Goldman Sachs raises target prices for U.S. oil majors, with a particular positive view on free cash flow growth at COP and CVX

Overview

This is a 2Q26 pre-earnings update report from Goldman Sachs Americas Energy: Oil on U.S. large-cap oil companies COP, CVX, and XOM. The report updates earnings forecasts based on mark-to-market commodity prices and refining margins, and screens for names with more attractive valuation and free cash flow growth amid macro volatility, Middle East production risk, and a strong refining environment. Goldman Sachs particularly emphasizes Buy-rated ConocoPhillips and Chevron Corp., with COP on the Conviction List and highlighted as having about 18% total return potential.

Core views

The core view is that COP’s project start-ups, cost savings, and OECD-region asset portfolio support about $7 bn of free cash flow growth by 2029 and could drive about 20%-25% CAGR in free cash flow per share through 2030; CVX benefits from an asset mix including the Permian, Kazakhstan, Gulf of America, and Guyana, with management guiding to about 7%-10% total production growth this year and about 10% annualized growth in adjusted free cash flow and EPS through 2030 at $70/b Brent; XOM still has quarter-over-quarter improvement in Upstream, Downstream, and Chemicals fundamentals, but Middle East LNG, Hormuz risk, M&A attention, and valuation premium keep its relative rating at Neutral.

Analysis framework

The report uses a pre-earnings estimate update, target price adjustment, and cross-company comparison framework, focusing on 2Q26 EPS, production guidance, capital spending, refining utilization, free cash flow, shareholder returns, cost savings, and Middle East supply risk. Estimate updates mainly reflect mark-to-market oil and gas prices, refining margins, production, buybacks, operating costs, and price realizations.

Methodology notes

• Valuation methodsP/E, EV/DACF, DCF, FCF Yield blended valuation

  Target price estimation

  COP’s target price is based on 12-month P/E, EV/DACF, and DCF, blending 85% fundamental value with 15% theoretical M&A value; CVX and XOM use EV/DACF, FCF Yield, and P/E frameworks.

• Earnings forecastingMark-to-market commodity prices and refining margins

  Updating earnings estimates at market prices

  The report re-marks commodity prices and refining margins to market and combines them with adjustments to production, operating costs, buybacks, and price realizations to update 2026-2028 EPS forecasts.

• Equity characteristic assessmentGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated factor profile

  Goldman Sachs Factor Profile compares key characteristics of individual stocks versus the market and industry peers across growth, financial returns, valuation multiples, and integrated percentiles.

• M&A scenarioM&A Rank

  Acquisition probability ranking

  Goldman Sachs uses M&A ranks from 1 to 3 to assess the likelihood of being acquired; for rank 1 or 2 companies, the target price may include an M&A component. COP’s target price includes 15% theoretical M&A value.

• Data toolQuantum

  Goldman Sachs proprietary financial database

  Quantum is used to access detailed historical financial statements, forecasts, and ratios, supporting both deep single-company analysis and cross-company comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ConocoPhillips (COP)

  Core bullish name, Buy, Conviction List

  Strengths

  Project start-ups, cost savings, about $7 bn of free cash flow growth by 2029, about 20%-25% free cash flow per share CAGR by 2030, about 45% of operating cash flow returned to shareholders, and OECD exposure through Alaska, Canada, and the Lower 48.

  Weaknesses

  Near-term Lower 48 natural gas realized prices are weak, at about 24% of Henry Hub last quarter, and the pace of capital returns may attract investor attention.

  Comparison

  Versus XOM, COP has more pronounced free cash flow growth and total return elasticity; versus CVX, COP is more directly driven by project start-ups and cost savings.

  Risks

  Commodity prices, capital spending, operational execution, Lower 48 natural gas price realizations, and LNG project timelines.

• Chevron Corp. (CVX)

  Core bullish name, Buy

  Strengths

  Diversified high-margin production mix across the Permian, Kazakhstan, Gulf of America, and Guyana, with management expecting about 7%-10% production growth this year and about 10% annualized growth in adjusted free cash flow and EPS through 2030 at $70/b Brent.

  Weaknesses

  Declining Kazakhstan production, CPC flow disruptions, and Tengiz operational impacts require further clarification.

  Comparison

  Compared with COP, CVX has a more diversified asset portfolio and larger long-term capital spending and buyback scale; compared with XOM, its rating is more constructive, with more attractive perceived risk/reward.

  Risks

  Commodity prices, refining margins, operational execution, Kazakhstan/CPC disruptions, and capital spending on major projects.

• ExxonMobil Holdings (XOM)

  Relatively neutral name, Neutral

  Strengths

  Quarter-over-quarter improvements in Upstream, Downstream, and Chemicals, with fundamentals supported by Permian technology, Guyana, LNG, Golden Pass, refining margins, and structural cost savings.

  Weaknesses

  Middle East business exposure, Qatar LNG train repairs, Hormuz risk, and high valuation limit relative upside.

  Comparison

  Compared with COP and CVX, XOM’s target price is raised but the rating remains Neutral, indicating Goldman Sachs sees its relative risk/reward as less attractive than the Buy-rated names.

  Risks

  Commodity prices, refining margins, operational execution, Middle East production disruptions, LNG project execution, and potential M&A valuation risk.

Key data

• COP target price$140, previous $138Maintains Buy; target price blends $137 fundamental value and $160 theoretical M&A value.
• COP 2026-2028 EPS forecast$9.57 / $9.01 / $9.62Previous values were $9.16 / $9.01 / $9.60; revisions reflect oil and gas prices, production, buybacks, operating costs, and price realizations.
• COP free cash flow growthAbout $7 bn by 2029; free cash flow per share CAGR of about 20%-25% by 2030Supported by major project start-ups and cost savings.
• COP shareholder returnsAbout 45% of operating cash flow; total capital return yield of about 7% in 2027/2028The company remains on track to return cash to shareholders.
• COP 2Q26 EPS estimate$2.92 vs FactSet consensus of about $2.89Management production guidance is about 2,185-2,215 MBOE/d, while Goldman estimates about 2,200 MBOE/d.
• CVX target price$225, previous $216Maintains Buy; based on 9.0x EV/DACF, 15.0x P/E, and 7.0% FCF yield.
• CVX 2026-2028 EPS forecast$15.68 / $12.65 / $13.31Previous values were $15.00 / $12.44 / $13.10, reflecting commodity prices, refining margins, production, operating costs, and price realizations.
• CVX long-term growthProduction growth of about 7%-10% this year; adjusted free cash flow and EPS annualized growth of about 10% through 2030Based on an asset mix including the Permian, Kazakhstan, Gulf of America, and Guyana.
• CVX capital allocationLong-term capital spending of about $18-$21 bn; annual buybacks of about $10-$20 bn; structural cost savings of about $3-$4 bnManagement maintains capital discipline and shareholder returns.
• CVX 2Q26 EPS estimate$5.76 vs FactSet consensus of about $5.53Focus areas include international production, U.S. activity, capital allocation, exploration, and AI/power projects.
• XOM target price$164, previous $157Maintains Neutral; based on 9.5x EV/DACF, 16.0x P/E, and 6.0% FCF yield.
• XOM 2026-2028 EPS forecast$11.37 / $10.24 / $10.63Previous values were $11.96 / $9.98 / $10.51, reflecting commodity prices, refining margins, refinery utilization, costs, and price realizations.
• XOM 2Q26 EPS estimate$3.62 vs FactSet consensus of about $3.61A recent 8-K implies midpoint EPS of about $3.60, excluding timing effects and identified items.
• XOM capital allocationAbout $20 bn of buybacks this year; capital spending of about $27-$29 bn; cumulative structural savings of about $20 bn by 2030Potential M&A remains a key investor focus.
• Middle East risk exposureXOM’s Middle East business accounts for about 20% of Upstream production; damaged Qatar LNG trains account for about 3% of total productionPrior company guidance indicates that a full-quarter Hormuz closure would reduce Middle East production by about 750 kbd versus 2025 and lower Product Solutions throughput by about 3% versus 4Q25.

Impact & implications

The portfolio implication of the report is that, against a backdrop of oil price, refining margin, and geopolitical risk volatility, Goldman Sachs prefers companies that can convert clear project start-ups, cost savings, capital discipline, and shareholder returns into free cash flow growth. COP’s Conviction List positioning and about 18% total return signal stronger relative attractiveness; CVX’s diversified high-margin assets and long-term cash flow growth offer a balance of defense and growth; XOM still has advantages in asset quality and cost efficiency, but relative valuation, M&A expectations, and Middle East disruptions keep the rating neutral.

Risks

• Volatility in oil and natural gas prices may affect earnings, free cash flow, and target price assumptions.
• A decline in refining margins would compress Downstream earnings for CVX and XOM.
• An escalation in the Middle East situation, damage to Qatar LNG trains, and Hormuz risk could affect production and throughput.
• Major projects such as Willow, NFE, Guyana, Papua New Guinea, Mozambique, and Golden Pass face execution risk in schedule, cost, and start-up timing.
• Higher-than-expected capital spending, underdelivery on cost savings, or changes in the pace of shareholder returns could weaken investor confidence.
• Localized oversupply in the Permian has led to weak Lower 48 natural gas price realizations, which could weigh on COP’s near-term earnings.
• Potential M&A expectations and premium valuation may increase XOM valuation volatility.

What to watch

• Updates on Lower 48 production, Alaska operations, commodity price realizations, capital spending, and LNG projects on COP’s earnings call.
• Subsequent Willow project sea lift processing modules milestones, NFE Train 1 start-up timing, and progress toward about $1 bn of run-rate savings by year-end.
• CVX commentary on Kazakhstan production, CPC flows, Tengiz operations, Guyana/Venezuela/Argentina projects, and refinery utilization.
• FID, capital spending, cash flow, 2.67 GW capacity, and 2028 first-power delivery progress for CVX and MSFT’s West Texas natural gas-powered data center project.
• Timing of XOM Qatar LNG train repairs, Middle East production impact, Permian proprietary technologies, Guyana Uaru, and Papua New Guinea and Mozambique FID.
• Differences between 2Q26 EPS and FactSet consensus: COP $2.92 vs about $2.89, CVX $5.76 vs about $5.53, XOM $3.62 vs about $3.61.
• Subsequent revisions to 2026-2028 EPS forecasts from oil prices, Henry Hub, Brent/WTI assumptions, and global refining margins.