Wells Fargo & Company adjusts energy stock ratings: ConocoPhillips (COP.US) dividend growth prospects are looked favorably upon, while Range Resources (RRC.US) is downgraded due to overvaluation.

Wells Fargo & Company has issued a research report, upgrading ConocoPhillips (COP.US) from a "neutral" rating to a "buy" rating, and raising the target price from $100 per share to $132 per share. The report points out that the stock is expected to achieve a leading dividend compound annual growth rate in the coming years. Wells Fargo & Company analyst Sam Margolin stated that the Willow oil field project under ConocoPhillips is scheduled to start production in 2029, which will be a key turning point for the company's free cash flow. Assuming a Brent crude oil price of $65 per barrel, the project is expected to generate about $4 billion in net cash flow for the company in its first year of production. Additionally, during the transition period before the project starts production, various factors will drive internal free cash flow growth and enhance dividend-paying ability: the winding down of expenses related to the Qatar liquefied natural gas project; the start of several growth projects such as the Qatar liquefied natural gas and the Arthur Harbor liquefied natural gas projects; the dividend income from the Arthur Harbor project in the 2025 fiscal year supporting stock buybacks and reducing total dividend expenditure pressures; and the expected narrowing of natural gas price differentials in the Wahaha region after the external gas pipeline starts operation in 2027. The analyst predicts that the cumulative dividend payment capacity of ConocoPhillips between 2026 and 2029 will increase by over $6 per share. Referring to the company raising dividends by 8% after the release of the third quarter 2025 financial report and reaching a dividend level of $3.36 per share in 2026, this growth trend provides relatively strong defensibility in a market environment with declining oil prices. At the same time, Margolin downgraded Range Resources (RRC.US) from a "buy" rating to a "neutral" rating, and lowered the target price from $46 to $43 per share. The reason for the downgrade is that, based on the free cash flow yield indicator, Range Resources' valuation compared to its peers is at a premium, particularly evident when compared to direct competitor Antero Resources (AR.US). The analyst stated that while the premium valuation of Range Resources' free cash flow is somewhat reasonable due to its strong balance sheet and cost control capabilities, the current premium valuation is at a high level. In the backdrop of rising risks in the natural gas market, the company's stock price upside potential will be constrained.