Morgan Stanley released a massive report on the energy sector today, one that makes an interesting argument: That technological gains in the U.S. shale won't cause oil prices to plummet, as cost inflation starts to offset some of those advantages. That goes against the conventional wisdom that sees shale production is getting so cheap that any uptick in price will cause a surge in production...and falling oil prices. Instead, they see oil prices staying in a $45 to $60 band, and this new framework also resulted in some ratings changes: Morgan Stanley analysts, including Evan Calio and Martijn Rats, upgraded EOG Resources (EOG) to Overweight from Equal Weight, and cut Whiting Petroleum (WLL) to Underweight from Equal Weight.
"In our view, a tighter (and moderately rising) oil price range and continued technology gains (partially offset by inflation) support relative alpha in E&Ps and provide a more positive risk-reward for Permian-focused operators (the basin where technology gains will likely be greatest). E&P equities now also offer more compelling valuations given their recent pullback... Specifically, we believe E&Ps best positioned for this environment are Pioneer Natural Resources (PXD), EOG, Parsley Energy (PE), Diamondback Energy (FANG), and Devon Energy (DVN) as the value play."
Read: http://www.barrons.com/articles/morgan- ... yptr=yahoo
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The valuations of the Sweet 16 in my newsletter assume commodity prices average $3.00/Mcf for natural gas and $50/Bbl for crude oil FOR ALL FUTURE PERIODS after 2017. - Dan
Sweet 16 Upgrades by Morgan Stanley
Sweet 16 Upgrades by Morgan Stanley
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Sweet 16 Upgrades by Morgan Stanley
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group