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2015 All-America Research Team: Integrated Oil, No. 2: Douglas Leggate

Bank of America Merrill Lynch’s Douglas Leggate slips back to the No. 2 position he earned in 2013.

Douglas Leggate
Bank of America Merrill Lynch
First-place appearances: 1

Total appearances: 8

Analyst debut: 2006

After a year at the top of this roster, Bank of America Merrill Lynch’s Douglas Leggate slips back to the No. 2 position he earned in 2013. He also claims third place on the Oil & Gas Exploration & Production lineup, advancing from runner-up. The Houston-based researcher, 49, is “a big thinker who sees the full picture,” one fund manager declares. “He is very thematic in his approach and knows all the nuances of his companies.” Over the 12 months through mid-September, U.S. integrated oil shares slumped 31.7 percent, while the broad market fell 2.6 percent, and Leggate believes that the group’s performance is all about oil prices and volatility at the moment. “The removal of OPEC as a source of support for oil prices has damaged market confidence in oil, allowing price discovery to be as much about financial [or] speculative moves as physical supply-demand,” he explains. “Sentiment is currently in the driving seat.” The market needs a framework to navigate through short-term gyrations, the researcher adds, so companies can position for a medium-term recovery with low-risk energy exposure. Considering the biggest players in the space, he is advising clients to prefer Exxon Mobil Corp. of Irving, Texas, over San Ramon, California–based Chevron Corp. “We identified that the pace of margin expansion at Exxon Mobil, as a result of well-timed projects funded at the peak of the oil cycle, would materially change the free-cash-flow outlook,” he reports. “In contrast, Chevron faced substantial cash burn, ultimately diluting Chevron’s sector-leading margins that were largely a function of strong oil prices.” Exxon’s stock bears a price objective of $106, representing a potential upside of 45.8 percent compared with its trading level in mid-September.

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