Sweet 16 Forecast Updates - Mar 31
Posted: Tue Mar 31, 2020 10:46 am
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.
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.