KeyBanc has increased price targets for EOG, FANG, PDCE, PXD
Posted: Tue Oct 19, 2021 10:43 am
KeyBanc
Oil & Gas: Raising 2021 WTI Oil Prices 1.5% to $69 & 2022 WTI Oil Prices 7% to $75 on Successful COVID
Vaccination Campaigns & Expectations for Pre-Pandemic Oil Demand in 2022
Leo Mariani, CFA - (512) 872-7875 - leo.mariani@key.com
We are raising our 2021 WTI oil price forecast by 1.5% to $69/Bbl and our 2021 Brent forecast by 2% to $72/Bbl on a successful
rollout of Covid-19 vaccines in the U.S. and Europe, leading to a quicker than expected recovery and better visibility on 4Q21 oil
demand growth. We are also raising our 2022 WTI oil price forecast by 7% to $75/Bbl on global oil demand returning to at or above
pre-pandemic levels next year. We are raising our 2021 Mt. Belvieu NGL price forecast by 11% to ~$38/Bbl on higher oil and gas
prices and elevated NGL exports. We are also raising our 2022 Mt. Belvieu NGL price forecast by 22% to ~$42/Bbl on expectations
for NGL prices to remain elevated through this Winter, though we expect prices to decline during the year in 2022 on higher supply.
Additionally, we are raising our 2021 HH Natural Gas price forecast by 21% to $3.70/Mcf on muted associated gas production
growth, the effects of the polar vortex to lower storage, a hot summer, and record U.S. LNG exports. We are also raising our 2022
HH Natural Gas price forecast by 31% to $3.75/Mcf, but we expect prices to taper off and fall throughout 2022.
Global oil demand
has continued to pick up steam in the U.S., and oil demand in China and India was already near or above pre-pandemic levels
late last year. Oil demand in India took a dip in April and May but recovered a bit this summer, and India's oil minister expects the
country's fuel demand to normalize by YE21. We also expect European oil demand to continue to improve as lockdown measures
have expired. Overall, we expect global oil demand to continue to pick up in 4Q21 on successful Covid-19 vaccination campaigns
with 100-101 MMBopd being achieved in 2022. Additionally, we think OPEC+’s plan to gradually raise production in August 2021-
September 2022 is evidence that it sees a continued improvement in oil demand growth in the medium-term. We also expect OPEC
+ to manage the market effectively into 2022. We only expect U.S. oil production growth of 1-2% exit to exit in 2021.
Furthermore,
the majority of U.S. oil-focused E&Ps implemented maintenance mode capex budgets in 2021, though a few E&Ps announced
modestly higher capex budgets. Lastly, we expect to see limited Non-OPEC growth in 2021 of 0.5 MMBopd on a y/y basis and
1.6 MMBopd in 2022. CFPS estimates for the oily E&Ps we cover are up 5% on average in 2021 on higher commodity prices with
APA (9%), CRC (8%), and MGY (7%) showing the biggest increases, while gassy E&Ps we cover are up 11% on average with
CTRA (24%), RRC (15%), and CRK (12%) showing the biggest increases. CFPS estimates for the oily E&Ps we cover are up 12%
on average in 2022 on higher commodity prices with OXY (20%), APA (18%), CLR (16%), and MUR (16%) showing the biggest
increases, while gassy E&Ps we cover are up 23% on average with CRK (37%), RRC (36%), and CTRA (27%) showing the biggest
increases. Additionally, E&Ps within our coverage reflect an average FCF yield of 21% in 2022 at $75 WTI/$3.70 HH and a DACF
multiple of 3.7x. Lastly, we are raising price targets for a number of E&Ps on our higher commodity forecasts including APA, BCEI,
BRY, COP, CRC, DEN, EOG, FANG, PDCE, PXD, SM, and WLL.
Oil & Gas: Raising 2021 WTI Oil Prices 1.5% to $69 & 2022 WTI Oil Prices 7% to $75 on Successful COVID
Vaccination Campaigns & Expectations for Pre-Pandemic Oil Demand in 2022
Leo Mariani, CFA - (512) 872-7875 - leo.mariani@key.com
We are raising our 2021 WTI oil price forecast by 1.5% to $69/Bbl and our 2021 Brent forecast by 2% to $72/Bbl on a successful
rollout of Covid-19 vaccines in the U.S. and Europe, leading to a quicker than expected recovery and better visibility on 4Q21 oil
demand growth. We are also raising our 2022 WTI oil price forecast by 7% to $75/Bbl on global oil demand returning to at or above
pre-pandemic levels next year. We are raising our 2021 Mt. Belvieu NGL price forecast by 11% to ~$38/Bbl on higher oil and gas
prices and elevated NGL exports. We are also raising our 2022 Mt. Belvieu NGL price forecast by 22% to ~$42/Bbl on expectations
for NGL prices to remain elevated through this Winter, though we expect prices to decline during the year in 2022 on higher supply.
Additionally, we are raising our 2021 HH Natural Gas price forecast by 21% to $3.70/Mcf on muted associated gas production
growth, the effects of the polar vortex to lower storage, a hot summer, and record U.S. LNG exports. We are also raising our 2022
HH Natural Gas price forecast by 31% to $3.75/Mcf, but we expect prices to taper off and fall throughout 2022.
Global oil demand
has continued to pick up steam in the U.S., and oil demand in China and India was already near or above pre-pandemic levels
late last year. Oil demand in India took a dip in April and May but recovered a bit this summer, and India's oil minister expects the
country's fuel demand to normalize by YE21. We also expect European oil demand to continue to improve as lockdown measures
have expired. Overall, we expect global oil demand to continue to pick up in 4Q21 on successful Covid-19 vaccination campaigns
with 100-101 MMBopd being achieved in 2022. Additionally, we think OPEC+’s plan to gradually raise production in August 2021-
September 2022 is evidence that it sees a continued improvement in oil demand growth in the medium-term. We also expect OPEC
+ to manage the market effectively into 2022. We only expect U.S. oil production growth of 1-2% exit to exit in 2021.
Furthermore,
the majority of U.S. oil-focused E&Ps implemented maintenance mode capex budgets in 2021, though a few E&Ps announced
modestly higher capex budgets. Lastly, we expect to see limited Non-OPEC growth in 2021 of 0.5 MMBopd on a y/y basis and
1.6 MMBopd in 2022. CFPS estimates for the oily E&Ps we cover are up 5% on average in 2021 on higher commodity prices with
APA (9%), CRC (8%), and MGY (7%) showing the biggest increases, while gassy E&Ps we cover are up 11% on average with
CTRA (24%), RRC (15%), and CRK (12%) showing the biggest increases. CFPS estimates for the oily E&Ps we cover are up 12%
on average in 2022 on higher commodity prices with OXY (20%), APA (18%), CLR (16%), and MUR (16%) showing the biggest
increases, while gassy E&Ps we cover are up 23% on average with CRK (37%), RRC (36%), and CTRA (27%) showing the biggest
increases. Additionally, E&Ps within our coverage reflect an average FCF yield of 21% in 2022 at $75 WTI/$3.70 HH and a DACF
multiple of 3.7x. Lastly, we are raising price targets for a number of E&Ps on our higher commodity forecasts including APA, BCEI,
BRY, COP, CRC, DEN, EOG, FANG, PDCE, PXD, SM, and WLL.