This is good news for Bakken Companies

[dan_s]

This is from Morgan Stanley energy sector analysts. - Dan

We narrow our 2014 Brent-WTI forecast to ~$3/Bbl. We expect the Cushing infrastructure overbuild to keep the 2014 diff narrower than Street expectations for $8-10/Bbl. Narrower diffs negatively impact Refining/Integrated and support E&P;. Raising E&P; estimates 8%; lowering CVX &; XOM by 4% and 13%.

Crude differentials tighter in 2014. We expect crude differentials will remain narrow in 2014. We are lowering our 2014 Brent-WTI forecast to ~$3/Bbl vs. our prior estimate of $8/Bbl and Street at $8-10/Bbl. We believe new and excess takeaway capacity from Cushing will narrow prices to less than transportation economics. Cushing will be structurally short crude until at least mid-2014 and will be unable to support new committed volumes without drawing inventories. We expect Cushing will compete with Gulf for light crudes in 2014 and trade to parity or a premium at times. We expect differentials will normalize in late 2014/2015 to a transportation cost differential of $6-9/Bbl. See Losing the Crude Advantage For Most of 2014, 9/30/13.

Raising 2014 E&P; estimates. We are raising our 2014 E&P; estimates by an avg 8% to reflect higher crude prices. The largest impact is in the Cushing area, with more modest impacts in the Bakken (rail economics hold) and in the Gulf Coast where we assume tighter diffs (improves Eagle Ford realizations).

Lowering 2014 Integrated estimates. We lower CVX and XOM 2014 estimates by 4% and 13%, respectively, to reflect our lower refining estimates. XOM is more negatively impacted given its larger Mid-Con refining exposure. We expect 2014 to be ~$1/sh lower than the Street ($7.15/sh vs. $8.03/sh), solely related to refining, and we are lower for each of the next 6 quarters. Despite underperformance in the last 3 months (-9% vs S&P; and -7% vs closest peer CVX), XOM remains at a historical premium to E&Ps;. Reiterate UW and have lowered our price target to $79/sh from $85/sh.