) to overweight from neutral.
Analyst Michael Mayer says he is raising oil and natural gas prices and refining margin forecasts and earnings per share estimates.
He notes his sector valuation range shifted up to reflect $22 per barrel downside risk, $30/barrel normalized, and $38/barrel upside potential, vs. prior range of $20, $25, and $30, respectively.
He feels the sector is discounting long-run oil price of about $26.60/barrel, a 21-year high, but leaves the group 10% below our new target prices, with a favorable risk/reward ratio.
Mayer raises his neutral sector rating to favorable and raises his Exxon Mobil $4.00 2005 earnings per share estimate to $4.45 and $57 target to $70.