVX-Free Report) and ConocoPhillips (NYSE:COP-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

PetroChina Upgraded to Buy

We have upgraded Chinese energy giant PetroChina Co. Ltd. (NYSE:PTR-Free Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

PetroChina is the largest integrated oil company in China. The impressive economic growth in China has significantly increased the demand for oil, natural gas and chemicals. This growth momentum presents attractive opportunities for industry players as it can fulfill the country's fast-growing energy needs. Being one of the two integrated oil firms in China, PetroChina is well-positioned to capitalize on these favorable trends.

Moreover, growing automobile ownership in China is expected to fuel consumption of refined petroleum products. Though PetroChina's downstream operations are primarily located in China's relatively poor Northern regions, this is likely to act as an advantage for the company in the long run.

Moreover, we believe that the potentially lucrative growth area for the company is its natural gas business, which is expected to witness strong growth in the coming years as China moves from coal to natural gas. At present, two-thirds of China's electricity is generated by coal-fired power plants, which emit greenhouse gases that lead to pollution.

We also like PetroChina's recent natural gas deals in Canada and Australia. The Chinese behemoth's plans – to form a joint venture in Canada's Alberta to develop natural gas/condensates assets and to purchase interests in the proposed Western Australian Browse liquefied natural gas (LNG) project – will provide it with a global resource and market base, making the company a leading international energy player. Additionally, these ventures will also provide a hedge against the uncertain Chinese product pricing policies.

All these positives are reflected in the company's long-term expected earnings growth of 17.2%. The Zacks Consensus Estimate for 2013 has also increased 1.3% to $12.25 per share over the last 60 days.

Crude Supplies Pull Back from Record Highs

The U.S. Energy Department's weekly inventory release showed that crude stockpiles fell sharply from their all-time high level, as refiner demand strengthened and imports plunged. The report further revealed that within the 'refined products' category, gasoline stocks fell, while distillate supplies were up from the week-ago level.

The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.

The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.

Analysis of the Data

Crude Oil: The federal government's EIA report revealed that crude inventories fell by 6.27 million barrels for the week ending May 31, 2013, following a climb of 3.0 million barrels in the previous week that saw it reach the highest level since EIA started gathering data in 1978.

The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. (NYSE:MHFI-Free Report) – had expected crude stocks to go down some 1 million barrels. A sharp drop in the level of imports and uptick in refinery utilization rates led to the massive stockpile drawdown with the world's biggest oil consumer.

In particular, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were down 484,000 barrels from the previous week's level to 50.02 million barrels. Stocks are currently just under the all-time high of 51.86 million barrels reached in Jan.

Despite the weekly inventory decrease, at 397.29 million barrels, current crude supplies are 1.8% above the year-earlier level, and exceeds the upper limit of the average for this time of the year. The crude supply cover was down from 26.2 days in the previous week to 25.7 days. In the year-ago period, the supply cover was 25.4 days.

Gasoline: Supplies of gasoline were down for the second time in as many weeks despite a decline in domestic consumption and rise in production. The fall in gasoline inventories could be attributed to lower imports.

The 366,000 barrels withdrawal – contrary to analysts' projections for a 1 million-barrels increase in supply level – took gasoline stockpiles down to 218.80 million barrels. Notwithstanding this drawdown, the existing inventory level of the most widely used petroleum product is 7.5% higher than the year-earlier level and is close to the top half of the average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) were up 2.61 million barrels last week, compared to analysts' expectations for a 1.4 million barrels build in inventory level. The increase in distillate fuel stocks – the seventh in 8 weeks – could be attributed to weaker demand, higher imports and improved production.

At 123.27 million barrels, distillate supplies are 2.8% above the year-ago level but are in the lower limit of the average range for this time of the year.

Refinery Rates: Refinery utilization was up 2.0% from the prior week to 88.4%. The analysts were expecting the refinery run rate to increase 0.5% to 86.9%.

Zacks Rank

A bullish data from the EIA generally acts as a positive catalyst for crude prices and buoy producers, such as Exxon Mobil Corp. (NYSE:XOM-Free Report), Chevron Corp. (NYSE:CVX-Free Report) and ConocoPhillips (NYSE:COP-Free Report). With an improvement in the companies' ability to generate positive earnings surprises, they can then move higher from their current Zacks Rank #3 (Hold).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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