Sweet 16 Forecast Updates - Mar 31

[dan_s]

Stifel: Morning Meeting Highlights on March 31, 2020

Oil & Gas Exploration and Production
- Focused on E&P Survivors - Michael S. Scialla
- Following a solid 4Q19 reporting period, pandemic-driven oil demand destruction and the dissolution of the OPEC+ agreement has us focussed on E&P companies that can endure an unparalleled oil market imbalance. The former is expected to reduce demand by 12-16 MMBopd or more in April, overshadowing an incremental 2 MMBopd of supply from Saudi Arabia. We note that saturated storage capacity and/or a slower-than-expected demand recovery could cause prices to slide further and force uneconomic production to be shut-in. With this somber backdrop, we are raising our ratings on BCEI, EOG, NBL, PDCE, PE, and XEC to Buy from Hold and lowering our rating on DNR and WLL to Sell from Hold. < I'm taking a hard look at Denbury Resources (DNR) now. We will publish an updated profile on it this afternoon. The company has some very good hedges that should keep them free cash flow positive through 2020. However, like most of the upstream companies, Denbury will need much higher oil prices to survive in 2021.

Oil & Gas Exploration and Production
- 4Q19 Natural Gas E&P Review Note: Reconciling Opposing Forces - Jane Trotsenko
- Our natural gas coverage is down almost 50% ytd compared to XOP index down 65%, as negative revisions for oil names surpassed those for natural gas equities following a collapse in crude oil price after March OPEC meeting. On the one hand, material capex cuts announced by oil producers reduce associated gas supply, leading to a higher call on gas plays. On the other hand, coronavirus destroys domestic and international natural gas demand, driving storage surpluses higher and natural gas prices lower. These opposing forces pull supply/demand balances in opposite directions, making investors wonder when is the bottom. Given growing storage surplus and high demand uncertainty, we believe it is prudent to remain cautious on natural gas equities until we have more clarity on economic recovery from coronavirus impact and 2021+ associated gas production declines are locked in.

[dan_s]

Notes below from Stifel:

Antero Resources Corporation (AR, $0.74, Hold; Target $1.00) - Lowering Rating to Hold from Buy; Dropping Target Price to $1 - Jane Trotsenko - We are lowering our rating on AR to Hold from Buy. We are reducing our target price to $1 from $4.

Comstock Resources, Inc. (CRK, $4.94, Buy; Target $8.00) - Raising Rating to Buy from Hold; Increasing Target Price to $8 - Jane Trotsenko - We are raising our rating on Comstock Resources to Buy from Hold and increasing our target price to $8 from $6. Please see our multi-company note titled "4Q19 Natural Gas E&P Review Note: Reconciling Opposing Forces" for more details.

EOG Resources Inc. (EOG, $34.98, Buy; Target $73.00) - Raising Rating to Buy - Michael S. Scialla - We are raising our rating on EOG to Buy from Hold.

Gulfport Energy Corporation (GPOR, $0.45, Sell; Target $0.40) - Lowering Rating to Sell from Buy; Dropping Target Price to $0.40 - Jane Trotsenko - We are lowering our rating to Sell from Buy and reducing our target price to $0.40 from $2.50. Please see our multi-company note titled "4Q19 Natural Gas E&P Review Note: Reconciling Opposing Forces" for more details

PDC Energy (PDCE, $5.73, Buy; Target $11.00) - Raising Rating to Buy - Michael S. Scialla - We are raising our rating on PDCE to Buy from Hold.

Parsley Energy, Inc. (PE, $4.81, Buy; Target $13.00) - Raising Rating to Buy - Michael S. Scialla - We are raising our rating on PE to Buy from Hold

Range Resources Corporation (RRC, $2.33, Hold; Target $3.00) - Lowering Rating to Hold from Buy; Dropping Target Price to $3 - Jane Trotsenko - We are lowering our rating to Hold from Buy and reducing our target price to $3.00 from $9.00. Please see our multi-company note titled "4Q19 Natural Gas E&P Review Note: Reconciling Opposing Forces" for more details

Cimarex Energy Co. (XEC, $14.86, Buy; Target $35.00) - Raising Rating to Buy - Michael S. Scialla - We are raising our rating on XEC to Buy from Hold.
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I am more bullish on natural gas than Jane is, but we definitely live in uncertain time.