Morgan Stanley says buy this dividend-paying ‘key beneficiary’ of rising oil prices

varam2 hours ago03 mins mins

Traders are hoping for a resolution in the Middle East, but hot oil prices are likely to be sticky – and that bodes well for Chord Energy, according to Morgan Stanley. The Dow Industrials were up more than 1,100 points at its session high on Tuesday as traders grew optimistic that an end may be in sight for the weekslong war between the U.S. and Iran. Just over the course of March, Brent crude oil futures surged more than 60% for their biggest monthly advance since 1988. West Texas Intermediate crude gained more than 51% this month. “Even with near-term resolution, prices are likely to stabilize above pre-conflict levels,” wrote a team of Morgan Stanley analysts led by Devin McDermott in a Friday report. They cited the need to restock oil inventories as well as heightened concerns regarding geopolitical risk, supply security and spare capacity, which should prop up prices even as tensions ease. The firm sees West Texas Intermediate crude averaging about $80 a barrel in 2026 and $70 in 2027. Morgan Stanley lifted its forecast for WTI in 2028 and beyond to $70 a barrel, up from $65. Those higher energy prices are bad news for consumers, but they’re a tailwind for select oil exploration and production companies, the analysts said. “Overall, our price targets are moving 21% higher for oil E & Ps and a much more modest +8% for gas,” they said. The analysts upgraded Chord Energy to overweight from equal weight and lifted their price target to $168 from $114, suggesting nearly 15% upside from Monday’s close. CHRD YTD mountain Chord Energy in 2026 “CHRD is a key beneficiary of higher oil prices, screening well versus peers on [free cash flow] and shareholder returns,” they said. Assuming a WTI price of $80 a barrel, Chord Energy offers an 18% free cash flow yield, compared to the oil E & P average of 12%, as well as a 12% shareholder return yield, versus the peer average of 6%, the firm found. Chord Energy has had a strong start to the year, up more than 53% in 2026, but the company also pays an attractive dividend. The stock offers a current dividend yield of 3.6% and last month hiked its base dividend to $1.30 a share, an increase of 4%. In the fourth quarter, the company successfully drilled its first four-mile lateral – that is, a horizontal well. Lengthier laterals can help boost well productivity and capital efficiency, according to the American Petroleum Institute . “We expect CHRD to continue to realize capital efficiency gains and see a positive rate-of-change on its longer lateral program,” the Morgan Stanley analyst said. This year, the company expects 80% of its planned wells to be three- to four-mile laterals, versus roughly 45% of its wells in the prior year. Wall Street is largely bullish on Chord Energy, with 18 out of 20 analysts deeming it a buy or strong buy, per LSEG. Average price targets, however, suggest only 4% upside from current levels. —CNBC’s Michael Bloom contributed reporting.