Energy company
West Texas Intermediate (WTI) crude oil was trading around $ 73 a barrel on Wednesday morning, up more than 17% since August 20. For the year to date, WTI peaked over $ 76 on July 2.
Oil and gas (E&P) exploration and production companies track movements in crude prices, but vary a lot in percentage changes. These differences are the result of several factors. In a new look at oil inventories, JPMorgan chronicles the evolution of oil prices and the price of oil inventories:
While [the first half of 2021] saw a solid upward movement in stocks with the price of oil, [the second half] was more mixed for equities despite continued high oil prices. We believe that the discipline of capital allocation and ESG concerns were factors; however, assuming discipline prevails, we believe attractive valuation (cheaper than pre-COVID levels), deleveraging, and the potential for return on capital all point to further uptick.
These comments are addressed specifically to integrated oil companies like Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM). JPMorgan analysts downgraded Chevron’s rating from Overweight to Neutral on Wednesday morning, “mainly because of the valuation, but also taking into account the upside. [Energy Transition] spending. ”On Tuesday, Chevron announced it would more than triple its spending to reduce its carbon footprint to a total of $ 10 billion by 2028. JPMorgan’s reasoning appears to be that money spent to reduce emissions carbon cannot be used to repay debt or increase returns on equity to shareholders. Analysts have lowered their target for the share price from $ 128 to $ 111, almost 10% below the average $ 122.73.
Analysts left its overweight rating and price target of $ 76 on Exxon, but removed the energy giant from its list of analysts’ attention. The average stock price target is $ 66.25. Year-to-date, Exxon’s share price has risen 43%, more than double Chevron’s 20.6% rise, but still below the 52% jump in crude prices.
The overall story is a little different among pure E&P companies that do not have internal refining and marketing divisions. JPMorgan analysts lifted SM Energy Co. (NYSE: SM) from Neutral to Overweight and left the price target at $ 27, a dollar below average. SM’s ‘robust’ free cash flow (2022 free cash flow to business value of 18%), ‘attractive valuation’ and holdings in the Austin Chalk game along the Texas Gulf Coast .
Gulfport Energy Corp. (NYSE: GPOR) and Range Resources Corp. (NYSE: RRC), both focused on natural gas deposits in the Appalachian region, went from underweight to neutral. Gulfport’s price target remained unchanged at $ 88 (the same as the average of 27 estimates), while Range Resources’ price target was raised from $ 15 to $ 20, or about 15% at- above the average of $ 17.46. Natural gas prices have risen 110% so far in 2021, more than double the rise in crude oil prices.
JPMorgan downgraded Southwestern Energy Co. (NYSE: SWN) from Neutral to Underweight, citing “the extent of hedge losses to [natural] gas price (~ $ 2.3 billion between 3Q21 and 4Q22 versus an EV of $ 6.3 billion) plus the [price/earnings] the overhang associated with the Indigo accord will lead to a relative underperformance. Analysts also lowered their target price on the stock from $ 7 to $ 6. The average price target is $ 6.40.
Matador Resources Co. (NYSE: MTDR) received an upgrade from Neutral to Overweight and an increase in the price target from $ 36 to $ 37 “based on continued operational outperformance, attractive mix growth and generation of FCF, [and] increase returns for shareholders.
Crude oil was trading up about 3.3% on Wednesday morning, and all of those companies are in the middle of writing. Chevron rose about 1.6% to $ 97.71, in a 52-week range of $ 65.16 to $ 113.11. The annual dividend yield is 5.57%.
Exxon traded up about 3%, to $ 56.22 in a 52-week range of $ 31.11 to $ 64.93. Exxon’s annual dividend yield is 6.28%.
SM Energy traded up nearly 13% to $ 22.86, in a 52-week range of $ 1.34 to $ 26.87. The company pays a dividend yield of 0.1%.
Gulfport Energy was about 5.6% higher, at $ 77.13 in a 52-week range of $ 58.71 to $ 82.16. Gulfport does not pay a dividend.
Range Resources traded around 9.8% to $ 20.19. Its 52 week range is $ 5.93 to $ 20.51. The summit was posted earlier in the morning. The company does not pay a dividend.
Southwestern Energy traded up 4.3% to $ 5.38 in a 52-week range of $ 2.18 to $ 5.85. It does not pay a dividend.
Matador Resources rose about 6.3% to $ 30.67. The 52-week range goes from $ 6.29 to $ 38.05, and Matador pays a dividend yield of 0.34%.
