Most games in life are cooperative. Many are competitive. A few are perverse.
That’s what the crude oil market is like today. It reminds me of the prisoner’s dilemma. In the prisoner’s dilemma, two parties that would benefit from cooperating together tend not to do so because of other incentives that if both follow, they will both end up in a worse place.
This stems from threeproblems facingOPEC [Organization of the Petroleum Exporting Countries].
The Saudis and the Iranians don’t want to take any action that would benefit the other, even if it would help themselves. It’s virtually impossible to keep member nations in OPEC from cheating, and producing more than their quota. Thanks to hydraulic fracturing (at least for now) there is enough supply outside of OPEC at inexpensive prices, that if OPEC cut production as a group, it might not gain as much of the benefit as they did in the ’70s and early ’80s.
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Top 10 Oil Stocks To Invest In Right Now: Encana Corporation(ECA)
Encana Corporation and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids. The company owns interests in resource plays that primarily include the Greater Sierra, Cutbank Ridge, Bighorn, and Coalbed Methane resource plays located in British Columbia and Alberta, as well as the Deep Panuke natural gas project offshore Nova Scotia in Canada. It also holds interests in resource plays comprising the Jonah in southwest Wyoming, Piceance in northwest Colorado, Haynesville in Louisiana, and Texas resource play, including east Texas and north Texas. The company serves primarily local distribution companies, industrials, energy marketing companies, and other producers. Encana Corporation was founded in 1971 and is headquartered in Calgary, Canada.
- [By Ben Levisohn]
Barclays analyst Thomas Driscoll and team see more dividend cuts and equity raises coming for oil & gas stocks like Apache (APA), Devon Energy (DVN),Encana (ECA), Anadarko Petroleum (APC), and Marathon Oil (MRO). They explain why:
Top 10 Oil Stocks To Invest In Right Now: Magellan Midstream Partners L.P.(MMP)
Magellan Midstream Partners, L.P., together with its subsidiaries, engages in the transportation, storage, and distribution of refined petroleum products and crude oil in the United States. Its pipeline system transports petroleum products and liquefied petroleum gases from the Gulf Coast refining region of Texas through the Midwest to Colorado, North Dakota, Minnesota, Wisconsin, and Illinois. The company owns and operates marine terminals, which store and distribute refined petroleum products, blendstocks, crude oils, heavy oils, and feedstocks, as well as inland terminals that consist of storage tanks connected to third-party interstate pipeline systems to deliver refined petroleum products. Its ammonia pipeline system transports ammonia from production facilities in Texas and Oklahoma to terminals in the Midwest. The company also stores, blends, and distributes biofuels, such as ethanol and biodiesel. As of March 31, 2011, it operated approximately 9, 600 miles of petr oleum products pipeline system and 51 terminals; 6 marine petroleum terminals located along the United States Gulf and East Coasts; a crude oil storage in Cushing, Oklahoma; 27 petroleum products inland terminals located principally in the southeastern United States; and a 1,100-mile ammonia pipeline system and 6 associated terminals. The company also provides ancillary services, such as heating, blending, and mixing of stored petroleum products and additive injection services. Its customers comprise independent and integrated oil companies, wholesalers, retailers, railroads, airlines, and regional farm co-operatives. The company serves various markets, including retail gasoline stations, truck stops, farm co-operatives, railroad fueling depots, and military and commercial jet fuel users. Magellan GP, LLC serves as the general partner of the company. The company was founded in 2000 and is based in Tulsa, Oklahoma.
- [By WWW.INVESTOPEDIA.COM]
Companies in the oil storage business can take advantage of what is known as contango, which is when forward prices are higher than current prices, allowing the purchase of cheap oil to be stored and sold at a later date while securing income using derivatives. Five companies that appear to be in a good position to take advantage of reduced oil storage capacity are Magellan Midstream Partners (NYSE: MMP), Enterprise Products Partners (NYSE: EDP), Spectra Energy Partners (NYSE: SEP), Buckeye Partners (NYSE: BPL) and EQT Midstream Partners (NYSE: EQM).
Top Information Technology Companies To Watch In Right Now: Halliburton Company(HAL)
Halliburton Company provides various products and services to the energy industry for the exploration, development, and production of oil and natural gas worldwide. It operates in two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services, completion tools and services, cementing services, and Boots & Coots. Its production enhancement services include stimulation and sand control services; completion tools and services comprise subsurface safety valves and flow control equipment, surface safety systems, packers and specialty completion equipment, intelligent completion systems, expandable liner hanger systems, sand control systems, well servicing tools, and reservoir performance services; cementing services consist of bonding the well and well casing, while isolating fluid zones and maximizing wellbore stability, and casing equipment; and Boots & Coots include well intervention services , pressure control, equipment rental tools and services, and pipeline and process services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and wellbore placement solutions that enable customers to model, measure, and optimize their well construction activities. Its services comprise fluid services, drilling services, drill bits, wireline and perforating services, testing and subsea services, software and asset solutions, and integrated project management and consulting services. The company serves independent, integrated, and national oil companies. Halliburton Company was founded in 1919 and is headquartered in Houston, Texas.
- [By Matt Egan]
Pink slips are flying in the oil patch: Profits at energy giants Chevron and Exxon Mobil fell over 50% around the middle of last year. No wonder many American oil companies, including Halliburton (HAL) and ConocoPhillips (COP) have aggressively slashed expenses to counter lower earnings. Government statistics indicate the energy industry slashed 130,000 jobs in 2015. Actual job losses that include oil-related businesses are likely higher.
- [By Ben Levisohn]
On a great day for theVanEck Vectors Oil Services ETF (OIH) and big holdings like Schlumberger (SLB), Halliburton (HAL), and Baker Hughes (BHI), Weatherford International (WFT) is doing better than most. One reason: Barclays analystsJ. David Anderson andWilliam Thompson upgraded Weatherford to Overweight from Equal Weight. They explain why:
- [By Ben Levisohn]
Shares of Halliburton (HAL) and Baker Hughes (BHI) are soaring after they announced that they’d challenge the U.S. Department of Justice’s decision to block their merger. RBC’s Kurt Hallead has the details:
Shares of both companies rose ~5% following the joint press release indicating they would challenge the DoJ’s decision to oppose the pending merger.
Following numerous media reports this week that the DoJ would move to block the pending Halliburton-Baker Hughes merger, the companies today issued a joint press release vowing to contest the DoJ’s effort to stop the deal.
This confirms that the DoJ is, in fact, planning to sue to halt the pending merger. While it is extremely difficult to handicap potential outcomes at this point, it appears likely that a resolution will be delayed further. The next critical date is April 30, after which either party can choose to walk away if regulatory approval has not been obtained.
Wells Fargo’s Judson Bailey and Christopher Voie explain why they’re still bullish on Baker Hughes:
With the DOJ announcing it will block the Halliburton-Baker Hughes transaction, we believe the recent increase inHalliburton shares makes sense but believe that the risk/reward forBaker Hughes as a stand-alone entity may be more compelling with what we view as an exceptionally strong balance sheet and operational upside potential off of a depressed base.
Potential Deal Still Up In The Air. Although the DOJ is blocking the Halliburton-Baker Hughes merger, the final outcome is still uncertain as there is a decent probability, in our view, that Halliburton will contest the decision and go to court over the issue. However, even ifHalliburton pursues this course, it is also a distinct probability thatBaker Hughes elects to exercise its rights under the merger agreement to terminate the merger after April 30 and collect the $3.5B break-up fee.<
Top 10 Oil Stocks To Invest In Right Now: Transocean Inc.(RIG)
Transocean Ltd. provides offshore contract drilling services for oil and gas wells worldwide. It offers deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and drilling project management services. The company also offers well and logistics services. In addition, it engages in oil and gas exploration, development, and production activities primarily in the United States offshore Louisiana and Texas, and in the United Kingdom sector of the North Sea. As of February 10, 2011, the company owned, had partial ownership interests in, and operated 138 mobile offshore drilling units, including 47 high-specification floaters, 25 midwater floaters, 9 high-specification jackups, 54 standard jackups, and 3 other rigs, as well as 1 ultra-deepwater floater and 3 high-specification jackups under construction. Transocean Ltd. was founded in 1953 and is based in Zug, Switzerland.
- [By Paul Ausick]
Following a November 2011 leak of about 3,600 barrels of oil from a rig offshore of Brazil, Chevron Corp. (NYSE: CVX) and driller Transocean Ltd. (NYSE: RIG) were slapped with a penalty of $17.5 billion by the governments public prosecutors office. That payment reportedly hasbeen reduced to less than $42 million as the company and the government have agreed on a settlement.
- [By Ben Levisohn]
RBC’s Kurt Hallead and Benjamin Owens offer their take on Transocean (RIG) appearance at the RBC Global Energy and Power Conference:
Our view: Transocvean continues to execute well, with the focus on revenue efficiency bearing fruit over the last several quarters. However, we believeTransocean shares have limited upside until the market gains more confidence in the supply/demand outlook for floating rigs in 2017-18. Currently, fundamentals continue to weaken for floating rigs, and it remains unclear where dayrates and utilization may bottom.
Expects to see 2H16 opportunities in the jackup market:Transocean expects shallow water to be the first area within the offshore market to see increased spending if oil prices remain constructive. The demand for jackups is being driven by independent oil companies and NOCs. The company still expects the deep water rig count to trend lower through at late-2016 or early-2017.
Deepwater recovery domino effect: In Transoceans view, deep water rigs currently working will remain working in a recovery. The next rigs back to work will be warm-stacked rigs, then rigs currently in the ship-yard, with rigs currently cold-stacked the last to find work. The company thinks newbuilds could cease for up to a decade during the next cycle, similar to what happened in the 1990s, with many offshore drillers opting to upgrade rigs rather than build new.
Offshore dayrates could lag in a recovery: With demand still declining, dayrates for new work are likely to remain near cash break-even to slightly higher in the near-term.Transocean thinks utilization needs to hit 80-85% before the industry starts to see pricing power for offshore rigs. The company thinks pricing could take a while to move off the bottom, even with activity increases, due to the fact that it will take the industry some time to digest the magnitude of oversupply in offshore rigs.
Evercore ISI’sJames West a
Top 10 Oil Stocks To Invest In Right Now: Apache Corporation(APA)
Apache Corporation, together with its subsidiaries, engages in the exploration, development, and production of natural gas, crude oil, and natural gas liquids. The company has exploration and production interests in the Gulf of Mexico, the Gulf Coast, east Texas, the Permian basin, the Anadarko basin, and the Western Sedimentary basin of Canada; and onshore Egypt, offshore Western Australia, offshore the United Kingdom in the North Sea, and onshore Argentina, as well as on the Chilean side of the island of Tierra del Fuego. Apache Corporation sells its natural gas to local distribution companies, utilities, end-users, integrated oil and gas companies, and marketers; and crude oil to integrated oil companies, marketing and transportation companies, and refiners. As of December 31, 2009, it had total estimated proved reserves of 1,067 million barrels of crude oil, condensate, and natural gas liquids, as well as 7.8 trillion cubic feet of natural gas. The company was founded in 1954 and is based in Houston, Texas.
- [By Shauna O’Brien]
Oppenheimer reported on Tuesday that it has raised its rating on energy company Apache Corporation (APA).
The firm has upgraded APA from “Perform” to “Outperform,” and has given the company a $100 price target. This price target suggests a 12% increase from the stock’s current price of $87.57.
Analysts believe that the current stock price already reflects risks and the company is repurchasing shares and debt.
Apache shares were up 79 cents, or 0.91%, during Tuesday morning trading. The stock is up 12% YTD.
Top 10 Oil Stocks To Invest In Right Now: Marathon Oil Corporation(MRO)
Marathon Oil Corporation, through its subsidiaries, operates as an international energy company with operations in the United States, Canada, Africa, the Middle East, and Europe. It operates through three segments: Exploration and Production, Oil Sands Mining, and Integrated Gas. The Exploration and Production segment explores for, produces, and markets liquid hydrocarbons and natural gas. The Oil Sands Mining segment mines, extracts, and transports bitumen from oil sands deposits in Alberta, Canada; and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil. The Integrated Gas segment markets and transports products manufactured from natural gas, such as liquified natural gas and methanol. The company was formerly known as USX Corporation and changed its name to Marathon Oil Corporation in July 2001. Marathon Oil Corporation was founded in 1887 and is based in Houston, Texas.
- [By Ben Levisohn]
Marathon Oil (MRO) has gained 2.7% to $11.98 after the oil explorer agreed to sell some assets for $950 million.
Avon Products (AVP) has fallen 1% to $$4.80 after getting cut to Neutral from Overweight at Piper Jaffray.
- [By Joshua Bondy]
The smaller players
Marathon Oil (NYSE: MRO ) recently spun off its downstream assets into Marathon Petroleum. Marathon Oil’s development of the Bakken and Eagle Ford are the main changes boosting its production volumes. Year-over-year, its second quarter U.S. volumes increased 38%. The Eagle Ford alone averaged 80 Mboepd and the Bakken averaged 39 Mboepd.
Top 10 Oil Stocks To Invest In Right Now: ONEOK Partners L.P.(OKS)
ONEOK Partners, L.P. engages in the gathering, processing, storage, and transportation of natural gas in the United States. The company?s Natural Gas Gathering and Processing segment gathers and processes natural gas produced from crude oil and natural gas wells located in the Mid-Continent region; and gathers natural gas in the Williston Basin, which spans portions of Montana and North Dakota, and the Powder River Basin of Wyoming. Its Natural Gas Pipelines segment primarily owns and operates regulated natural gas transmission pipelines, natural gas storage facilities, and natural gas gathering systems for non-processed gas. It also provides interstate natural gas transportation and storage services. This segment?s interstate natural gas pipeline assets transport natural gas through FERC-regulated interstate natural gas pipelines in North Dakota, Minnesota, Wisconsin, Illinois, Indiana, Kentucky, Tennessee, Oklahoma, Texas, and New Mexico. In addition, it transports intra state natural gas through its assets in Oklahoma; and owns underground natural gas storage facilities in Oklahoma, Kansas, and Texas. Its Natural Gas Liquids segment gathers, fractionates, and treats natural gas liquids (NGLs), as well as stores NGL products primarily in Oklahoma, Kansas, and Texas. This segment owns FERC-regulated natural gas liquids gathering and distribution pipelines in Oklahoma, Kansas, Texas, Wyoming, and Colorado; terminal and storage facilities in Missouri, Nebraska, Iowa, and Illinois; and FERC-regulated natural gas liquids distribution and refined petroleum products pipelines in Kansas, Missouri, Nebraska, Iowa, Illinois, and Indiana that connect its Mid-Continent assets with Midwest markets, including Chicago, Illinois. ONEOK Partners GP serves as the general partner of the company. The company was formerly known as Northern Border Partners, L.P. and changed its name to ONEOK Partners, L.P. in May 2006. The company was founded in 1993 and is base d in Tulsa, Oklahoma.
- [By Garrett Cook]
Citi maintains Buy ratings on Targa Resources (NYSE: TRGP), ONEOK (NYSE: OKE) and Oneok Partners (NYSE: OKS) citing the companies stories around natural gas liquids (NGLs).
Top 10 Oil Stocks To Invest In Right Now: Whiting Petroleum Corporation(WLL)
Whiting Petroleum Corporation engages in the acquisition, development, exploitation, exploration, and production of oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States. As of December 31, 2010, its estimated proved reserves were 304.9 million barrels equivalent of oil; and had interests in 9,698 gross productive wells covering approximately 1,115,000 gross developed acres. The company sells its oil and gas to end users, marketers, and other purchasers. Whiting Petroleum Corporation was founded in 1983 and is Denver, Colorado.
- [By Ben Levisohn]
Productivity analysis favors stock picking framework of shale scale + the next rung down. We continue to maintain our Buy ratings on several shale productivity winners such asEOG Resources (CL),Diamondback Energy (CL),PDC Energy (CL),Pioneer Natural Resources and RSP Permian, while increased visibility in a path towards oil price recovery has heightened our confidence in next rung down stocks such as Hess (HES) (CL), Anadarko Petroleum (APC), Encana (ECA), Carrizo Oil & Gas (CRZO) and Whiting Petroleum (WLL). While our well results analysis supports our thesis on these shale scale winners, we note that a number of these higher beta stocks also screened particularly well, further bolstering our view on these equities.
- [By Ben Levisohn]
Credit Suisse analystsMark Lear and team explain why they upgradedWhiting Petroleum (WLL) to Outperform from Neutral:
We upgradeWhiting Petroleum to Outperform and raise our target price to $14 per share (from $13/sh) given Whiting Petroleums significant beta to a higher mark to market 2Q16 WTI price. Our target price is further aided by a recent debt exchange whereby the company was able to remove $1.065bn of debt principal through the use of mandatory convertibles. Our $14/sh target price…is based on an assumption of max dilution, with actual shares issued on the convertible debt depending on how Whiting Petroleums stock trades over the next few weeks. This exchange came on the heels of a smaller 1Q16 announcement which removes ~$477mm of debt from the balance sheet.
In the most recent exchange, the minimum mandatory conversion price has a lower bound at $8.75 per share, which when coupled with macro fears appears to have unjustly hurt and kept the stock range-bound since the announcement, asWhiting Petroleum is down ~34% over the past month relative to the XOP up ~2%. However, an extensive inventory in the core of the Williston coupled with improving type curves from larger completions which are increasing validated in state production data provide compelling near term catalysts as we expect drilling activity to accelerate in 2017 at the latest. Meanwhile, asset sales remain another key catalyst with remaining assets on the block including North Ward Estes and the monetization of Whiting Petroleums Williston Basin gas plants.
Lear also sees strong “upside potential” forConcho Resources (CXO), Pioneer Natural Resources (PXD) and Newfield Exploration (NFX) as well performance improves in the Permian/STACK, and also writes positively on Devon Energy (DVN).
Not that the upgrade is doing much good today. Shares ofWhiting Petroleum have dropped 1.4% to $8.68 at 1:59 a.m. today, wh
Top 10 Oil Stocks To Invest In Right Now: ConocoPhillips(COP)
ConocoPhillips operates as an integrated energy company worldwide. The company?s Exploration and Production (E&P) segment explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids. Its Midstream segment gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad. The company?s Refining and Marketing (R&M) segment purchases, refines, markets, and transports crude oil and petroleum products, such as gasolines, distillates, and aviation fuels. Its Chemicals segment manufactures and markets petrochemicals and plastics. This segment offers olefins and polyolefins, including ethylene, propylene, and other olefin products; aromatics products, such as benzene, styrene, paraxylene, and cyclohexane, as well as polystyrene and styrene-butadiene copolymers; and various specialty chemical products comprising organosulfur chemicals, solvents, catalyst s, drilling chemicals, mining chemicals, and engineering plastics and compounds. The company?s Emerging Businesses segment develops new technologies and businesses. It focuses on power generation; and technologies related to conventional and nonconventional hydrocarbon recovery, refining, alternative energy, biofuels, and the environment. This segment also offers E-Gas, a gasification technology producing high-value synthetic gas. ConocoPhillips was founded in 1917 and is based in Houston, Texas.
- [By Ben Levisohn]
Unlike ConocoPhillips (COP), Hess’s (HES) dividend wasn’t big enough to move the needle if cut. So it’s selling stock instead:
Hess has priced the concurrent offering of ~28.8mm shares of common stock and ~11.5mm depositary shares, assuming the over-allotment options are exercised. The depositary shares represent a 1/20th interest in each share of Hess 8% Mandatory Convertible Preferred Stock, which unless converted earlier at the option of the holder will convert on or around February 1st, 2019 into Hess common shares. Based on the equity offering price of $39/share, we estimate total net proceeds of ~$1.65bn net common offering proceeds of $1.09bn and net depositary share offering proceeds of ~$558mm. The offerings represent ~10% of Hess prior outstanding share count and ~15% on fully diluted basis including the conversion of the convertible preferred shares.
Hess said it will use the proceeds from the offerings for general corporate purposes and to strengthen its balance sheet. Prior to the offering, Hess already had one of the strongest balance sheets within our E&P coverage group with a net debt/capitalization ratio of ~14% at YE15 and more than ~$2.7bn of cash on its balance sheet. However, based on current NYMEX strip prices and after dividends, Hess was confronting a ~$2.0bn cash flow outspend this year and another ~$2.3bn in 2017. Mgmt. emphasized that it has no intention to cut the companys dividend.
Mgmt. emphasized that the offerings were not intended to pre-fund any M&A activity or to accelerate drilling activity.
Shares of Hess have tumbled 11% to $38.89 at 1:26 p.m. today, while the Energy Select Sector SPDR ETF (XLE) has fallen 2.2% to $56.
Top 10 Oil Stocks To Invest In Right Now: Range Resources Corporation(RRC)
Range Resources Corporation, an independent natural gas company, engages in the acquisition, exploration, and development of natural gas properties primarily in the Appalachian and southwestern regions of the United States. The company?s Appalachian region drilling and producing activities include tight-gas, shale, coal bed methane, and conventional natural gas and oil production in Pennsylvania, Virginia, Ohio, and West Virginia. It owns 4,969 net producing wells, approximately 2,750 miles of gas gathering lines, and approximately 1.8 million gross acres under lease. The company?s Southwestern drilling and producing activities cover the Barnett Shale of North Texas, the Permian Basin of West Texas and eastern New Mexico, the East Texas Basin, the Texas Panhandle, and the Anadarko Basin of Western Oklahoma. It owns 1,954 net producing wells, as well as approximately 886,000 gross acres under lease. As of December 31, 2010, Range Resources Corporation had had 4.4 Tcfe of pr oved reserves. It sells gas to utilities, marketing companies, and industrial users. The company was formerly known as Lomak Petroleum, Inc. and changed its name to Range Resources Corporation in 1998. Range Resources Corporation was founded in 1975 and is headquartered in Fort Worth, Texas.
- [By Wayne Duggan]
Bernstein maintains Outperform ratings on the following oil stocks:
Apache Corporation (NYSE: APA) Anadarko Petroleum Corporation (NYSE: APC) Cobalt International Energy, Inc. (NYSE: CIE) Cabot Oil & Gas Corporation (NYSE: COG) ConocoPhillips (NYSE: COP) Devon Energy Corp (NYSE: DVN) EOG Resources Inc (NYSE: EOG) Range Resources Corp. (NYSE: RRC) Southwestern Energy Company (NYSE: SWN)
GMP analyst Bob Bakanauskas went long E&Ps back on February 3. He predicts that the oil market will transition from oversupply to undersupply in 2017. From that point forward, the world will once again require shale production growth.
- [By Dave Forest]
Consider Range Resources (NYSE: RRC). The company now trades at an enterprise value of $15.5 billion. And yet the after-tax value of its reserves at year-end 2012 was just $3.2 billion.