Home 2020 2020 2-H Crude Oil Recovery to Boost Oil Stocks + HeffX Oil...

2020 2-H Crude Oil Recovery to Boost Oil Stocks + HeffX Oil Report


This year the markets have seen the waterfall effects of the C-19 coronavirus and a battle over Crude Oil dominance between Russia and Saudi Arabia over production that helped to slash benchmark pricing for WTI and Brent Crude Oil by more than 70% several days ago.

The energy sector took another turn South recently when the front-month Crude Oil futures for May, which expired in mid-April, traded negative, as traders were forced to sell at a loss.

The exchange has strict rules for those players holding contracts ay expiry have to take physical delivery.

So, with no storage available, that brought a tital wave of selling with no bids.

We say crisis brings opportunity.

Goldie feels that way too, and in a recent report, GS analysts noted that the unprecedented drop in demand is giving investors a chance to buy energy stocks at very cheap marks. They list of 24 Crude Oil stocks that are likely to benefit the most from a recovery. And even see Crude Oil demand ramping back up by the end of June, and it also sees low prices forcing more domestic production choked and shut-in as we do.

Below are the reasons noted in GS’ research report why investors should be looking at the hammered energy sector now, as follows:

  • Oil prices are at/below cash costs.
  • Shut-in announcements are becoming material.
  • Demand appears to be at a trough.
  • Valuation is near 25-yr lows on enterprise value/gross cash invested.
  • The Energy Select Sector SPDR Fund (NYSEARCA:XLE) ETF had risen nicely, despite the recent bad news.

Here are 5 of the energy stocks that are see a recovery rebound and are Buy rated + retained their dividends.

Energy stocks have been hammered for sometime now. so it is almost impossible to get that April’s great stock market rally had energy stocks leading the way with the greatest gainers. Even so, Oil & Gas stocks still have a place as value stocks and not value traps.

Chevron: This integrated leader is a safer way for investors looking to be positioned in the energy sector. Chevron Corp. (NYSE:CVX) is a US-based integrated Oil & Gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals. The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and LNG.

Chevron is among the companies with the largest corporate debt, and recently slash spending after halting its $5-B/yr share buyback and halving spending in the Permian Basin, which means a large decrease in projected output from America’s biggest shale region.

The California-based giant has said that it would lower projected Y 2020 capital spending by 20%, or $4-B. The Permian will account for the largest element of that reduction .

Shareholders receive a strong 5.45% dividend, which the analysts feel comfortable will remain at current marks. The Goldman Sachs price target is posted at 89. It compares to a Wall Street consensus target of 90.62. The last Chevron trade Friday was reported at 89.44, down almost 3% on the day.

HeffX-LTN’s overall technical analysis is Neutral with a Bullish bias, a break about the Key resistance at 109 augurs a move to the January high at 121.

ConocoPhillips: This stock offers solid upside potential, and the company recently gave investors a massive dividend increase. ConocoPhillips (NYSE:COP) explores for, produces, transports and markets crude oil, bitumen, nat gas, LGN and nat gas liquids worldwide.

Conoco’s portfolio includes resource-rich North American tight Oil and Oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects.

Conoco posted solid Q-1 EPS that beat consensus estimates. Many analysts see the delta on lagged realizations, lower operating expenses and taxes as solid positives. Shut-in plans are increased for May and expanded to June as a response to the price collapse.

Investors receive a solid 3.98% dividend. The Goldman Sachs price target is 38. The posted consensus price target is 46.83, and ConocoPhillips stock closed Friday at 39.14.

HeffX-LTN’s overall technical analysis is Neutral with a Very Bullish bias as our 3 Key indicators just turned Very Bullish, a break about the Key resistance at 45.7 augurs a move to the 12 February high at 59,76.

EOG Resources: EOG (NYSE:EOG)is a leading energy company is also a top pick across Wall Street. EOG Resources Inc. is 1 of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the UK and China.

In February the company post adjusted Q-4 Y 2019 earnings that beat consensus expectations on better realizations, lower operating expenses and depreciation, depletion and amortization. The company had $440-M of free cash flow generated after dividends.

Shareholders receive a 3.14% dividend. The price target at Goldman Sachs is 58, while the consensus price target is 59.68. EOG Resources stock closed Friday at 44.57.

HeffX-LTN’s overall technical analysis is Neutral with a Bullish bias, a break about the Key resistance at 52.73 augurs a move to the January high at 70.97, the lower 24 February gap mark.

Marathon Petroleum: MCP (NYSE:MPC)is a solid way to play the energy sector, it is the Top pick at Jefferies. Marathon Petroleum Corp. is 1 of the largest indy petroleum refining and marketing companies in the US. It operates approximately 2,750 retail sites under the Marathon and Speedway brands. Plus, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport Crude Oil and petroleum products.

In late February MPC said it would invest $550-M in Speedway. The investment will focus primarily on converting convenience stores the company added to its portfolio through several acquisitions over the past 2 yrs, notably, its strategic combination with San Antonio-based Andeavor in the Fall of 2018 to Speedway’s branding and systems.

The company bought rival Andeavor for $23.3-B in the biggest-ever deal for an Crude Oil refiner, creating the largest independent fuel maker in the US. It was 1 of the biggest mergers in Y 2018. Following the deal, Marathon became the largest operator of refining capacity in the United States, and management believes the company can achieve the $1-B in synergies that it suggests.

Shareholders receive a very strong 7.02% dividend. The 31 Goldman Sachs price target is lower than the 46.14 consensus figure. Marathon Petroleum stock closed Friday at 29.24

HeffX-LTN’s overall technical analysis is Neutral with a Bullish bias, a break above Key resistance at 39.15 augurs a move to the 2 March close at 45.15. high.

Pioneer Natural Resources: PDX (NYSE:PXD)is a pure Crude Oil play. Pioneer Natural Resources Co. operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.

Pioneer is a huge player in the Permian Basin and in the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s 2nd-largest Crude Oil reservoir in the Midland Basin. The company recently updated Ys 2020 and 2021 hedging, adding $1.2-B to cash flow estimates over next 2 yrs. It also added a new $900-M credit facility, which enhances liquidity. In addition, the Gulf coast marketing makes Pioneer less exposed to widening Midland differentials.

Investors receive a 2.45% dividend. The Goldman Sachs price target is 105. The consensus figure is 107.06, and Pioneer Natural Resources stock closed on Friday at 82.92.

HeffX-LTN’s overall technical analysis is Neutral with a Bullish bias, a break about the Key resistance at 83.06 augurs a move to its 25 February close at 130.09. The stock is Very Oversold in here.

The above outlook is on Big exploration and production companies and a refiner, and avoided oil field services only, due to the continued potential for domestic production shut-ins + OPEC cuts.

The energy sector is volatile on the back of C-19’s chaos, but scale buying and patient will bring very solid gainers for investors over the rest of Y 2020. With the nation opening back up, and the busy Summer driving and vacation season all but upon us, demand looks to move substantially higher as American will take to the open road after being cooped up aat home for 3 months

Click here for the latest HeffX Crude Oil Report.

Have a healthy weekend, Keep the Faith!

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.