Top Picks by MKM Partners Research Team - Dec 14

[dan_s]

MKM Research Note 12-14-2020

The E&P sector reflects NYMEX $52-$53 oil and $2.60-$2.65 gas. Our NYMEX 2021 oil price is $47.50 and 2022+ equilibrium outlook is $55. Our NYMEX 2021 natural gas price is $3 and 2022+ equilibrium outlook is $2.80. Our commodity price deck implies a sector median intrinsic upside of ~17%. Oil-oriented E&Ps (> 50% oil) have ~12% upside, gas-oriented E&Ps (<20% oil) have ~35% upside and combo-composition E&Ps (20%-50% oil) have ~15% upside.

Our equilibrium composite Mont Belvieu NGL price is ~45% of NYMEX oil. Companies with superior combined full-cycle returns, equity value upside, and financial leverage include Cabot, EOG Resources (EOG), Chevron, Range Resources (RRC), Pioneer Natural Resources (PXD), Diamondback Energy (FANG), Comstock Resources (CRK), EQT Corp. (EQT) PDC Energy (PDCE), ConocoPhillips, and ExxonMobil.