Is this a "Buying Opportunity"? - April 2

[dan_s]

Note from one of the Raymond James Energy Sector Team based in Houston.

Be Patient As Oil Price Still Needs to Drop Alot More, But Start Getting Your E&P Shopping List Ready

COVID-19 driven global demand disruption and the Saudi-Russia price war has pushed oil prices into the low $20s. Crude prices have fallen ~64%
YTD and our E&P coverage has fallen by a similar amount (~67%). Unfortunately, with the effects of COVID-19 continuing to weigh on global
demand, it's likely global crude storage capacity maxes out in 2Q20, creating a nightmarish scenario and the possibility that crude could test
the $10/bbl threshold. Buying E&P stocks during an oil free-fall doesn't typically work out, so our message to investors is to sit tight and remain
patient. However, now is the time to get your E&P shopping list together.

We believe a buying opportunity is going to emerge during 2Q with some names approaching valuations well below any levels they've traded at
before. A few weeks ago, we published a report containing the findings of a stress test should crude prices remain depressed through 2021. We
concluded from that test that many E&Ps could survive this ultra-depressed scenario. The question becomes: of those survivors who would be
the most attractive candidates? Remember that our near-term call is for patience. However, should the oil environment continue to worsen as
we expect, there will be several high-quality names that likely reach unprecedented valuation levels. As of today, Diamondback Energy (FANG)
and Parsley Energy (PE) screen the best, but there will likely be plenty of others that soon join them. We'll explain our approach and findings
from this round of analysis on page two.

They also like CLR, COG (top gasser on their list), CXO, CVN, EOG, MTDR and XEC

Important to note that at the comments above were written before news of Trump's deal to get Saudi Arabia and Russia to cut production.

[k1f]

<<Trump's deal to get Saudi Arabia and Russia to cut production.>>

Has there been an actual "deal"? If so, that's good news.

[dan_s]

OPEC+ is having a virtual meeting on Monday to vote on what I'm sure will be Saudi Arabia's plan to cut production. Russia won't need to cut much to get the deal done.

Keep in mind that there are lots of oilfields in OPEC countries that will be shut-in anyway because they are cash flow negative at $30 oil. I saw one estimate today that up to 10 million barrels per day will be going offline due to the low price. Oil wells get plugged and abandoned when they become sub-economic. Low oil prices remove production and they put the brakes on exploration & development.