An analyst at Stifel upgraded W&T Offshore's stock from hold to buy. They also increased their price target on the company from $5.10 per share to $6.90 per share. That implies significant upside potential given that shares traded around $4.50 after today's rally.
Driving Stifel's upgrade is the recent increase in oil prices. West Texas Intermediate (WTI), the U.S. oil benchmark price, is closing in on $85 a barrel. Because of that, W&T Offshore is earning more money on its oil output.
The analyst also updated their production estimates for the company for the second half of the year after it released new production guidance. W&T Offshore reported earlier this week that it shut in about 80% of its production at one point due to Hurricane Ida. However, it has brought most of that output back online. As a result, it sees its third-quarter production averaging between 34,200 and 35,100 barrels of oil equivalent per day (BOE/D). Meanwhile, its fourth-quarter output should rise to between 34,000 and 38,500 BOE/D, assuming no further hurricane-related shut-ins this year.
While Hurricane Ida impacted W&T Offshore, the company is quickly bringing its oil production back online. That's enabling the company to cash in on higher oil prices, which are at their best levels since 2014. If oil prices stay high and no more hurricanes impact its production, W&T Offshore could generate a gusher of cash flow in the coming quarters. That could give its stock the fuel to continue rallying.