Higher 2026 oil is real, but 2027 cash should fade as inventories rebuild. Eleven times $12.50 of 2027 earnings lands near $138, a market-like return from $148.
Key points
- $8 billion of 2026 free cash is management’s strip-price plan, about $15 a share on 520 million shares.
- $12.50 is my 2027 earnings estimate if WTI sits nearer $75 than today’s $96 print.
- 11 times that earnings figure produces a $138 twelve-month target, 7% below $148.
The call
The shares at $148 need about $13.50 of 2027 earnings at 11 times, or $8 billion of free cash kept forever at 10 times enterprise value. That only holds if Middle East disruption keeps oil well above mid-cycle through 2027.
I model $12.50 of 2027 earnings and $6.5 billion of free cash as inventories rebuild and volumes grow only 5% in oil. Encino synergies and sub-$710 Delaware well costs are real, but they do not offset a $20 drop in crude. The market is too optimistic on how long this price lasts.
Revenue and operating income ($ billions)SEC XBRL through Q2 2026; 2026E-2027E are this desk
Valuation
| Item | Figure |
|---|
| 2026E free cash (company strip plan) | $8.0 billion |
| 2027E earnings (this desk) | $12.50 a share |
| 2027E free cash (this desk) | $6.5 billion |
| Shares (year-end 2027E) | 515 million |
| Multiple on 2027E earnings | 11 times |
| Twelve-month target | $138 |
Eleven times is a mid-cycle independent-producer multiple when WTI is $70, $80, not a war premium. Asymmetry is modest: a lasting $90 oil tape could take the stock to $165; a $60 tape takes it toward $110. That band around a 7% gap is a hold, not a sell.
Risks
- A longer Iran conflict keeps WTI above $90 into 2027; watch EIA inventories and the November 6 print.
- Utica or UAE wells disappoint versus the 14% total-volume plan; watch Q3 volumes versus 1,390, 1,435 mboe/d guidance.
- Buybacks slow if cash is used for another acquisition; watch remaining $11.7 billion authorization.
What would change my mind
A 2027 capital plan that still funds 5% oil growth at a stated $50 WTI breakeven after a $20 price drop would push the target up.